In search of panacea
The Global Life Sciences team focuses on medical innovation, including the fight against cardiovascular disease, cancer and diabetes. Heart disease causes 17.9 million deaths per year¹
and caused $ 863 billion in medical costs worldwide in 2010. It is estimated to increase by 22% by 2030.²
Wealth Growth is considered desirable by the world population. But with higher disposable income, consumption of meat, processed foods and sugar also generally increases. Thus, the number of people suffering from diabetes has quadrupled worldwide since 1980. Their worldwide treatment already exceeds $ 800 billion.
The price of cancer drugs continues to rise worldwide. Therapeutic and supportive care services spent $ 133 billion globally in 2017, compared to $ 96 billion in 2013⁵. Meanwhile, estimates suggest that the number of new cancers will rise to 23.6 million annually by 2030. Life sciences therefore focus on improved cancer detection as a prerequisite for the disease to be cured rather than being lethal.
Immuno-oncology drugs are a real revolution. The immune system is used to detect and attack cancer cells – often with impressive results. Recently approved immunotherapy in Keytruda has reportedly reduced the risk of death from the most common form of lung cancer by half.
Genetically related diseases are another interesting area for us. Scientists have identified more than 7,000 such diseases. But for just under 5%, there are currently effective treatments available. The remaining 95% offers considerable space for discovering new treatments for hereditary diseases.
Meanwhile, the development of new therapies goes hand in hand with our better understanding of the disease. New treatments for hemophilia, sickle cell anemia and muscular dystrophy may soon be available. Last year, the FDA approved 59 new therapies – more than ever before. But it's hard to come up with the desired seal of approval.
Choose the winners
Before new drugs can be approved, significant development and testing costs begin, with no guarantee of approval.
Drug development may or may not be successful. With the help of medicines that have been given regulatory positions, companies can make millions of dollars and millions of lives for their financiers. But the chances are not good. About 90% of drugs tested in clinical trials are never marketed. Even with successful innovation, the return expected by investors is not always achieved. About 90% of consensus estimates of drug sales are wrong: in the first three years after launch, actual sales may exceed expectations, but they may also succeed. Therefore, choosing an extension product company is a matter of judgment, which should not be compromised.
Therefore, it is our priority to look for companies that we believe to be inventory is undervalued relative to the scientific and commercial potential of the product and development plumbing. Following last year's slide, a number of biotech stocks are now attractively valued from a team perspective, which could lead to increased mergers and acquisitions.
In the fast lane
With the launch of the product, today, regulatory bodies around the world have to adapt to the fast-paced pace of changing life sciences. For example, the European Medicines Agency is aiming for one third of the reduction in the authorization period. Meanwhile, China is now also accepting clinical data from abroad to evaluate new treatments, which could shorten approval times. The FDA is also accelerating the approval process and expects to give it the green light for up to 20 gene and cell therapies each year⁷.
Prevent is just as important as cure
In key areas of healthcare, technology is often just as important as medicine when it comes to maintaining good health. Headlines often deal with new treatments. However, we also closely monitor the medical device market to identify companies that use innovative methods to reduce disease detection time or significantly reduce costs. This gives more people access to innovative treatments.
Invest in life
There are many reasons why long-term investors need to look at global life science companies. On the one hand, there are favorable demographic trends for the sector as the world's population grows, ages and grows richer. Hundreds of millions of people will live longer in the future and will need appropriate health services and medicines.
The second is structural differences, which mainly benefit healthcare investors. For many years, the health sector has been developing relatively independently of the broader stock market (MSCI World Index) as measured by the MSCI World Health Care Index. In a period of sustained low growth worldwide, this is a marked distinction (Source: Fact, over a 10-year period from September 2009 to September 2019).
In addition, the industry has been showing defensive features for years. For example, the MSCI World Health Index has lost an average of about a third less than the MSCI World Index in any decline since 2000. (Source: Fact, September 2019) Past performance is not a reliable indicator of future performance.
There have been some surprising turns this year on the path to reforming US drug prices. We believe that the planned reorganization, which is high on the agenda of the US president, will be vigorously led before the 2020 presidential election. New proposals could bring more uncertainty. The focus of our global life sciences strategy on companies that develop innovative drugs and solutions and make the healthcare system more efficient, therefore, could become even more important. Because these companies should be well positioned to secure market share in the long and winding path of drug price reform.
Andy Acker, Portfolio Manager, Global Life Sciences Team, Janus Henderson
1) World Health Organization, May 17, 2019 (https://www.who.int/news-room/fact- sheets / detail / cardiovascular disease- (cvds)).
2) Global Economic Burden of Noncommunicable Diseases, Harvard School of Public Health / World Economic Forum, Harvard, September 2011.
3) World Health Organization, October 30, 2018 (https://www.who.int/news-room/fact- sheets / detail / diabetes).
4) World diabetes trends since 1980: pooled analysis of a 751 population study that included 4 · 4 million participants, NCD Collaboration of Risk Factors, April 6, 2016 (https://www.thelancet.com/journals/lancet/article/ PIIS0140-6736 (16) 00618-8 / full text #% 20).
5) IQVIA Institute for Human Data Science, Global Oncology Trends 2018, May 2018.
6) National Cancer Institute (https://www.cancer.gov/about-cancer/understanding/statistics) April 2018
7) FDA, December 31, 2018