But the development of Immunogenetics – genetically-driven tailored drug treatments – is now driving a golden era for the pharmaceuticals sector. And, as a result I have begun to buy into the sector for the first time since joining the fund in 2003.
The US FDA (Food and Drug Administration) became very risk-averse in the 1990s following some high profile drug safety failures, which meant fewer products were getting approved.
Year-on-year, the pharmaceutical industry lost patent-protection on some of its largest and most profitable drugs. This culminated in the patent cliff of 2012, the worst year in history for the industry, where seven of the world’s nine largest pharmaceutical companies lost their biggest or most profitable drugs to generic competition.
The result was a “lost decade” for the sector. In the ‘80s and ‘90s the pharmaceutical industry experienced average annual growth of 12%. Throughout the last decade this slowed to around 3%.
However, the investment case has changed dramatically. Breakthrough drugs are approaching approval; drugs where no substitute exists, and treatments for rare diseases and drugs that will command pricing power.
It started with the mapping of the human genome – up until then only 50% of proteins and genes were mapped and understood, which means 50% of the market for new treatments was unknown. Ten years on and we’re in an age of genetically-driven tailored drug treatments. We’re about to see a wave of innovation that’s meeting an increasingly pragmatic and sympathetic FDA – a breakthrough in first in class drugs that will cure conditions like Hepatitis C, slash the number of deaths from stroke, give much better treatment of Type II diabetes, and improve immune-oncology. And, in potentially one of the biggest drug approvals in history, could see a first-in-class drug which will dramatically slow the progression of Alzheimer’s, which is all the more significant because brain diseases are some of the greatest areas of unmet medical need.
These and a pipeline of drugs awaiting approval mean we’re about to experience accelerating growth – better growth every year, at least to 2017.
