Cracking the Code E-Book

Jim Mellon

• Herausgeber: John Wiley & Sons
• Kategorie: Fachliteratur
• Sprache: Englisch

Seitenzahl: 524

Veröffentlichungsjahr: 2012

Beschreibung

Everything you need to know about the most important trend in the history of the world Within most people's lifetimes, the developments in the biotechnology sector will allow us to live increasingly long and healthy lives, as well as provide us with technological innovations that will transform the way we live. But these innovations offer more than just hope for a better life, but hope for better returns too. Financial returns of incredible magnitude await savvy investors and businesspeople who can see the massive changes on the horizon. This book details these fast-moving trends and innovations and offers extensive advice on how to profit from them in business and investing.

Leseprobe

Table of Contents

Cover

Other books by Jim Mellon and Al Chalabi

Title page

Copyright page

Acknowledgements

Introduction

A Note on the Text

Chapter One: Transformational Technologies

Futurists and Scientists Look into the Future

The Convergence of Technology and Biology

Chapter Two: The Evolution of Medicine and the Emergence of Biopharma

From Atoms to Cells to Living Organisms

The History of the Pharmaceutical Industry

Chapter Three: The Drug Industry – Reinventing the Model

Big Pharma, Biopharma

Drug Patents

The Path to Riches: FDA Approval

In Summary

Chapter Four: Curing Disease – Promising Prospects in the Main Therapeutic Areas

Cancer – Step by Step, Being Beaten

Infectious Diseases: New Antibiotics, Hepatitis and HIV Drugs Make for a Fast-growing Sector

Obesity and its Evil Sisters: Type 2 Diabetes and Kidney Disease

The Heart of the Matter – Biggest Killer on the Prowl

Fading into the Night – Neurodegeneration, Rheumatology and Multiple Sclerosis

Respiratory Disease – New Drugs: A Breath of Fresh Air

Rare Diseases and Rare Profits

Drugs for Pain and for the Central Nervous System

The Best of the Rest – Ophthalmology, Dermatology, Gastrointestinal and Bone Disease

Chapter Five: Turning Back the Clock – Stem Cells, Genomics, Gene Therapy and Regeneration

Stem Cells

Gene Therapy and Nano Medicine

Organ Growth in and out of the Body

Chapter Six: Demographic Changes

The Working Age Labour Pool in the World is Shrinking

Can Immigration Solve the Labour Shortage in the Developed World?

The Social Impact of an Ageing Population

The United States is the Best Positioned Developed Country

Support Ratios Have Been Plummeting

China’s Grey Future

What Can Governments Do To Avoid Their Country Becoming a Nursing Home?

Chapter Seven: Bioscience’s Disruptive Influences

Insurance and Healthcare

Real Estate

Politics

Geopolitics

Retail Goods and Services

The Food Industry

The Investment Industry

The Law

Shortage of Young People in Developed Nations

Chapter Eight: Robotics and Nanotechnology

Robotics

Surgical Procedures/Surgical Assistance

Medical Monitor/Nurse

Housemaid/Domestic Assistance

Companion/Pet

Nanotechnology

Chapter Nine: Lifestyle Maintenance

It’s a Fact: Obesity Shortens your Life

Extending Life Expectancy

Common Traits of People who Live the Longest

A “Cure” to Ageing

Telomeres – Our Biological Clock

Chapter Ten: Investment in Biopharma – Chasing Those Money Fountains

Conservative Portfolio

Balanced Portfolio

Speculative Portfolio

Company Overviews

Summary

Glossary

Appendix – Key Financial Charts of Big Pharma

References

Bibliography

Index

Other books by Jim Mellon and Al Chalabi

Jim and Al have been writing together since 2003. Their first book “Wake Up! Survive & Prosper in the Coming Economic Turmoil” (Capstone, Wiley) was published in late 2005. As the title implies, it warned of a coming financial crisis provoked by a housing bubble that was fuelled by debt and advised readers to be prepared by adopting a defensive position, such as accumulating gold.

Their second book, “The Top Ten Investments for the Next Ten Years” was published in 2007 and gave investors more specific advice on the asset classes that were likely outperform in the coming decade. These included the Japanese Yen, commodities and the BRIC economies. The book was updated and re-released post financial crisis in early 2009 under the title “The Top Ten Investments to Beat the Crunch.”

Since 2006 Jim and Al have also been writing their Wake Up! Newsletter, which they release every quarter to thousands of subscribers around the world. The newsletter provides a commentary on economic developments and offers suggestions on how readers can protect their assets from potential threats and profit from untapped opportunities. It is free to subscribe to the newsletter at www.wakeupnewsletter.com.

This edition first published 2012

© 2012 John Wiley & Sons, Ltd

Registered office

John Wiley & Sons Ltd, The Atrium, Southern Gate, Chichester, West Sussex, PO19 8SQ, United Kingdom

For details of our global editorial offices, for customer services and for information about how to apply for permission to reuse the copyright material in this book please see our website at www.wiley.com.

The right of the author to be identified as the author of this work has been asserted in accordance with the Copyright, Designs and Patents Act 1988.

All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording or otherwise, except as permitted by the UK Copyright, Designs and Patents Act 1988, without the prior permission of the publisher.

Wiley publishes in a variety of print and electronic formats and by print-on-demand. Some material included with standard print versions of this book may not be included in e-books or in print-on-demand. If this book refers to media such as a CD or DVD that is not included in the version you purchased, you may download this material at http://booksupport.wiley.com. For more information about Wiley products, visit www.wiley.com.

Designations used by companies to distinguish their products are often claimed as trademarks. All brand names and product names used in this book are trade names, service marks, trademarks or registered trademarks of their respective owners. The publisher is not associated with any product or vendor mentioned in this book. This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold on the understanding that the publisher is not engaged in rendering professional services. If professional advice or other expert assistance is required, the services of a competent professional should be sought.

Library of Congress Cataloging-in-Publication Data

Mellon, Jim.

 Cracking the code : understand and profit from the biotech revolution that will transform our lives and generate fortunes / Jim Mellon and Al Chalabi.

p. cm.

 Includes bibliographical references and index.

 ISBN 978-1-119-96318-9 (hardback)

 1. Biotechnology industries—Finance. 2. Pharmaceutical industry—Finance. 3. Biotechnology industries. 4. Pharmaceutical industry. 5. Investments. I. Chalabi, Al. II. Title.

 HD9999.B442M45 2012

 338.4'76151—dc23

2012002918

A catalogue record for this book is available from the British Library.

ISBN 978-1-119-96318-9 (hardback) ISBN 978-1-119-96936-5 (ebk)

ISBN 978-1-119-96937-2 (ebk) ISBN 978-1-119-96938-9 (ebk)

Acknowledgements

We owe special thanks in the preparation of this book to the following: Anthony Chow, CFA and Rebecca Allen (Jim’s colleagues), Mike Perry of Bay City Capital, Declan Doogan of Palantir Partners, Chris Anzalone of Arrowhead, Bob Palay and Jamie Thomson of Cellular Dynamics, Eli Casdin, Brett Robertson, the Bodleian Library of Oxford University, John Arrowsmith of Reuters Thompson, Trish Wilson, David Hung and Greg Bailey of Medivation, Warren Huff of Reata, Cowen and Company, JP Morgan, Alliance Bernstein and Jefferies Inc. Thank you also to Dr Nadia Short for her feedback on the therapeutics chapter.

Introduction

Imagine living in a big, rambling old house, within which there is one remote room, whose door has always remained firmly locked. Speculation abounds as to what lies behind it, and even though generations have peeped through the keyhole, the contents of the room remain almost entirely hidden from view.

After years of persistence, someone finally manages to open the door and discovers that the room contains stacks upon stacks of dusty books – literally thousands of them piled right up to the ceiling.

This hidden room stands for the repository of all knowledge about the human body; the books within it represent the codes that make up all the individual components. The successful locksmith represents the scientists who today have become the first to gain access to the locked room, meaning that for the first time in our history, we have gained access to these “books of life”, the genetic code that makes us what we are.

Each generation of humankind, at least those for which we have records, has considered itself to be in a golden age of discovery. Even during the Dark Ages, in the worst periods of plague and conflict, humans achieved some scientific or social progress. But compared to where we are today, the pace has been glacial and the progress slight. We are living in the Diamond Age of discovery.

Our world stands on the brink of the greatest era of discovery and advance ever seen, and all the tremendous advances of the past two hundred years – the steam-based industrial revolution, the car, the transistor, the personal computer, antibiotics and vaccines – will appear insignificant compared to the advances we are about to witness in the coming decades.

Without a doubt, the two seminal moments that form the pillars of this incredible move forward are the discovery of the structure of DNA and the sequencing of the human genome, the latter occurring nearly 50 years after the former. These twin achievements are allowing us to see behind the body’s own closed door, and to read and understand the books that contain our own particular codes. This ability to “see” the molecular and cellular makeup of our bodies will enable us to take life expectancy to well over 120 years, to repair bodies that are diseased or worn out, and to improve dramatically the quality of life in old age.

From these books of life, comprising our genomes, a vast new industry is about to be born – the industry of human life extension and improvement. This industry, which is loosely called life sciences, is about to gain a new prominence, and its biggest successes will dwarf the likes of Apple, Exxon, BHP and so forth that are the current colossi of stock markets.

The book you are reading is about this new(ish) industry and what it will do to transform our world. We identify its key parti­cipants and explain how investors can profit mightily from its development.

In addition, we describe the medical advances that will give hope to those who just a few years ago would have had none. We go through all the major therapeutic areas and discuss the emerging technologies that are relevant to us as investors.

Our book also concerns how the world as we know it is about to be turned upside down. This will be as a result of these breakthroughs coinciding with a period when the world’s human population is undergoing the most ubiquitous and rapid ageing ever. Entire industrial sectors will be disrupted by the achievements of the life sciences, and fortunes will be made by investing in the right companies.

As with our previous books, we describe the amazing developments that are underway without too much of the confusing technical jargon for which this industry is notorious. And of course, these step changes have remained hidden from the public gaze: drugs and medical devices do not have the same wide public appeal as tablet computers, and so our job is to expose them as the modern miracles that they are.

We give a brief overview of the history of medicine up to the present time. We then explain how we are nearing a significant increase in potential human life expectancy, and include the specific reasons why this change in our potential life spans is occurring. As well as describing the many aspects of human life and behaviour that will be transformed, we also include a review of most of the companies that we think are going to be the key players in the field.

As the authors of a book about such an exciting field of science, we have a confession to make: we have never donned white coats except in fancy dress, and neither of us can in the slightest way claim to be experts in molecular biology. It was a steep learning curve for us that involved reading a mountain of books, hundreds of published articles and visiting over 100 companies.

In a way, being outsiders is an advantage; we have spent more than a year going “undercover” in the life sciences industry, learning the language of obscurantism that separates the scientific community from the rest of the population, and having done so we hope that we have been able to demystify many of the technicalities that surround the life/bio sciences field.

The principal conclusions from our extensive research are as follows:

Up to 1975 or thereabouts, medicine was principally focused on keeping people alive to their “natural” life span, that is 75 to 80 years of age, but since then

biotechnological

and other medical advances have been nudging that figure ever higher. What that age will ultimately be is the subject of much debate, but our own view is that the unlocking of the secrets of the human genome will allow life expectancy to climb to at least 120 in the next 20 to 30 years. For the developed world, achieving a 50 per cent increase in life expectancy may appear heroic but it is in fact a smaller increase in life span than the one that took place between 1900 and now.

The common assumption that the very old are almost universally afflicted by a range of age-related diseases, be it

osteoporosis

,

Alzheimer’s

,

Parkinson’s

,

blindness

or immobility, is one that will be altered in the next couple of decades. This will be because many of those diseases will be curable or at least their progression halted by new and effective therapies. In much of the literature that we have read, there is a sort of defeatist pessimism about the chances of this happening. But we are optimistic: our research indicates that the major diseases associated with advanced ageing are being addressed at a pace unseen by most. It will not be inevitable that most centenarians will be “illderly” people confined to dribbling in plastic chairs in their dotage. In fact, we think quite the reverse, and we explain why.The major advances that are needed and that will occur in this area must be in

neuro degenerative diseases

; it is a sad fact that

one in two people over 85 will suffer from

Alzheimer’s

or a similar malady.

This would prove to be an unsupportable burden on developed societies as life expectancy increases hugely, and so a change is needed.Although there is no specific cure

yet

for Alzheimer’s, bit by bit the pathways that cause it are being explored and uncovered, and we believe that within ten years there will be a much more effective treatment for this disease, which is possibly the greatest scourge of our age. Blind faith in science is not a great thing, so we will present evidence as to why

neurodegeneration

is not inevitable and why it will be conquered. Already, a blood test to detect the early stages of Alzheimer’s is in accelerated development, based on levels of Dehydroepiandrosterone (DHEA) in the brain.

The mainly age-related diseases that present themselves typically in younger cohorts (the 65 plus) are being slowly strangled by medical advances. Although

metastatic cancers

(i.e. those that have spread from the original location of the tumour) are still difficult to treat,

cancers

that are detected early now have much better prognoses than a few decades ago. One by one, cancers – and there are approximately 200 types of them – are being beaten by the engine of science, and survival rates will rise much further (from about 70 per cent overall after 5 years) in the next 20 years. Cancer – formerly the most dreaded disease – is no longer the biggest killer. That honour belongs to the

metabolic diseases

related largely to lifestyle:

cardiovascular diseases

,

strokes

,

type 2 diabetes

and

morbid obesity

. These constitute the biggest causes of mortality in the developed world and are fast becoming a comparable threat in the developing world also. In the developing world,

infectious diseases

,

infant mortality

and increasingly

lung cancer

from smoking-related causes are the biggest killers.Although there is not yet a magic bullet to solve the problem of people’s sedentary and unhealthy lifestyles, there are many new therapeutics which will in due course become available that will, for example, reduce the incidence and impact of type 2 diabetes, reduce the incidence and impact of

chronic kidney disease

, vaccinate against or treat

hepatitis C

and thereby reduce

liver disease

, and cure many

infectious diseases

, possibly including

malaria

and

HIV

. Additionally, recent Australian research has indicated that there is a way in effect to “vaccinate” mosquitoes against

dengue fever

, an even more prevalent disease than malaria. This process involves infecting mosquitoes with the bacterium Wolbachia.

Genetic diseases

will gradually be cured by a combination of

genetic engineering

(i.e., selecting out defective genes in reproduction) and specific new therapies currently being developed. Of course, like all living organisms, human beings keep on evolving, and in a way the addressing of genetic diseases by new therapies is simply an acceleration of our natural evolutionary process. (Harvey Fineberg, President of the Institute of Medicine, calls it “neo-evolution”.) Later in the book, we talk about advances in this area and identify the companies at the forefront of their fields. We have also talked with leaders in the field of genetic engineering and as a result are able to identify some investment opportunities.

Regenerative medicine

is possibly the hottest and most eagerly anticipated area of medicine today. It is a fact that organs can already be grown outside the human body and whereas at the moment this is limited to simple tissue engineering (such as skin, the windpipe and heart valves), within perhaps 20 years there will be almost no organ that is not reproducible. This is clearly amazing, and will allow, for instance, patients with

renal failure

to avoid dialysis, heart patients to get a brand new heart, lung cancer victims to replace their failing lungs and so on.Although there is no prospect just yet of an

age-reversal pill

or therapy, many of the constituent parts of the body will be able to be replaced as they wear out. Advances in hip and knee replacement will alleviate the suffering that

arthritis

and osteoporosis cause for many elderly people, restoring mobility and vitality. And

tissue engineering

,

stem cell therapy

and

in vivo gene therapy

will all add to the capacity of our bodies to perform longer and better. Age will still be a disease to which everyone inevitably succumbs, but its impact will be lessened, and death, which for many today is an undignified and painful torment, will be much less feared.Today, about one third of all healthcare expenditures in most wealthy countries take place in the last period of life, typically in the last year. This is because most people in developed countries die in hospitals, and hospitals are the most expensive hotel any of us will ever stay in. One of the reasons that healthcare costs have soared as a percentage of national incomes in most wealthy countries is because of the sheer cost of

hospitalization

; in the US, healthcare now costs the country 6 per cent of its GDP and appears to be on the rise.If

new drugs, therapies

and

medical devices

as well as

preventative medicine

can displace a part of hospitalization costs, then overall medical costs will fall as a percentage of national income. In this way, drugs can be a displacement factor for much more expensive interventions, and advances in drugs are going to keep a lot of people out of hospital.

Medical advances and

genomic sequencing

will create a much larger group of elderly people in almost every developed and developing society in the next 30 years. The well-advertised collapse in fertility in many European countries as well as in Japan and Korea will be amplified by the rapid rise in the percentage of over-65-year-olds in those societies.Worldwide, population growth will slow and plateau at almost zero by 2040, with the only areas exhibiting growth being Africa, the Indian sub-continent and parts of the Middle East. Otherwise, most populations, including that of China, will start to decline by mid-century, leaving the world at a peak population of between 8.5 to 9.5 billion people. Barring war, famine or a new form of plague, life expectancy will continue to rise in almost every single part of the world.This rise will lead to the well-known future that confronts baby boomers today; pensions will be inadequate to keep them in the style to which they might like to be accustomed, so people will have to work longer and harder. But because those very same people will benefit from new medical advances, they will be able to do so without too much hardship; and it will not be surprising to see retirement ages of 80 plus by 2050.But there will be one gaping hole in this demographic picture: an absence of large numbers of young new entrants into the labour force. In most rich societies, the highest workforce participation rates in history occurred from around 2000 to 2005. This was the result of the baby boomers mostly being at work, the wave of workers born in the 1970s joining the workforce and rising female participation rates.All those factors will be in reverse in most rich countries, and immigration will not be sufficient to take up the slack, at least not under the current economic and political conditions. This will mean that the so-called

dependency ratio

(the number of people dependent on those in the active work force, notwithstanding rising retirement ages) will grow.

More old people being looked after by fewer young people

. And although old people will be fitter and more active than ever, ultimately they will need some sort of care.For that reason, we look at

robotic

s in some detail later in the book as a likely solution to the labour shortage. Sounds fanciful, but believe us this is coming to a restaurant, shop or house near you!The demographic changes we outline will have further major impacts – first on

geopolitics

and second on

industrial patterns

.

Population size

is in itself not a foolproof indicator of global power – the US only has 5 per cent of the world’s population, but has the largest economy and huge heft in military might and in world leadership.Indeed, even though the US currently has 34 per cent of the G20 nations’ GDP and that figure will fall to 24 per cent by 2050, it will still remain exceptionally important relative to its population size.However, the size of a nation’s population might well have more relevance in the future. In this respect, the Indian sub-continent, parts of Africa and parts of Asia (perhaps not China) will gain in relative geopolitical importance. Europe, Japan and possibly Latin America will lose relative strength.Many industries will be disrupted by the wave of advances in life sciences.

Genome sequencing

will, despite ethical considerations, turn the

life insurance industry

on its head. Youth-oriented industries will be squeezed at the expense of those that cater to the elderly, such as nutrition, clothing and entertainment. People looking at the long-term future of their profession should have an eye out for the disruptive trends that are about to change many industrial landscapes.

In this book we also provide:

A background on medicine and medical advances to the present time, and set the scene for what is likely to happen tomorrow, that is, in the next 10 to 20 years.

Some basic scientific overview to explain how we are moving into an entirely new quantum of progress, leading to life extension, improved quality of life, and demographic and industrial disruption. Recent books such as

100 Plus

by Sonia Arrison are keen to promote the idea of life spans going to 150 plus, but do not break down the specific science by which this will happen – whereas we attempt to do so. After all, if people are to live to 150 on average, some must live to 200 to achieve that and we think that is a stretch too far for the foreseeable future.

Interviews and commentaries on the players that matter to investors. This is interwoven into the sections on major therapeutics – cancer,

infectious diseases

,

neurodegenerative diseases

, type 2 diabetes, cardiovascular and other diseases associated with “western” lifestyles.

Specific recommendations to investors on which areas to be positioned in, what to look for in companies in the bio and life sciences field, and the scope of market opportunities in therapeutic areas and in regions of the world.

An explanation of the process of drug discovery or device development, including the regulatory hurdles inherent in the process and how that might be changing. We cover the financial risks in drug discovery and how to mitigate them in the construction of a long-term portfolio. We also talk about the interplay between so-called

big pharma

and the newer wave of biopharma companies. In practice, the two disciplines of synthetic chemistry relating to so-called

small molecule drugs

(such as

Viagra

and

Lipitor

), the previous domain of the major pharma names (

GlaxoSmithKline

,

Pfizer

,

Merck

and so on), and the engineering of living organisms (biotech firms such as

Genentech

and

Amgen

) are fusing, and we describe why.

By the end of this book we hope that you will agree with us that life sciences hold a golden key to unlocking a whole new world for humans; one in which current levels of old age will be considered “normal” and where people’s lives will be planned in a totally different dimension.

A world where discovery will advance at a pace too fast for most of us to recognize and where innovation will lead not only to material wealth on an unimaginable scale across the world, but also a world where people will live much longer lives and, importantly enjoy them.

Our first book called Wake Up! Survive and Prosper in the Coming Economic Turmoil (published at the end of 2005) forecast a large economic crash; and we have to say that the effects of that crash will probably continue to be felt until at least 2015.

We are pleased to say that this book is an optimistic one and paints a brighter, longer future for all of us. It posits that most people alive today will live far longer than their parents or grandparents, their quality of life will be considerably superior and suggest that almost every affliction from which they might at one time have suffered will be treatable by 2030.

Of course, the people who inhabit this brave new world will also confront other issues such as the depletion of natural resources, environmental damage (with or without climate change) and fiscal issues relating to ageing populations. They will also face an unsettled world order where the postwar hegemony of the United States will be gradually eroded (although not as fast as its detractors would like to suggest).

But because we are living in this Diamond Age of discovery, and because the discovery is not just limited to the medical field, but is also occurring in almost every scientific discipline, solutions for many of the problems that sceptics think are intractable will soon emerge.

Robotics, nanotechnology, new energy sources and commodity substitution will soon be commonplace – and by soon we mean in the next ten years. When that happens, goods will become abundant, computing power will be far greater than it is today, food will be reengineered to be plentiful and education will be universally more effective. Indeed, we believe that a Malthusian nightmare of food production being unable to keep up with explosive population growth will remain just that – a bad dream unmatched by reality.

This book is principally about how humans will live longer and healthier; how the fusion of computational power with bioengineering will radically alter the way we think about ourselves, and how in that process we, the early adopters and believers, can make a lot of money.

In our last book, The Top Ten Investments for the Next Ten Years, we talked of Big Ideas that become Money Fountains, and how getting just one Big Idea right was all it took to get your Money Fountain spouting.

This is our Big Idea and we hope you enjoy the book and that you live long and prosper from it.

A Note on the Text

For the reader’s convenience, in the first instance in this book company names will appear in italic text, the names of drugs will appear in bold text and types of diseases will appear in bold italic text. After the first instance all terms will then appear in standard text throughout the rest of the chapter.

Chapter One

Transformational Technologies

Futurists and Scientists Look into the Future

Futurists tend to be rather unusual folk whose chosen career, to study trends and factors they believe will influence and shape our future, must leave them with a sense of anticipation and, possibly, frustration. From their perch above time, futurists make deductive predictions on what lies ahead for humankind – sometimes right, most often wrong.

We do confess to have studied the work of some of these futurists, particularly those who write about the convergence of technology and biology and how it will dramatically enhance and transform our lives. This is largely because we have been seeking validation for our own strong opinion that this convergence is real and that its impact is under-appreciated. The disruptive effects of the fusion of raw computing power and biology are going to be considerable, and are a key feature of this book.

We have also, perhaps less exotically, studied the works of leading scientists in various fields of technology, physics and bioscience to develop a deeper understanding of what is really going on in science generally, and what lies in store for us humans in the next 10 to 30 years.

Some truly breath-taking innovations are just about to be commercialized, and the effect of these will allow us to live longer, healthier and happier lives. Although we will begin to see some of these new technologies within five years, we will have to wait up to 20 years for others, but of course we are all going to live longer, so that’s not such a stretch.

As we share our findings, we hope that the technologies we highlight will blow you away, as they have us, and convince you that “the future is already here, it’s just not very evenly distributed”.