James Anderson | April 2018

Healthcare is not an industry brimming over with recent success. Costs are out of control, with new drugs being vastly more expensive but substantially unchanged versions of often questionable mass prescriptions. And life expectancy is now falling in several supposedly advanced societies. On current trends everybody will work in healthcare and all inflation will come from healthcare, but we won’t be any healthier. These, though, are the trends of the past.

Beneath the decline the potential for transformation is prophecy no more. To be precise: there is an excellent chance of history showing that 2017 marked the start of a new era for healthcare. The combination of genomics, immunotherapy and associated gene therapies and editing techniques has now produced clinical data and licensing approvals that make it possible to talk of cures in several rare diseases and an increasing number of cancers.

What’s more, 2017 saw the FDA license gene therapies for the first time. This happened both for cancers – starting with Kymriah, as the first authorised CAR-T immunotherapy – and for inherited conditions, with Luxturna for blindness. That’s not to say that progress will now occur in a straight line. It never has.

The overall situation is far in advance of where it was at the end of the 20th century, or even five years ago.

The first gene therapy to be licensed was Glybera in Europe. It was the world’s most expensive drug on its introduction in 2012. Since then it has quietly been abandoned. There was a tiny market and doubtful efficacy. The previous dreams of gene therapy ended in the death of Jesse Gelsinger in 1999 as science over-confidence proved well ahead of clinical reality. But it’s clear that, even if there are serious specific setbacks to come, the overall situation is far in advance of where it was at the end of the 20th century, or even five years ago.

This could be illustrated in the number of treatments in trial (in the hundreds) or the range of indications that are covered, but it may be better to focus elsewhere. As Nick Leschly of bluebird bio (clinical-stage gene therapy company) puts it, “the key advance is that we can now understand what we are doing in biotechnology and how it works”. That’s the gift of super-exponential progress in genomics. This doesn’t just bring exponential progress. It also introduces healthcare to the world of deflation. The leaps in potential progress that this combination implies are worthy of reflection.

...let’s not be scared by the side effects of dramatic change for the better. It’s very exciting.

Hopefully, bluebird represents a case in point. After even a modest period of learning and experimentation via sequencing, its multiple myeloma treatment bb2121 shows 56% of patients being in complete remission and 89% having had a very good partial response or better.

We are no longer in the world of recent decades of marginal improvement in return for much higher prices. For sure this requires serious re-thinking of pricing and supply mechanisms but let’s not be scared by the side effects of dramatic change for the better. It’s very exciting.

The views expressed in this article are those of the author. Its express purpose is to highlight areas of intellectual thought and debate which inform the investment philosophy that underpins Scottish Mortgage, in the hope that they may be of wider interest. The author(s) therefore make(s) no suggestion that this article constitutes independent investment research and it is not subject to the protections afforded to such.

Further, it is not intended to be considered as advice or a recommendation to buy, sell or hold any particular investment. As referenced above, private companies may be more difficult to buy or sell, meaning short-term changes in their prices may be greater. Those considering investing in any of the areas highlighted in the article should undertake their own research and seek advice if unsure. For those looking for information on Scottish Mortgage specifically, please visit www.scottishmortgageit.com