Big players in the healthcare sector are desperate to differentiate their approved ‘checkpoint inhibitors’ (a drug that unleashes an immune system attack on cancer cells) by combining their use with conventional chemotherapy or other new drugs. Biotechnology firms are developing many of these next-generation combination agents as well as continuing to strengthen their positions in treatments for more niche medical problems.
This makes for an interesting area for investors. Except that the eyes of the investment world point to the ongoing highly charged political debate over drug prices and drug reimbursement programmes. They see the costs of such programmes as a very real threat to biotech companies’ creativity, profitability and viability.
If you look at biotech companies which are active in oncology, they have more leeway in setting prices as long as the products they bring to the market deliver superior medical benefits. Currently the unmet medical need in many cancer indications remains very high.
So companies whose drugs cure most quickly and effectively will be more competitive in the marketplace and therefore have more flexibility in setting their prices.
Oncology biotech developments
Within our portfolio, BB Biotech’s third largest holding is Celgene. There is plenty of attention on the clinical data from Celgene and its partner Bluebird Bio for cell therapy in patients with multiple myeloma. We hope that this process will be classified as ‘breakthrough therapy designation’ by the US Food and Drug Administration (FDA). If so this will expedite the development and review of the new drug. Celgene/Bluebird Bio reported improved outcomes, significantly better than the advances achieved with Darzalex, the latest compound to be granted breakthrough therapy designation by the FDA. Final results of the Celgene trial are expected in 2019 with the therapy coming to market as soon as the end of 2019. In the world of drug approvals this seems swift, but precedent was set by the recent speedy approval process of Kite/Gilead’s Yescarta treatment of large B-cell lymphoma.
Elsewhere Celgene is due to present clinical trial data on Abraxane as a secondary treatment for pancreatic cancer.
Some of the smaller stocks in our portfolio reported interesting data and it’s worth keeping a close eye on them: Tesaro, an oncology focused pharmaceutical experimented with a combination trial in 2017 with Zejula to treat ovarian cancer. By adding on a drug used for the treatment of ovarian cancer, the hope is that Zejula’s potential sales could increase substantially beyond ovarian cancer and combat other types of cancer. Tesaro is also due to present further clinical trial data on Niraparib to combat breast cancer.
The prospects for Incyte's cancer drug Epacadostat were severely dampened after the latest trial failure with most investors having given up on this drug class. That said the disappointment is now priced in after the recent markdown. Incyte is continuing to work on a range of immuno-oncology treatments. Impending clinical results from a study of its Jakafi drug (for treating bone marrow disease Myelofibrosis) as a treatment for patients with graft-versus-host disease should be the next market-moving news.