Cutting-Edge Science Abounds Across Healthcare Industry by Harlan Sonderling, ColumbiaManagement

  • Investors in the healthcare industry are enthusiastic and, in some cases, stock valuations may be similarly optimistic.
  • Investors who provide funds to develop new therapies should expect and even demand significant scientific breakthroughs.
  • Healthcare payers will increasingly pay for healthcare outcomes and seek to foster competition throughout the drug supply chain to control costs.

Healthcare industry analysts are privileged to be tasked with understanding and assessing the abundance of scientific innovations that improve health and quality of life and contribute to the gradual increase of human life span. The degree to which these will succeed across a range of indications is, of course, unknown; but get used to phrases like “redefine the treatment paradigm,” “cure a patient subset,” and “FDA breakthrough designation.” Remember, however, that the benefits seen thus far have sometimes been short-lived, cures are still relatively rare, and many drugs are in early development stages. Investors are enthusiastic and, in some cases, stock valuations may be similarly optimistic. Consider three emerging scientific platforms in various development stages.

Immuno-oncology (IO): It has long been a scientific goal to treat cancer in a more targeted manner than conventional chemotherapy, which is the controlled delivery of poison to kill cancer cells. Chemotherapy has high toxicity and cure rates are low. The essence of immuno-oncology is using the patient’s own immune system to fight tumors, a highly selective, more efficacious treatment with reduced toxicity. There are currently two broad types of IO therapies being developed. The first is designed to non-selectively stimulate the immune system by blocking PD-1, which is a cloaking mechanism tumors use to conceal their abnormal nature from the body’s immune cell surveillance. It is little surprise that melanoma was the first tumor target of immunotherapy, as melanoma is highly immunogenic (provokes the body’s immune response) and thus has a lower response threshold and higher response rate. Melanoma also showed better initial risk-benefit in combination therapy. The FDA’s recent approval of the second PD-1 blocker to treat advanced melanoma (skin cancer) sets more clearly the ongoing competitive scientific, regulatory and marketing framework in which numerous global pharmaceutical companies will compete across cancer categories, most notably non-small-cell lung cancer, but also in other solid and blood tumors. So far, PD-1 blockers have not shown efficacy in breast cancer.

Immuno-oncology development broadly is expanding quickly toward (1) combination therapies with existing anti-cancer agents that will begin reporting data this year and (2) different and more selective mechanisms of action. Expect to hear more, too, about anti-PDL-1 drugs, which block the ligands, or matched proteins, of PD-1 receptors; both mechanisms share the goal of blocking cancer cells’ false signals to the immune system. PD-1 blockers may be incrementally more efficacious but also cause more side effects. Expanded late-state human clinical trials will reveal more differentiation.

Perhaps even more cutting-edge IO therapy than PD-1 inhibitors are developmental treatments to genetically modify a patient’s native immune cells to fight cancer, a platform known as CAR-T (Chimeric Antigen Receptor T-cells). The science broadly involves removing a patient’s immune cells and inserting new genes that specifically recognize cancer cell. These genetically modified immune cells are then injected back into the patient. Early clinical trials show promise in treating leukemias and blood cancers. Despite this being as exciting as it is futuristic, remember that scientists have for decades sought to stimulate the immune system to fight cancer. The past approach was to vaccinate patients (inject crushed cancer cells into a patient) to teach the immune system to recognize and fight cancer. Estimates are that over 100 such trials have failed. The current approaches are much more elegant and advanced, and there is reason to be excited.

RNA interference (RNAi): Human DNA is the code by which the body makes proteins; each gene encodes one protein. These proteins allow cells to function, doing everything from sending electrical signals to making hormones. Turning genes into proteins involves an intermediate copy of the gene made of a molecule called RNA (similar to DNA). Blocking this RNA can block protein production, including defective and harmful proteins that cause disease. Similarly, viruses use their own genes to make viral proteins, and blocking viral RNA may be a new way to fight viruses. RNA interference (RNAi) is being investigated to treat diseases ranging from hepatitis to high cholesterol to hemophilia to rare genetic disorders. Early-stage clinical data look extremely promising.

Gene therapy: Gene therapy attempts to alter a patient’s genetic code in some organs to induce the body to make essential proteins that are otherwise absent, such as blood clotting proteins for hemophilia patients. Alternatively, abnormal and harmful genes could theoretically be altered to be inactivated so that their harmful proteins are never gets produced. Gene therapy works by modifying a virus to deliver the new, desirable gene; the virus can be modified to target specific organs. Risks are that the body mounts a massive immune response against the genetically-modified virus. Gene therapy, like cancer immunotherapy, has evolved rapidly and is being investigated to treat hemophilia, enzyme-deficiency disorders, blood disorders, Huntington’s disease and more.

Among other promising therapies in development are:

  • PCSK-9 for very high and treatment-resistant cholesterol
  • CGRP-blockade for migraine treatment
  • Bcl-2 inhibitors, BTK inhibitors, and PI3-delta kinase inhibitors to treat leukemia and other blood cancers
  • Long-acting injectables (LAI) for depression and psychosis
  • A drug to reduce the strain on the failing heart by enhancing the heart’s protective neurohormonal systems while     simultaneously suppressing the harmful RAAS system
  • Anti-IL17A for psoriasis and similar autoimmune diseases
  • Insulin patches to be worn in conjunction with continuous blood glucose monitors.

The Chinese greeting, “May you live in interesting times,” is generally believed to be a tacit curse. In the case of medical innovation, we undoubtedly live in interesting times, and this is our blessing. Consider finally that the costs of developing new therapies are high. Investors, who provide most of the funds to do this development, should expect and even demand significant scientific breakthroughs. Similarly, healthcare payers, whether taxpayer-supported governments or privately-insured institutions and individuals, will increasingly pay for healthcare outcomes and seek to foster competition throughout the drug supply chain to control costs. The present hepatitis C price and coverage wars are only the beginning.