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Despite the devastating effects of the Covid-19 pandemic, infectious diseases are no longer a major cause of death. Due to advances in medicine, life expectancy across the world has vastly improved – reaching 72.6 years in 2019, compared to just 66.3 at the turn of the century. As a result, the global population of over 65s is projected to increase to 2.5 billion by 2100, up from 650 million in 2017.
While the growth in ageing populations is undoubtedly positive, old age naturally predisposes humans to diseases. After the age of 50, biological wear and tear begins to take a toll on the human body, requiring increased consumption of healthcare resources. Cancer, cardiovascular diseases, and dementia are ailments commonly associated with age, which all require drug-based treatments.
As a result, there is a high correlation between GDP, healthcare spend and life expectancy. Currently, the US spends 17% of GDP on healthcare – compared to the Organisation for Economic Co-operation and Development (OECD) average of about 8%. These figures are expected to increase, as GDP and ageing populations continue to grow.
Emerging markets are following suit, with even faster growth in elderly people, alongside continually improving economic standards. The increasing affordability of innovative treatment options is also driving healthcare spend in developing countries.
Although expensive, the most innovative drugs become available for wider use at a lower cost after the patent life expires. These so-called generics are free to copy at a fraction of the cost, and in the developed world, the use of generics constitutes the majority of volumes dispensed.
Tech-driven drug discovery
Under growing pressure from an ageing global population, the healthcare sector has continued to innovate. In particular, the increasing use of platform technologies in the biotechnology space is powering a higher pace of scientific development.
By compiling data and discoveries relating to different molecules, platforms offer a systematic method of leveraging prior knowledge. Platform technologies have been used to generate therapies addressing multiple disease types – for example, the use of RNA technology for vaccines, rare diseases and cancer.
This has led to an uptick in clinical trials being conducted, and, hence, a greater number of drugs being approved for use by regulators. For instance, the US Food and Drug Administration approved 53 new chemical entities in 2020, compared to 20 in 2016.
Innovative treatments can delay a person’s need to move into a care facility – benefiting the individual and their family, as well as society. Considering drugs constitute roughly 12-15% of total healthcare cost, a drug able to delay the onset or slow the progression of a disease can have huge cost saving implications for society, while lowering the financial burden for relatives.
Investing in innovation
Driven by rising demand from ageing populations and continuous innovation in biotech, the healthcare sector has outperformed the wider market for at least the last past five years – and we expect these underlying forces to remain in place over the long term.
By investing in companies at different stages in the innovation cycle, we aim to capture the immense potential growth on offer within biotech, while seeking to mitigate the risks related to drug approval. We have a proportion of the trust in dependable profitable companies, another segment in higher-risk development stage companies and the final percentage in revenue growth opportunities – companies with an approved and launched product not yet turning a profit.
In terms of an ageing world, the next health epidemic requiring urgent attention is dementia. It has been difficult to discover effective drugs to combat this impairment, due to poor understanding of the biological underlying causes. However, after decades of industry research, we have seen the first approval of a drug aimed at combatting Alzheimer’s from Biogen – one of our profitable portfolio holdings. Aducanumab, sold under the brand name Aduhelm, targets neuron destroying plaques of amyloid-beta that build up in the brain. While concerns around the effectiveness of the drug remain, any delay in disease progression would have beneficial implications for patients and caregivers.
Oncology is another area disproportionately affecting older people, which is witnessing strong growth. This is driven by a better scientific understanding of the biology and pathology of cancers. We are seeing advances in treatments addressing individual cancers in a patient specific way, which companies such as Seagen, Amgen, Mirati and Incyte are addressing.
This article was written by Marek Poszepczynski and Ailsa Craig, co-investment managers of the International Biotechnology Trust. The views expressed above are their own and should not be taken as investment advice.