Health Trends in 2024

Changing market dynamics and some optimism for 2024?

For an industry which, globally, saw incredible revenue peaks during covid, the return to normalisation was always going to be difficult and unpredictable.

Layer on the inflationary pressures of the past two years, including significantly higher interest rates, skills shortages, and the effects of Brexit (especially in relation to regulatory matters and UK import/export rules), this has created a challenging environment in the UK for fundraising and deal activity in the broader health sector. There is however increasing optimism, with inflation falling, interest rates beginning to track down, re-engagement with Horizon (the flagship EU R&D programme), the announcement of a more streamlined and patient focussed UK regulatory environment and significant UK Government financial support for the sector which have all been broadly welcomed by the industry.

In addition, there was a good start to the year when large pharma including J&J, Novartis, GSK and Merck all announced major M&A deals and it is envisaged that increased levels of deal activity will be a key feature of 2024.

Momentum in UK & Scotland investment

Recent positive developments in the UK include a commitment by Astra Zeneca to invest up to £450m in its manufacturing facilities in Liverpool and £200m to support its R&D capabilities in Cambridge.

We have also seen some notable recent VC investments including into English companies Curve Therapeutics (£40.5m) and Mission Therapeutics (£25.2m), as well as Enterprise Therapeutics announcing a £26m series B round at the end of January.

Scottish companies have also raised capital including Wobble Genomics (£8.5m) and Carcinotech (£4.2m). Edinburgh biotech dental business Calcivis secured £5m of funding from the Scottish National Investment Bank, while Aberdeen founded EnteroBiotix has raised £27m to progress clinical trials from a combination of Scottish National Investment Bank, Thairm Bio and Kineticos Life Sciences. Glox Therapeutics also secured £4.3m in seed funding from the Boehringer Ingelheim Venture Fund and Scottish Enterprise to establish laboratories in Oxford & Glasgow.

Listing - proceed with caution

Going public is the aim of many biotech companies in the UK and many choose to list in the US. 2023 was a very difficult year for new public listings and there were many valuation issues for those already on NASDAQ.

This year has started more positively and by the end of February 2024 seven biotech companies had been admitted to the public markets in the US. However, the global outlook for public markets in the sector remains cautious.

Enhanced UK government support

The government’s May 2023 commitment to a £650m package to stimulate the industry and ensure the UK’s continued position as a global leader was a positive story. In addition is the government’s significant financial commitment to encourage UK pension funds to invest in UK life sciences companies, historically not an area in which UK pension funds have invested to any material extent. The ‘first of a kind’ UK pension fund collaboration involving Phoenix Group (the UK’s largest pensions provider) and Intermediate Capital Group (ICG) with the support of the UK government, has just been announced. ICG has been awarded £100m by the British Business Bank to invest in the life sciences sector which will be matched by £100m from Phoenix Group. This development should be of benefit to UK life science companies in years to come.

Targeted optimism

If there is more broad-based optimism for 2024, it’s likely to be quite targeted certainly as far as drug development is concerned with companies focussed on cancer, neurology and infectious diseases. But there are also some fundamentals at play in the UK market – which is high on pharma and biotech R&D but not particularly matched in terms of UK based expert investors who can properly assess, fund and help commercialise those opportunities - especially at the growth stage of the business when significant capital is likely to be required. That ultimately places pressure on businesses being able to fundraise and be even more proficient at providing clarity on the science and differentiation of their discovery with a clear route to viability and growth.

AI - analysing clinical trials data, developing personalised treatments and new drugs

AI is clearly the hottest ticket in town, shifting the dynamics of particular industries and finding new ways to address old problems. Life sciences are certainly one of the most high-profile of the promised beneficiaries of AI applications. There have been many tie ups between technology providers and healthcare multinationals - a trend which is likely to continue. For example, NVIDIA has announced generative AI collaborations with GE Healthcare, J&J Medtech and Cognizant. Merck has also entered partnerships with two UK based companies, Benevolent AI and Exscientia, both aimed at speeding up drug discovery.

On a local basis it was gratifying to see the output of test trials of Mia, a breast cancer diagnostics tool from US firm Kheiron Medical Technologies, publicising its ability to spot early-stage cancers following an extended test within NHS Grampian.

More evidence of Scotland’s representation within health AI is the University of Edinburgh’s joining together with experts from Neochromosome in the US to use AI in the design and selection of the best-performing enzymes for the treatment of genetic and autoimmune disorders including diabetes.

Increasingly medical technology and life sciences are drawing closer together as AI is deployed more broadly in drug development and diagnostics and while some professional communities might worry about job security, for an already over-stretched health industry, the promise of increased speed, accuracy and efficiency will be warmly welcomed.

Weight loss & obesity – driving stock market valuations

Such had been the enthusiasm for GLP-1 based weight-loss drugs that they’ve already suppressed the valuations of treatments for cardiovascular disease and medical devices in the orthopaedics space as investors, perhaps over pessimistically, worry about reduced long-term demand.

The corporate winners in this development space have included Eli Lilly (Zepbound) and Novo Nordisk (Wegovy) although other drugmakers could still “win” the race in the rapidly growing obesity market according to the chief executive of biotech company Zealand Pharma, Adam Steensberg. Also, with this ‘race’ in mind it’s interesting to note the late 2023 announcement of Roche’s buyout of drug developer, CarmotTheraputics, which included an upfront payment of £2.7bn.

While the hype is strong the reality is that supply issues of GLP-1s are already negatively impacting UK distribution and are unlikely to be resolved until the end of this year. Albeit the continued development and uptake of these drugs will take a decade at least to reach full market potential, with yet to be seen knock-on effects in wider areas of health to be played out over an even longer period.

Gene Editing – CRISPR applications gets closer to reality in the UK

Despite the decline in investments for early-stage biotech companies, last year proved to be a pivotal year for biotherapeutics, marked by significant breakthroughs. The surge in the number of cell and gene therapies (CGTs) in clinical trials reached over 1,600 in 2023 compared to around 1,000 in 2018 – indicating a significant growth trajectory. Many of these therapies are successfully advancing from early-stage clinical trials to later stages and gaining regulatory approvals. Notably, the ground-breaking Casgevy, the first CRISPR-based gene-editing cell therapy, secured approvals from both regulators in the UK and the FDA.

Although its pricing may prove prohibitive it was nonetheless significant that the UK approved the first drug developed on the CRISPR gene-editing platform. It is still to progress through the NICE however, the pricing gatekeeper for the NHS, but that body is exploring further data collection.

Also significant is the increasing investor focus on the importance of taking gene therapies to market faster and making financial returns - neither of which is a straightforward exercise. In addition to pricing challenges, clinical trials are expensive and there can be technical issues in relation to both manufacturing and delivery of therapies. There is also still a way to go to improve both patient safety and experience and to reduce the costs of R&D.

The care provision gap

UK M&A deal activity in health and care was over 50% down in 2023 compared to 2022 - demonstrating that while health is a strong sector it’s not immune to high interest rates and inflationary pressures. However, as both these factors are reducing so far in 2024, there is optimism that activity rates will rebound.

The shortage of care provision in the UK is also a driver. Population trends suggest that 144,000 extra care home beds will be needed over the next decade. This fundamental lack of supply also means that planning applications are expected to rise by later 2024.

Some of the latest evidence of that uptick has seen a new 65 bed flagship care home for Aberdeen announced and the planned opening later this year of new care facilities at Almondside in Livingston. The latter is one of five development which will add 250 new bed spaces across Scotland.   

Improving data connectivity across the UK health system

In the UK, medical data and health records sit with a GP and hospital data with the relevant Trust or Board (Scotland), meaning that data is siloed and isn’t particularly standardised. But what we’re seeing increasingly is a shift to integrated care – where the data held by the GP is linked to the data held by the Trust or Board, and then linked to social care data.

Currently there are only guidelines for data standards that are used within the healthcare system, but the upcoming Data Protection and Digital Information Bill (currently at committee stage in the House of Lords) will mean that all UK medical data has to conform with certain information standards – for researchers and users, that will be interpreted as a positive shift as more health data will be standardised and linked and interoperability should improve.

Skills shortage

Although a topic that never seems far away from UK and Scottish Health provision, the skills shortage still warrants inclusion in any list of key issues and trends for the sector. Roles within health services, day care and residential care feature highest in terms of shortages of all sectors.

While there has been some respite, post-covid, from the employment of migrant workers as care home roles were added to the Skilled Worker definition in 2022, the most recent changes, which came into force in this March of this year, now limits care workers coming into the UK from being to be able to have their family join them – which is only likely to put off future recruits. 

The knock-on effects of this issue are certainly not contained to public health services. Although the increase in popularity of private health care continues to rise, it still not providing a guarantee of faster access to procedures as operators struggle to recruit enough doctors and wider staff to satisfy demand.

Consumer health wearables – growing but with more growth to come

Growth in wearable devices is set to increase at an aggressive pace across the next decade, driven by the growing limitations of traditional healthcare institutions and increased awareness within the population for both the monitoring of pre-existing health conditions and for fitness. The devices themselves range from the ubiquitous Fitbit and Apple Watch through to far more specialised sensors that track specific conditions – glucose monitoring for diabetics is an obvious example. Also interesting to note is the recent entry into the market of companies such as ‘Zoe’ a consumer health science company which combines the AI and consumer apps knowledge of its founders with nutritional expertise from leading academic institutions in the US and the UK.

The development of wearables is likely to continue to be centred in China and the US, not least because the UK and European regulations are more constraining, currently, with respect to the approval of innovation. But none the less, the trend globally is on a strong upward trajectory.     

Growing importance of digital health, including remote patient monitoring and medical devices

Rapid advances in digital technology are resulting in an ever-growing number of digital tools which can be used in the development of transformative products and services intended to meet global challenges in relation to patient care. Certain countries such as Japan have taken the lead in this area. With WHO having just launched their global initiative on Digital Health, we are likely to see continued advancements in virtual care platforms and remote patient monitoring in the years to come, especially with the drive both for efficiencies within health systems and cost-effective patient care.

Of increasing importance and recognising the need to provide personalised patient care are the large number of both mobile apps and software solutions now appearing on the market. These can be very useful tools in managing many conditions such as cardiovascular health. For example, Scottish company Lenus Health is deploying its clinically proven AI for the remote monitoring of chronic conditions such as COPD and heart failure and has partnered both with the NHS in England and NHS Scotland amongst others. In general terms the medical device market is on a fast growth trajectory over the next 10 years with the US being particularly supportive and the FDA recognising the need to rise to the many regulatory challenges involved.    

Increasing value of Technology and Pharma partnerships 

One of the key medical technology trends for 2024, as mentioned above, will be continuing to build on partnerships in the digital space, streamlining everything from new molecule discovery through to clinical trials management, diagnostics, screening and patient centric treatments.

Pharma’s partnerships with digital and AI companies have remained steady and AI acquisition has been a significant feature of pharma industry deals over the last two years, a trend that will only continue through 2024.

However, AI digital investment is not limited to commercial activity - the NHS AI lab was established in 2019 to accelerate the creation, scaling and safe adoption of AI technologies with health and care provision. A recent innovation was the introduction of a tool which recognises patients who are at risk from longer hospital stays and identifies the contributory factors.  

Sustainability 

Sustainability in healthcare will remain a hot topic in 2024 as net zero targets draw ever closer. The drive for sustainability in medical devices continues to gain momentum as more goals are set and deadlines approach for carbon reduction. The removal of Desflurane from NHS Scotland hospitals on sustainability grounds and the awarding of £3.5m to the Medical Device Manufacturing Centre at Heriot Watt University by Scottish Enterprise to develop durable and degradable polymers for medical device use are both clear evidence of sustainability policies in action. We expect this to become a stronger feature of med device manufacturing in the months and years to come.