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Under the microscope: disruption in healthcare

Disease treatment is changing rapidly, leading to new therapies and better long-term results for patients -- and creating investment opportunities, according to Andy Acker, portfolio manager, Janus Henderson Global Life Sciences and Dan Lyons, research analyst.

What do you think are some of the most revolutionary changes happening in drug development?

Disease treatment has come a long way over the past decades. One of the most revolutionary aspects is the massive scale at which we can do DNA sequencing (the process of determining the order of the chemical building blocks that make up the DNA). While we could previously only sequence a single DNA fragment at a time, innovative technology has made it possible to sequence millions of fragments simultaneously and to analyse the data with vastly improved, lower cost computing power, leading to a better understanding and the ability to treat previously intractable diseases.

What role does technology play?

We have made a lot of advances in medicine by understanding and manipulating genetic material, but we also benefit from advances in the tools that researchers use. X-ray crystallography is a good example. With this imaging technique, scientists can see, at an atomic level, how well a drug binds to its protein target. As a result, even small molecule drugs are becoming more targeted and effective, with fewer safety issues. That makes it easier for companies to get regulatory approval, which can improve the risk/reward opportunity for investors.

What is the potential market size for some of these new therapies?

Scientists so far have identified more than 7,000 genetic diseases, but less than 5% have treatments 1. Knowing exactly which genes are defective and correcting them with a one-time gene therapy treatment would add tremendous value to the healthcare system and dramatically improve the lives of these patients.

For example, heart disease is one of the biggest killers, with one in every four deaths caused by it each year in the US2. New therapies are helping reduce the risk of someone suffering a serious event, such as heart attack, stroke or death. But even if you reduce the odds of those events by 30% – a significant amount – there is still a lot of room to improve, given the numbers.

What about the regulatory hurdles that must be cleared in order to bring new products to market?

The US Food and Drug Administration (FDA) is mindful of the many advances taking place in medicine and takes a pragmatic approach to lower the cost of drug development by collaborating with companies. The FDA has also created new pathways for firms to achieve regulatory approval and bring products to market faster. So, companies have an incentive to focus on truly innovative new therapies, which in theory leads to more competition and better treatments for patients while potentially rewarding the companies that succeed.

This mindset is not limited to the US regulators. Europe has similar goals while China is making a big push to add more therapies to the country’s national reimbursement drug list. China has also introduced reforms to encourage innovation and reduce the backlog of drugs waiting for approval. China is the second largest pharmaceutical market in the world3, so these changes are significant.

The same is true for medical devices. The FDA really wants to lower the time and cost of bringing new devices to market. In 2018, for example, the agency created a way for devices related to integrated continuous glucose monitoring (iCGM) to come to market without clinical trials or other time intensive steps. These types of initiatives should shorten product cycles and create more competition, helping drive down costs for the healthcare system. And while competition can be bad for incumbents, it can be good for start-up companies that want to bring something differentiated to market.

Does competition also pose a risk for investors?

It means that investors have to be mindful of what is becoming an increasingly competitive marketplace. It is one reason why we also invest in private companies. We want to be aware of not just the companies that are leaders today but also the firms that could disrupt tomorrow. Research by Bio Industry Analysis in 2016 showed that 90% of drugs that enter human clinical trials never make it to market. So, we think it is important to cast a wide net and rigorously apply fundamental research.

Today’s uncertainty may cause you to question your investment strategy. But with the right perspective and investment solutions, we think it’s possible to stay focused on long-term goals.

Stay on the right side of disruption. Learn more about strategies to navigate uncertainty with Janus Henderson Investors.

For Hong Kong investors, click here.

For Singapore investors, click here.  


1 Pharmaceutical Research and Manufacturers of America, 2015

2Source: Centers for Disease Control and Prevention, as of 2 December 2019

3Source: The Economist, “China is sprucing up its pharma sector”, 30 August 2018


Small molecule drug: a medicine with a low molecular weight, enabling it to easily enter cells and effect change. Most small molecule drugs are taken as pills and new tools such as x-ray crystallography have helped to make the drugs more targeted and effective.

Gene therapy: a method by which healthy genes are inserted into cells via a viral delivery vehicle to correct a genetic defect.

Therapies mentioned above are for illustrative purposes only, should not be misconstrued as advice and should not constitute or form part of any offer or solicitation to issue, sell, subscribe or purchase any security.


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