biotechnology certificate 2...2020/02/26 · biotechnology certificate 3 in our investment process,...
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Biotechnology UBS Certificate details
Issuing bank: UBS AG Zurich, Calculation agent: UBS AG,
London Branch
ISIN: CH0275762380
Currency: USD Fees: 1.6% management fee
Biotechnology Certificate
Biotechnology brings new sophisticated solutions to treat and cure complex diseases…
➢ Thanks to a better understanding of the underlying of many diseases, more effective and safer drugs will appear.
➢ Aside from critical areas such as oncology, orphan diseases, and neurological diseases, the BiotechnologyCertificate focuses on tomorrow's new generation of drugs that could revolutionize the future of biotechnology.Such technologies include RNA-based drugs, cell and gene therapies, and cancer vaccines.
➢ These medical innovations, as well as the emergence of artificial intelligence and big data, will allow for morepersonalized treatment and better diagnosis.
➢ The certificate looks at companies that address unmet medical needs, which means that huge unexplored marketsare waiting to be exploited such as specific orphan diseases.
➢ Research and development, through partnerships or M&A, will continue to be strategic for companies seekinginnovation.
➢ Finally, these medical innovations are getting support from authorities such as the FDA that encourages theapproval of this new generation of drugs by recruiting specialized teams and establishing specific guidelines.
Investment Case
Biotechnology JP Morgan Certificate details
Issuing bank: JPMorgan Chase Bank, Calculation agent:
JPMorgan Securities plc
ISIN: XS1668108928
Currency: USD Fees: 1.5% management fee
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3Biotechnology Certificate
➢ In our investment process, we favor companies with drug candidates in phase 1 and 2 or post-phase 3 results.
➢ Indeed, the outcome of phase 3 is still very binary. Negative surprises are less frequent in Phase 1 becausepreclinical studies have already reviewed (and to a certain extent confirmed) the safety of the product.
➢ Efficacy data, on the other side, can be seen most of the times at the end of phase 2. During Phase 3, stockvaluations are generally already high as expectations build.
➢ Our goal is to invest at the right entry point and avoid excessive risks without missing the potential upside
➢ The screening: in each area, we analyze:
The therapeutics landscape
Investment Process
The commercial opportunity The Mechanism of Action (MoA) of the drug
The manufacturing capacity of the company The medical need in the area
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4Biotechnology Certificate
Investment Universe
Personalized Medicine
Cardiovascular
Immunotherapy
Rarediseases Neurology
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➢ Biologics (from Biotechnology companies) are large molecules and derived from living cells. There more complex than small molecule (from classic pharma) and usually administered via injection.
➢ Today lines are blurred between pure biotech and pharmaceutical companies as these industries are partially consolidating.
➢ We never end new discovery paving the way for new companies to develop a different kind of technologies, methods, drug types or targets…
5Biotechnology Certificate
Biotechnology: Using Living Systems To Cure
Small MoleculeEx: acetylsalicylic acid
(Aspirin)
Biologic medicine Ex: IgG1 antibody
SELECTED CLASSES OF BIOLOGICS
Category Sub-Category (examples) Examples
Classic Proteins Growth factors, hormones, enzymes
Eylea (growth factor inhibitor), Ibrance (CDK inhibitor)
Vaccine Live-attenuated,Inactivated, Future: DNA vaccines
Prevnar 13 (Pneumococcal vaccine)
Peptides Cytokines (interferons, interleukines): act like receptorsPeptide hormones
Tanzeum (GLP-1 receptor), Lantus (insulin)
Monoclonal antibodies (mAb)
Bispecific mAbmAb
Adalimumab (Humira), Trastuzumab (Herceptin)
Human tissues/ cells bone, skin, corneas, valves Botox (Bacteria)
Blood factors Clotting factors (Anticoagulants)
Afact (Factor VIII), Eliquis (Factor Xa)
Nucleic acids DNA, RNA Luxturna (Gene therapy)
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6Biotechnology Certificate
The total worldwide drug sales (Prescription drugs + OTC) was $880B in 2019, the total market could reach $1222B in 2024.
Biotechnology sales represent 29% of total sales: $258B.
Biotechnology: The Future Conventional Drugs?
18% 18%20% 21% 22% 23%
25% 26%28% 29% 30% 30% 31% 31% 32%
82% 82%80% 79% 78% 77%
75% 74%72% 71% 70% 70% 69% 69% 68%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024
Technology % of prescription & OTC Sales
Biotechnology Conventional
Biotech drugs within top 100Biotech Conventional
2010 34% 68%
2018 53% 47%
2024 50% 50%
SOURCE: EvaluatePharma; May 2019
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7Biotechnology Certificate
Key Growth Drivers (I/II)
GROWTH TRENDS
Age-related diseases, including dementia, Parkinson’s, rheumatism, cancers, and metabolic disorders will be on the rise. Aging and economic
development are two drivers for
healthcare consumptions.
NUTRITION HABITS
Bad nutrition habits contribute to approximately 621,669 deaths each
year in the U.S. On thirty years, obesity rates have doubled in adults and tripled in children.
INNOVATION
• The advancements in novel technologies (Orphan drugs, CAR T cells, RNA-based
drugs, DNA gene therapies)• Personalized medicines and diagnostic
solutions on principles of genome sequencing and AI
• Knowledge: research on biology and genetic associations
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8Biotechnology Certificate
Innovation productivity continues with approvals of several highly anticipated drugs and new drug classes.
The FDA provides scientific and regulatory advice needed to bring a new type of treatments into the
market. The FDA is reshaping current regulations to speed up approvals of new drugs.
M&A ACTIVITY
With mounting cash balances and intensified need for near- and longer-term growth, large Pharma and large Biotech could once again look to external innovation to augment pipelines and commercial portfolios.
The biotech/pharma sector is on record-breaking pace for M&A in 2019 (deal value: $217.2B) , driven by large-scale acquisitions: Bristol-Meyers Squibb buying Celgene in January for $74B, Abbvie’s $63B takeover of
Allergan.
GOVERNMENT INCENTIVES
Key Growth Drivers (II/II)
48
59
46
22
4541
35
43
35
26
3431
262928
3835
26
32
0
10
20
30
40
50
60
1999 2001 2003 2005 2007 2009 2011 2013 2015 2017 2019
Number of new drugs approved by FDA
SOURCE: EvaluatePharma; January 2020; FDA.gov
Biopharma M&A transactions announced each quarter
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9Biotechnology Certificate
The Long Road To Drug Approval (I/II)
DISCOVERY
Analyzing diseases and finding the molecular targets or genes
involved.
3 t
o 7
yea
rs
PRECLINICAL
Scientists through preclinical research (in animals usually)
ensure that the drugs have no potential harmful effects and
that can be tested on patients.
0.5
to
2 y
ears
Before entering clinical trials, the company must apply for permission from the FDA, called an Investigational New Drug (“IND”). The agency generally
approves the IND within thirty days.
PR
ECLI
NIC
AL
TRIA
LS
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10Biotechnology Certificate
The Long Road To Drug Approval (II/II)
PHASE I
The purpose of this phase is to find the maximum dose that can be tolerated. It involves 20-100 healthy volunteers.
PHASE 2
The focus here is preliminary efficacy and side effects.
100-300 patients
PHASE 3
Phase 3 is also on efficacy but on 1’000-5’000 patients.
PHASE 4
Post-marketing surveillance. These studies may answer questions posed by the FDA,
usually to evaluate long-term effects.
Post-commercialization
CLI
NIC
AL
TRIA
LS
Not mandatory: Advisory Committee
(AdCom) : independent experts vote
New Drug Applications (NDAs) or Biologics license application (BLA): all data
sent to FDA for review
➢ The final FDA decision to approve or not approve a new product occurs on the Prescription Drug User Fee Act (PDUFA) meeting date. The PDUFA date is the final step in the formal regulatory pathway.
1 t
o 2
yrs
2 t
o 3
yrs
2 t
o 3
yrs
1 to 2 yrs
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A 25.3%*probability of approval for orphan
drugs
11Biotechnology Certificate
Accelerated Review For High Unmet Medical Need
➢ The Orphan Drug Act given by the FDA encourages the discovery and development of drugs for rare diseases. The drug which is granted with the “orphan drug” statue would be eligible for:
• 7 years of exclusive marketing regardless of patent status from approval (10 years in Europe)
• Tax incentives for clinical research; No filing fees and grants for Phase 1 and 2
• Clinical trial design help from the FDA
➢ Beyond rare diseases, there are 4 additional programs for drugs that address unmet medical need:
➢ All these designations increase the FDA’s assistance and accelerate development timelines.
9.6% for classic drugs
Fast Track designation
Priority Review designation
Breakthrough Therapy designation
Accelerated Approval
*excl. onco drugs Source: 2016 - Hay, Thomas, Craighead, Economides, Rosenthal (study on 1103 companies, 7455 drugs in dvp.)
60%29 of the 48 drugs approved in 2019 were designated under one or more of the four accelerated programs
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12
Targeting High Unmet Medical Needs
Biotechnology Certificate
Unmet medical
need
InfectionHematology
OncologyRespiratory
Ophthalmology
Beta-thalassemiaHaemophiliaSickle cell diseasePrimary hemophagocytic lymphohistiocytosisPost transplant lymphoproliferative disorder
ImmunologyANCA associated vasculitisPrevention of graft rejection
Musculoskeletal conditions
Alzheimer’s diseaseMajor depressive disordersPost-partum depressionSpinal Muscular Atrophy type 1Parkinson’s diseaseMultiple SclerosisHuntington’s disease
Neurology
Osteogenesis ImperfectaOsteoporosis
Acute lymphoblastic leukaemiaDiffuse large B cell lymphomaGliomaSarcomaMultiple Myeloma NTKR fusion-positive solid tumors
Rare diseases
Hepatology/ Gastroenterology
Cystic Fibrosis
Asthma Chronic Obstructive Pulmonary disease
Primary Biliary CholangitisProgressive Familial IntrahepaticInflammatory Bowel DiseaseEosinophilic gastrointestinal disordersNASH
Diabetic retinopathy Uveitis
Duchenne Muscular Dystrophy
Lysosomal Diseases: Fabry/ Pompe /Gaucher
AIDSDrug-resistant infectionsEbolaHepatitis D
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13Biotechnology Certificate
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behavioral, physiologic
and molecular)
Using Innovation To Defeat Eroom’s Law*
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▪
➢ The cost of discovering and developing a newly approved drug is becoming more and more expensive.
➢ New types of clinical trials, more adaptive to patients and a better pre-identification of patients will likely improve the efficiency of clinical trials.
*the number of new drugs approved per billion US dollars spent on R&D has divided per two roughly every 9 years since 1950 (source: Nature Review; called the Eroom's law from the famous Moore's law in reverse
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14Biotechnology Certificate
“Never Was Anything Great Achieved Without Danger”
Clinical trials risk
Commercialization challenges
Increasing risk from biosimilars
Manufacturing challenges
Pricing controls & change in reimbursement dynamics
Risks around M&A deals
Data from trials and regulatory events along the life of a drug from discovery to commercialization produces share price volatility.
These events create opportunities
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15Biotechnology Certificate
The US Drug Pricing System: A Real Headache
➢ Partly due to the high development risk and complex manufacturing cost, most biotechnology products are relativelyexpensive
➢ Total health-care spending in the U.S. represented 18% of gross domestic product ($21.1T in 2018), according toMedicare. National healthcare spending is projected to grow to $3.6T in 2019.
➢ U.S. market, the leading market for biotech, does not control the prices of drugs. As a result, if the governmentchanges the rules of the game, stock market’s volatility is inevitable.
➢ In the US, drug pricing and payer negotiations are complex, and competition can give payers leverage in negotiatingrebates. Payers can be both private or public (Medicare/Medicaid). Pharmacy benefit managers (PBMs) work onbehalf of payers to negotiate upfront discounts on the prices of prescription drugs, called rebates, which rewardfavorable coverage of a drug.
Who has health insurance in US?US healthcare spending
SOURCE: Centers for Medicare & Medicaid Services, Office of the Actuary, National Health Statistics Group. (2017)
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Number of deaths by cause, world (2017)
Biotechnology Certificate
SOURCE: IHME, Global Burden of disease ourworldindata.org/causes-of-deaths
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17Biotechnology Certificate
Strategic Therapeutics Areas (STArs)
Biotech are developing targeted therapies and immune-oncology treatments. Genome sequencing and AI tech will lead to personalized treatment and better diagnostic tools.
Oncology
Central Nervous System (CNS)
There is an unmet medical need in CNS related disorders. Discoveries on how diseases are working will pave the way for new drugs from genetic diseases to degenerative diseases.
Lifestyle diseases
Rare Diseases
Gene therapy and next medical innovations…
Approvals and additional positive data in potentially curative gene and cell therapies helped to increase the confidence in these new treatments.
An attractive space with strong governments' incentives. Innovation continues in the space of rare diseases in several therapeutic areas from oncology to neurology and rare blood diseases.
Shift in lifestyle and consumption of bad food have contributed to an increase of these diseases: it include cardiovascular / metabolic diseases, certain forms of diabetes, liver diseases (NASH), many types of cancers
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Oncology Is Still The Largest Therapy Area In Sales
18Biotechnology Certificate
SOURCE: EvaluatePharma; May 2019
-5%
0%
5%
10%
15%
20%
25%
-5.0% 0.0% 5.0% 10.0% 15.0% 20.0%
WW
Mar
ket
shar
e (%
) 2
02
4
2018-2024 CAGR (%)
Top 10 Therapeutic Areas By 2024 - Market Share & Sales Growth
ImmusuppressantsDermatologicals
Anti diabeticsVaccines
Anti rheumatics Anti virals
Sensory OrgansBronchodilators
Anti coagulants
Oncology treatment sales are expected to reach $237bn by
2024
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➢ A $237B market by 2024 (11.4% CAGR)
➢ New cases have increased by 17% worldwide during the last 10 years
✓ The accumulation of mutations on the DNA lead to the development of a tumor, the biggest factor risk: aging
✓ Increased DNA damage and replication error can also be due to environmental carcinogens (UV, Smoking…)
➢ The industry consolidation is a key driver of growth (several big M&A deals in this sector: GSK/ Tesaro , Bristol Myers/ Celgene, Ely Lilli/ Loxo Oncology)
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New Strategies For Treating Cancer
Biotechnology Certificate
WW 2018 sales ($B)
WW 2024 sales ($B)
WW Market share (%) 2024
2018-2024 CAGR (%)
Oncology 11.4 196.4 83% 9.9%
Immuno-Onco 12.4 40.2 17% 21.7%
Total Onco 123.8 236.6 11.4%
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➢ Targeted therapy and immunotherapy are taking their place alongside conventional treatments.
➢ Immunotherapy is the use of medicines to stimulate a patient’s own immune system to recognize and destroy cancer cells more effectively.
➢ The new generation of immuno-oncology drugs to reach the market is the so-called checkpoint inhibitors.
➢ Checkpoint inhibitors drugs have now become a standard of care in advanced lung cancer and melanoma. For example, Merck's Keytruda is now approved for use in previously untreated ("first-line") lung cancer.
➢ Combination between several kind of therapies is the key. Currently, there are two major approaches:
✓ Immuno (IO) + chemotherapy: Use of immuno (anti PD-1 or PD-L1) with chemotherapy. About 69% of patients who got Keytruda were alive a year later while just 49% of those who got chemo alone.
✓ IO + IO therapy: Two immuno-oncology agents combined (anti PD-1/CTLA-4 for example).
➢ An early screening in cancers will allow more personalized treatments.
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Precision Medicine To Treat Cancer
Biotechnology Certificate
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21Biotechnology Certificate
Lifestyle Diseases: A Major Threat To Global Health
➢ Diabetes and chronic kidney diseases increased worldwide by 30% from 2005
✓ due to: Obesity, High Blood Pressure, Smoking, Environmental, Inactivity
➢ NASH disease: the fatty liver disease
✓ The prevalence of NAFLD (non-alcoholic fatty liver) is estimated to be ~25% of the global population.
✓ Drug companies estimate that NASH medicines represent a $35B market opportunity. Most market analysis estimate a market between $7B to $35B as less severe NASH patients could be treated by lifestyle changes.
✓ FXR agonists and PPAR are the first therapies in development to reduce fat build up, inflammation and fibrosis.
• PPAR receptors, when activated, reduce fat metabolism, lipid production and suppress inflammation. FXR agonists suppress carbohydrate and lipid metabolism, and activates liver growth and regeneration following liver injury.
• Combinations will likely be a solution, but products must show efficacy and safety as stand alone drugs
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22Biotechnology Certificate
Rare Diseases Are Not So Rare…
➢ A rare disease is defined in the US when it affects fewer than 200,000 people and in Europe when it affects less than 250,000 people.
➢ To give an idea, rare diseases impact more people than AIDS and cancer combined. There are approximately 6’000 types of rare diseases.
➢ Rare diseases are more and more “attractive” due to governmental support and high profit margins.
Orphan drug sales could reach $242 bn by 2024 (2019-
24 CAGR 12.3%)
In 2019
21 of the 48 novel drugs were
approved to treat rare diseases
Rare diseases affect
That’s 1 in 10!
30 millionsAMERICANS
Infectious disease
NeurologicalAlimentary/Met
abolicCancer
Blood and clotting
TuberculosisAmyotrophic
lateral sclerosis
Gaucher’s disease
PancreaticHaemophilia
A
MalariaHuntington’s
diseaseAcromegaly Ovarian
Haemophilia B
TetanusDuchenne’s
muscular dystrophy
Pompe’s disease LiverIdiopathic
thrombocytopenic purpura
Pertussis UveitisCushing’s disease
MyelomaSickle cell anemia
Haemophilus influenza
Spinal Muscular Atrophy
Renal
Waldenstron’s
hypergammaglobulinaemia
PrimaryBiliary cirrhosis
Top 5 (in term of numbers of drugs in active development)
44%
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23Biotechnology Certificate
Will Gene Therapy Cure all Diseases ?
➢ Gene therapy seeks to modify or introduce genes into a patient’s body with the goal of treating, preventing or potentially curing a disease. Examples of gene therapy types include:
✓ replacing a mutated gene that causes disease with a functional copy;✓ introducing a new, correct copy of a gene into the body;✓ turning off genes that are causing problems.
➢ Therapeutic genes are packaged in a delivery vehicle (called a vector) to insert the new genes into cells, often deactivated viruses such as adeno-associated viruses, retroviruses or lentiviruses.
➢ There are 7 diseases that are currently treated with cell and gene therapy (16 products approved by FDA) and more than 100 diseases are being explored
Oncology and rare diseases dominate gene therapy drug development
A $35B marketpotential by 2026
from $6B today
22% CAGRover the next 5 to 7 years
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24Biotechnology Certificate
Bypassing the DNA: RNA As A Drug Target
➢ RNA Based Therapeutics Market is expected to reach more than $10 billion in 2024, registering a CAGR of 39% during the forecast period 2018 – 2024. The emerging class of RNA drugs known as mRNA (messenger RNA), siRNA (RNA interference) or Antisense drugs may be tomorrow the future generation of therapeutics.
➢ siRNA and Antisense Oligonucleotide lead to the inhibition of protein production and mRNA lead to protein production. They have the potential to treat variety of diseases such as cancers, AIDS, rare diseases, hemophilia…
➢ The advantages of RNA therapeutics are their high specificity and low manufacturing cost. However, the main barrier remains delivery—getting the RNA drug where it needs to be.
Mechanism of siRNA (inhibition of protein production)Mechanism of mRNA (protein production)
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25Biotechnology Certificate
Personalized Medicine: From Disease Prediction to Treatment
➢ Treatments targeted to the needs of individual patients
➢ Technological breakthroughs and computer power are giving a boost to this field
➢ Strong government support: 16 new personalized medicine therapies approved in 2017 for target cancer, orphan diseases, infectious disease, two CAR-T gene therapies.
Source: 2018 Progress Report: Personalized Medicine at FDA
30%Of 2017 FDA approvals were personalized medicine
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unit) of AtonRâ Partners and sent to you by the company sales representatives.
As an internationally active company, AtonRâ Partners SA may be subject to a number of provisions in
drawing up and distributing its investment research documents. These regulations include the Directives
on the Independence of Financial Research issued by the Swiss Bankers Association.
Although AtonRâ Partners SA believes that the information provided in this document is based onreliable sources, it cannot assume responsibility for the quality, correctness, timeliness or completenessof the information contained in this report.
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While all reasonable effort has been made to ensure that the information contained is not untrue ormisleading at the time of publication, no representation is made as to its accuracy or completeness and itshould not be relied upon as such.
Past performance is not indicative or a guarantee of future results. Investment losses may occur, andinvestors could lose some or all of their investment.
Any indices cited herein are provided only as examples of general market performance and no index isdirectly comparable to the past or future performance of the Certificate.
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26Disclaimer