09 November 2020.

If 2020 has taught us anything, it’s that the possibilities of medical biotechnology are not only resolutely in demand, but projected to expand as we tackle global issues such as the onset of disease.

More broadly, the health sector plays a critical role in a country’s GDP and is significant not only in terms of human welfare, but from a political perspective.

According to MSCI World Ex-Australia, the healthcare sector has an index weight of 13.8%.¹ Global health care spending is projected to increase at an annual rate of 5.4% in 2018–2022, a considerable rise from 2.9% in 2013–2017.

This increase reflects the expansion of health care coverage in developing markets, the growing care needs of ageing populations, advances in treatments and health technologies, and rising health care labour costs.

Through extensive research and financial modelling, U Ethical identifies the medical biotechnology sector as having potential upside due to growing research and development in the health care segment as well as strong government support.

Understanding the biotechnology industry

At its simplest, biotechnology is technology based on biology - the use of living cells and other cell materials to better the health of humans. Primarily, it is used for finding cures as well as eliminating and preventing disease.

Through research, biotechnologists find efficient ways of maintaining human health, understanding pathogens, and understanding human cell biology. This enables them to produce pharmaceutical drugs as well as other chemicals to combat disease. Understanding DNA (Deoxyribonucleic acid) is central to the science; manipulating the genetic makeup of cells to increase the production of beneficial characteristics that humans might find useful, such as the production of insulin.

The field usually leads to the development of new drugs and treatments such as vaccines, antibiotics and artificial tissue growth.

Which biotechnology stocks does U Ethical invest in and why?

U Ethical looks to invest in market-leading healthcare companies across Australian and International equities. Within our International Equities Trust are Bristol-Myers Squibb and Amgen; biopharmaceutical companies with a focus on oncology, hematology, inflammation, immunology and cardiovascular disease treatments. In our Australian Equities Trust is leading biotech company, CSL, which researches, develops, manufactures, and markets products to treat and prevent serious human medical conditions.

These companies have solid pipelines of new products supporting future earnings growth and we view the valuations as attractive given strong free cash flow generation.

CSL

In the face of the pandemic, CSL has been working hard to safeguard people, patients and donors by providing critical medicines to patients throughout the world. It has joined with other leading plasma companies to form the CoVIg-19 Plasma Alliance, an unprecedented industry collaboration with the goal of developing and delivering CoVIg-19, a potential plasma-derived therapy for treating those with serious complications from the virus.² CSL has also partnered with SAB Biotherapeutics, a clinical-stage biopharmaceutical company, to advance and deliver an immunotherapy targeting COVID-19.

Amgen

Amgen is committed to unlocking the potential of biology for patients suffering from serious illnesses by discovering, developing, manufacturing and delivering innovative human therapeutics. This approach begins by using tools like advanced human genetics to unravel the complexities of disease and understand the fundamentals of human biology.³

The company focuses on areas of high unmet medical need and leverages its expertise to strive for solutions that improve health outcomes and dramatically improve people's lives. A biotechnology pioneer since 1980, Amgen has grown to be one of the world's leading independent biotechnology companies and has reached millions of patients around the world and is developing a pipeline of medicines with breakaway potential. It has presence in about 100 countries worldwide - reaching millions of people in the fight against serious illnesses.

Its six areas of therapeutic focus are oncology/haematology, cardiovascular disease, inflammation, bone health, nephrology and neuroscience. Its medicines typically address diseases for which the number of effective treatment options is limited. In Australia specifically, it markets eleven medicines for the treatment of cancer, kidney disease, bone disease and other serious illnesses.

Understanding the fundamental biological mechanisms of disease is a defining feature of Amgen’s discovery research efforts—and a major contributor to the development of Amgen’s deep and broad pipeline of potential new medicines. Amgen’s “biology first” approach permits its scientists to first explore the complex molecular pathways of disease before determining what type of medicine, or modality, is most likely to deliver optimal efficacy and safety.

Bristol-Myers Squibb

Bristol-Myers Squibb is a pharmaceutical company with the mission to transform patients’ lives through science.⁴ It has created impactful advancements in oncology, hematology, immunology and cardiovascular disease. 2019 heralded one of the largest mergers in the big pharma industry when Bristol-Myers Squibb merged with Celgene (a biotechnology company specialising in innovative therapies for cancer as well as immune-inflammatory diseases).

The global company works sustainably and responsibly to create a positive impact in the communities in which it operates. Its responsibility goes beyond medicine by promoting health equity globally and striving to increase access to life-saving medicines for populations disproportionately affected by serious diseases and conditions. It achieves this in part through the Bristol Myers Squibb Foundation, which supports community-based programs that promote cancer awareness, screening, care and support among high-risk populations.

Examples of Bristol-Myers Squibb technology:

Oncology
Building upon the company’s transformative work and legacy in hematology and immuno-oncology that has changed survival expectations for many cancers, Bristol-Myers Squibb researchers are advancing a deep and diverse pipeline across multiple modalities.
They are working to develop cancer treatments directed at key biological pathways using their protein homeostasis platform, a research capability that has been the basis of approved therapies for multiple myeloma and several promising compounds in early to mid-stage development.

Fibrosis
Bristol-Myers Squibb is researching medicines that have the potential to halt or reverse the progression of fibrosis: the build-up of excessive scar tissue that impairs normal organ function.
Its researchers are investigating multiple mechanisms and approaches and by exploring new anti-fibrotic therapeutic mechanisms, they are hoping to advance the next wave of fibrosis medicines to patients, with the goal of improving or restoring organ function.
They are advancing a pipeline of medicines to potentially treat multiple fibrotic diseases including nonalcoholic steatohepatitis (NASH), a liver disease that can lead to liver fibrosis and cirrhosis, and for which there is currently no approved therapy. Additionally, they are discovering and developing therapies for idiopathic pulmonary fibrosis (IPF), a progressive lung disease with very poor outcomes and limited therapeutic options.

The possibilities of medical biotechnology are undoubtedly critical in our fight against serious illness and disease. We look forward to tracking the developments of the aforementioned research, discoveries and advancements of these three companies within our portfolio.


¹MSCI World-Ex Australia as at 30 September 2020
²CSL website, ‘COVID-19 Update, published on 4 May 2020, accessible at: https://www.csl.com/news/2020/..., accessed on 20 May 2020.
³Amgen website November 2020, https://www.amgen.com.au/
⁴Bristol Myers website November 2020, https://www.bms.com/