New Technologies for Health
After a very tough 2016 marked notably by political rhetoric on drug pricing and a very low level of drug approvals by the FDA, and a sharp recovery that followed in 2017, we believe the current rerating of the Biotechnology sector is likely to gain steam in 2018 and beyond. We see M&A as a very powerful catalyst to support sector's undemanding valuations.
On the therapeutic front, we believe that genes therapies and personalized medicine will be on investors’ agenda as newer technologies (including mobile wearables) are now able to capture, analyze, and share clinical data in a very short timeframe. With the new US tax-code and the huge incentive it has on investments (expense of amortizations), Capex is likely to get a boost and is likely to benefit the "hardware" players.
We also believe that personalized medicine is not far away from becoming ubiquitous as prices for new testing (including DNA analysis) and analysis are coming down sharply.
Against this backdrop, we favor Biotech companies exposed to gene therapies, antibodies and rare diseases over the larger market cap names which benefited more from rising drug prices than from volume growth.
Today lines are blurred between pure biotech and pharmaceutical companies as these industries are partially consolidating.
Food and Drug Administration - the first level of decision-making before commercialization:
The FDA does not make decision on drug reimbursement:
A record year for FDA approvals in 2015, followed by an unprecedented low number in 2016 as fewer applications were submitted and complete response letters (CRLs) were sent due to manufacturing practice deficiencies (GMP), again followed by a new record year in 2017 as:
Source: Census Bureau's March 2014, March 2015, and March 2016
Current Population Survey (CPS: Annual Social and Economic Supplements)
Source: AtonRâ Partners, FDA
Obesity is one of the biggest health concerns. Obesity levels are rising. Across the United States, more than one in three adults and one in six children are obese (13% of worldwide obese population comes from the U.S.).
The two countries showing the highest growth in obesity level are China and India (15% of the worldwide obese population) leading to:
Emerging markets will lead the diabetics industry growth. Global executives are expecting 30% of their biopharmaceutical sales to come from emerging markets by 2018.
|Source: MarketLine Industry Profile|
Source: EvaluatePharma 2016
(by number of cases)
Source: AtonRâ Partners, The Lancet
Oncology cases have increased by 17% worldwide during the last 10 years due to aging population (probability increases with age).
Neurological Diseases are affecting more and more people (+35.2% growth from 2005) due to: aging population, obesity, smoking and genetic predisposition.
Infection cases have decreased by 10% during the last 10 years led primarily by decreases in HIV/AIDS and tuberculosis cases.
Diabetes and chronic kidney diseases increased by 30% from 2005 worldwide due to: obesity, high blood pressure, smoking, environmental, inactivity.
Cheaper gene sequencing triggers the development of personalized medicine notably in oncology.
Rare diseases are more and more attractive due to governmental support and higher profit margins.