There's something wrong with cancer trends

What happened

New epidemiology data are out and it's not looking good

The cancer rates in the G20 group of industrialized nations have increased by 22% for 25- to 29-year-olds between 1990 and 2019, faster than any other age group. More alarmingly, several cancer incidences have jumped to much higher levels.

• Breast: +51%
• Colon & rectum cancer: +70%
• Prostate: +90%
• Nasopharynx: +110%

Cancer is now the 3rd cause of death, after unintentional injury and homicide/suicide, in the 15 to 39-year-old bracket within the G20 group of nations. For middle-income countries with limited access to new oncology treatment, it is even worse, being the number one cause of death.

ASCO data offers hope

ASCO (American Society of Clinical Oncology) is one of the biggest oncology conferences in the world. Since the abstract's release and the presentations at the conference, the index tracking small biotech (XBI) outperformed the bigger players indexes (NBI and XLV), showing again that the value baked in the pipeline of the SMID biotech remains underappreciated. 

Here is a list of exploits by tech that were released during the conference:

Cell & Gene therapy:

• After a leaked abstract ginned up excitement for Johnson & Johnson and Legend Biotech ’s CAR-T Carvykti, the companies took a victory lap at ASCO with a confirmed 74% reduction in risk of disease progression or death for multiple myeloma patients. But the impressive data belie a growing concern that patients eligible to receive CAR-T therapies may not always be able to do so.
• Moderna and Merck are doubling down on their personalized mRNA cancer vaccine with new Phase II data showing a combination of the shot and Merck's blockbuster Keytruda reduces metastases by 65% among patients who underwent surgery to remove high-risk skin cancer.

Antibody technology:

• Daiichi Sankyo Company’s lead asset, Enhertu, was impressive in a 'game-changing' study with many cancers. It shrank tumors in 37.1% of patients with various types of HER2-expressing solid tumors (2% of all tumors found). The data could open Enhertu for tumor-agnostic approvals in HER2-positive tumors regardless of their location, a dream outcome for Daiichi Sankyo.
• Early data show Bicara therapeutics’s bispecific antibody helps shrink head and neck cancers when combined with Keytruda. Head and neck cancers are in the top 5 of the most unmet medical need in the world.
• Full TIGIT data from Gilead Sciences, Arcus Biosciences reignited hope in the number of companies following the same path. Combining Roche’s anti-Tigit MAb tiragolumab with Tecentriq and Avastin reduced the risk of progression or death by 58% versus Tecentriq and Avastin alone. It’s getting hard to argue there isn’t something there.
• Bristol-Myers Squibb' Opdivo keeps cancer at bay in more lymphoma patients than Seagen's Adcetris in Phase III.

Small molecules:

• Servier’s vorasidenib stalls progression of brain cancer by 61% in pivotal Ph3 INDIGO study.
• J&J’s bladder cancer drug Balversa cuts the risk of death.

Impact on our Investment Case

Cancer (drug market) keeps growing

IQVIA, one of the lead source of market data for the pharma sector, expects the $200bn of oncology product sales in 2022 to reach $375bn globally by 2027. This figure makes oncology the biggest drug indication market. Additionally, a market growing at a 14% CAGR is attractive for biotech investors and biotech alike. No wonder our portfolio is overweight on oncology.

The cost for society is increasing too

The estimated global cost of cancer from 2020 to 2050 is ~$25tn at constant drug prices (base year 2020). But for the last 20 years, drug price inflation has largely exceeded headline inflation, making the estimate largely conservative. It is especially true in the last years, between 2016 and 2022, during which the yearly average price increase for drugs was >30%.

Considering the resulting cost burden on the public healthcare systems, unless new treatments with better efficacy arise, the risks of an implosion of healthcare systems in their current form are very significant. This a situation no one wants to see happening, neither patients, nor countries, nor investors.

The price of new therapies is not where the focus should be

As mentioned in the first part, oncologists worldwide flew to look at new data published at ASCO. Obviously, the price of these new therapies is and will be astronomical, but they pale in comparison with the real cost of today's therapy: earlier death. Although age remains the biggest predictor of cancer risk, with around 90% of all cancers affecting over-50s and half afflicting those over 75, the trend towards earlier patients means that countries will lose workforce (and, therefore, GDP output) to cancer.

Today, only 5 countries have a GDP per capita higher than one year of immunotherapy for one patient (~$140k), which may feel like oncology treatments are overpriced. To zoom out, the average GDP per capita of the top 30 countries accumulated over 5 years is ~$500k. Therefore any treatment that gives back 5 years of full capacity to patients at a cost of $140k would not be overpriced, knowing the treatment length is 1-2 years. Any treatment providing even more years of life would even be "cheap" if priced at ~$140k. What we really need is to focus on treatment efficacy and insurance plans. Improving treatment efficacy could lower the most significant part of the cancer bill, i.e. medical services. Drugs often represent only ~10% of the bill. Better insurance plans would also help improve coverage.

The tech at the rescue

Never in the history of ASCO have so many different modalities been presented. Giving additional hope that a combination of them could yield fantastic results, such as Merck's antibody + Moderna's mRNA vaccine.

Cell & Gene therapies are yielding exceptional results. Antibody targets and technologies are expanding, notably via the Antibody-drug-conjugates modality embodied by Seagen and Daiichi Sanyo. Small molecules should not be dismissed either: with an estimated 10^33 possible spatial configuration possible, a few blockbusters surely hide among them. 

Investors with a good understanding of biological targets, technologies and specific indications are poised to make banks among the ranks of slaughtered biotech stocks.

Our Takeaway

Cancer, and its constellation of forms, will sadly remain the top indication to treat for the years to come. On top of it, given the increasingly younger patient population, the outlook is grim for nations and healthcare systems. 

At atonra, we keep following all development in the field of oncology, and we have an overweight exposure in our portfolio to capture the new treatments opportunity and technology. Our latest addition was Daiichi Sanyo, months before the good ASCO results.