Source: Finance Association

The number of new drugs approved by the US Food and Drug Administration (FDA) in 2023 increased by nearly 50% compared to 2022, returning it to close to normal levels. Analysts and investors believe that increased approval of new drugs is expected to increase investment in biomedical technology companies, which is also a major benefit for related concept stocks.

On Tuesday, US healthcare concept stocks collectively strengthened. Since the FDA will decide whether to approve the marketing of Modena's adult RSV vaccine in April of this year, the asset management agency Oppenheimer will$Moderna (MRNA.US)$The rating was raised to “better than the big market.”

According to reports, the FDA approved 55 innovative drugs last year, up from 37 in 2022 and 51 in 2021. Historical data shows that the FDA usually approves about 45-50 new drugs every year, reaching a peak of 59 in 2018.

Among the most popular drugs approved last year, include$Eli Lilly and Co (LLY.US)$The company's obesity drug Zepbound, and Eisai and Baijian's Alzheimer's treatment drug Leqembi. The popularity of weight loss drugs has boosted manufacturers$Novo-Nordisk A/S (NVO.US)$And Eli Lilly's stock prices both hit record highs.

In addition to 55 new drugs, the FDA has approved five gene therapies, including$Vertex Pharmaceuticals (VRTX.US)$and Swiss pharmaceutical companies$CRISPR Therapeutics (CRSP.US)$The novel genome-editing therapy Casgevy, which was jointly developed to treat sickle cell disease, also lays the foundation for the next generation of genome-editing technology.

John Stanford, executive director of Incubate, a Washington-based life sciences investor organization, said: “We're excited to see an increase in the number of new drugs approved by the FDA.” He emphasized that advances in gene editing technology are particularly encouraging.

Stanford added, “Our scientists can do more, and from that perspective, we're excited about what's to come, not just in 2024, but beyond.”

However, the FDA said in a statement that the number of new drugs approved varies from year to year, which may be due to various factors. These factors include the complexity of new drugs being developed and advances in scientific understanding of diseases and disease targets.

2024 will return to peak levels

TD Cowen analyst Ritu Baral believes that the COVID-19 pandemic may be a factor in the sharp drop in the number of new drug approvals in 2022. When the pandemic hit, the FDA was forced to work remotely or online, causing issues such as delays in drug reviews. As disruptions decrease, Baral expects the number of approved new drugs to return to peak levels in 2024.

Currently, the market's investment in biomedical technology companies is only a small percentage of previous years. A basket of biotechnology funds tracked by the US research institute Piper Sandler showed a capital outflow of 15.8 billion US dollars in 2023, the largest capital outflow since 1992.

Analysts at market research firm William Blair said in a report in December last year: “2023 is a year for the market to screen companies that can obtain funding.”

They pointed out that companies developing GLP-1 weight loss drugs, that is, companies in the same category as Novo Nordisk and Eli Lilly, are more likely to enter the IPO market.

Industry analysts also said that investors' concerns about high interest rates and government scrutiny of pharmaceutical companies may hinder the inflow of capital.

Incubate's Stanford believes that increased regulation of the pharmaceutical industry, the government's drug price negotiation plan, and the Biden administration will seek to seize patents on drugs developed with government funding may cause some investors to wait and see.

editor/tolk