Investment areas

Many severe illnesses such as Alzheimer’s or certain types of cancer are untreatable or not effectively treatable. Currently available drugs do not satisfy market demand for innovative therapies  in therapeutic areas with a high medical need.

Innovative biotech products that directly target a disease process in an attempt to inhibit or stop disease progression altogether hold out the promise of successful new treatment methods. This approach contrasts with conventional methods, which are more likely to focus on treating the symptoms of a disease.

Oncology

Nowhere is the medical need for new, more effective therapies greater than in oncology. The pricing latitude for new drugs is correspondingly large in this area. The biggest impact in the coming years is expected from a variety of immunotherapy treatments.

Immunotherapy works by activating parts of the human immune system, i.e., T cells that kill cancer cells by targeting them directly. Checkpoint inhibitors block the signal pathways cancer cells can use to stop the immune system from targeting them. Because the approved checkpoint inhibitors attach to different proteins and have different mechanisms of action, they can be administered individually or in combination.

While pharmaceutical companies were the dominant force behind the first checkpoint inhibitors, development of the second generation of checkpoint inhibitors has mainly been led by biotech firms (Incyte, Macrogenics, Tesaro and Celgene). The latest trend is to use conventional therapies in combination with new approaches as second- and third-line treatments. One of the most promising candidates is the IDO1 inhibitor developed by Incyte.

In contrast, CAR-T therapies have mainly been pioneered by biotech companies like Juno Therapeutics and Kite Pharma. This type of cell therapy allows genetically engineered immune cells to recognize and attack cancer cells. These modified T cells are obtained from blood samples, reprogrammed in a lab and re-infused to the patient. Most of the clinical trials launched so far are investigating types of blood cancer. However, CAR-T cells have the theoretical capacity to fight any kind of cancer, always provided that the cancer cells have a suitable target structure.

PARP inhibitors prevent cancer cell growth by blocking the PARP enzymes involved in cancer cell DNA repair. Leading developers include our portfolio company Tesaro. Tesaro’s share price quadrupled in 2016 following the release of very good effcacy data for Niraparib in breast and ovarian cancer

Metabolic diseases

Research activity in the metabolic disease sector is dominated by efforts to develop new methods for treating the two types of diabetes. The approval of the first biosimilar in the EU for the diabetes medication Lantus has added to the already intense competition. GLP receptor agonists that improve insulin secretion in the pancreas while reducing glucose production in the liver represent a more recent drug class. Novo Nordisk is the leader in the GLP-1 agonist class with Victoza, a product with a first-class mechanism of action. Another hopeful from the company’s portfolio is Tresiba, an insulin analogue whose 40-hour duration of action enables once-daily dosing.

Another area of high unmet medical need is metabolic diseases of the liver. One such condition is non-alcoholic fatty liver disease and related complications, known as non-alcoholic steatohepatitis (NASH). NASH is predicted to become the most common cause of costly liver transplants and liver cancer by as early as 2020. Intercept, a BB Biotech portfolio company, is expecting regulatory news flow on Ocaliva, the compound that is furthest along in clinical development and the first product candidate with antifibrotic effects in the liver. Ocaliva was granted fast-track status by the FDA in May 2016 for the treatment of primary biliary cirrhosis. The results of a clinical trial to treat NASH are expected in 2018.

Radius Health is specialized in developing treatments for diseases involving hormonal disorders. Abaloparitide successfully completed clinical trial phase III in postmenopausal osteoporosis (PMO). Radius is also developing a transdermal patch delivery system in collaboration with 3M designed to make treatment much more convenient for women with this condition.

Cardiovascular diseases

Because of the large patient populations involved and the associated cost of extensive clinical studies, the development of new drugs to treat cardiovascular disease has largely been the preserve of big pharma. Increasingly stringent requirements for demonstration of benefit by new drugs are adding to the challenges. Given the existing availability of a wide variety of treatment options, new drug developers can demand higher prices from health insurance providers only if the drug demonstrably constitutes a medical breakthrough.

PCSK9 inhibitors, a new class of cholesterol lowering drugs, were launched with high expectations. Intended as superior replacements or for additional lowering compared with conventional statins whose patent protection has expired over the past few years and which are now being sold as generics, these new drugs are finding themselves in a tough market. Regeneron Pharma received approval in summer 2015 for Praluent from the emerging class of PCSK9 inhibitors and is battling for market share with Amgen’s Repatha, which was approved at around the same time. Healthcare payers are curbing the use of this relatively expensive new drug class (which comes with a price tag of approximately USD 14,000 per patient) at the moment, citing a current lack of proof of long-term effectiveness. Another BB Biotech portfolio company, Alnylam, has a new therapeutic approach based on switching off specific gene fragments that cause disease. Ionis Pharma already has approval for a lipid lowering agent, Kynamro, in this area, and another clinical candidate based on the company’s proprietary antisense technology platform. Again, the strategy is to block the specific parts of genes that cause disease. Esperion’s candidate ETC-1002 is intended mainly for patients who are unable to tolerate conventional statins or still have high cholesterol despite statin treatment. The company expects to file for FDA approval in 2018. The decisive question will be whether interim results suffce to obtain fast-track approval for ETC-1002 in 2019.

Swiss firm Actelion has occupied a lucrative niche market with drugs for pulmonary hypertension (high blood pressure in the lungs), a life-threatening disease associated with serious impairment of lung and heart function.

Orphan diseases

Many of the inherited rare diseases known as orphan diseases are metabolic conditions that may be life-threatening or shorten the life expectancy of those affected. RNA-based technologies have been chalking up major clinical advances in this area.

While conventional therapies available so far have only been able to modify proteins that already exist, antisense RNA technology makes it possible to control the production of a protein through its genetic code. This significantly reduces the generation of harmful proteins that have been identified as the causes of disease. Antisense technology has been advancing and progressing for more than a decade and demonstrating its usefulness in tackling previously untreatable serious orphan diseases. Ionis, a core position in our portfolio, achieved another milestone for its antisense platform late last year when the FDA approved Spinraza, a drug developed in collaboration with Biogen. Spinraza, which is administered by injection, is the first available therapy for spinal muscle atrophy, a disease caused by a rare genetic mutation that affects about 10,000 to 25,000 people worldwide. The wasting of muscle tissue (including the muscles used for breathing) due to loss of motor neurons is associated with greatly reduced life expectancy. Unlike antisense technology, the RNAi approach works by switching off certain genes in the human genome that are believed to trigger the condition. The players here include Alnylam, a company in BB Biotech’s portfolio. If the results of pivotal clinical trials scheduled for announcement this year are positive, the company plans to file for approval for patisiran to treat TTR amyloidosis (a peripheral nervous condition) before the end of 2017.

Alexion established its pioneering status in orphan diseases with the approval of Soliris in 2007. 2016 saw the launch of another two products, Strensiq and Kanuma, for the treatment of two ultra-rare diseases (HPP and LAL-D)

Neurological diseases

Because of the wide gaps in our understanding of what triggers neurological disease, there are more clinical setbacks in neurology than in almost any other area of drug development. Alzheimer’s is a good example. Following the latest failure, this time at the pharmaceutical company Eli Lilly, Biogen and Roche are the two players left with the most advanced clinical candidates. Probiodrug, a German company in BB Biotech’s portfolio that has been listed on Euronext since October 2014, is expected to release its first data from an effcacy study in 2017 for its furthest developed drug entity, PQ912. The results will determine the design of future studies and whether an alliance partner can be found. PQ912 targets pyroglutamate- Abeta, a protein molecule believed to trigger the buildup of toxic beta-amyloid plaques in the neurons of people with Alzheimer’s.

A new approach for treating chronic migraine is also showing great promise. One of the four companies with CGRP (Calcitonin Gene Related Peptide) inhibitors in the final stages of clinical development, and which could be introduced to the market in 2018, is Alder Biopharma, a recent addition to BB Biotech’s portfolio. Alder’s antibody ALD 403 blocks calcitonin, a peptide that triggers migraine headaches and the associated sensitivity to pain, light and noise. Another BB Biotech investment, Neurocrine Biosciences, is nearing a crucial deadline for its first pipeline product. On April 11, 2017, the relevant FDA offce will deliver the outcome of priority review of Ingrezza for approval in the treatment of tardive dyskinesia. Dyskinesia is characterized by involuntary movements occurring as a side effect of treatment with psychoactive drugs. There are no approved therapies for this neurological disorder, which affects 500 000 people in the United States alone.

Infectious diseases

Novel treatment approaches in recent years have transformed hepatitis C into an infectious disease with a permanent cure. The big breakthrough came with the approvals for Sovaldi in December 2013 and Harvoni in October 2014. Both drugs emerged from the laboratories of Pharmasset, a biotech company acquired by Gilead Sciences at the end of 2011. The novelty of the mechanism of action is that it prevents the hepatitis C virus from replicating. In clinical trials, administration of the drugs in a once-daily pill over a period of two to three months eliminated all traces of the virus in the blood in more than 95% of study patients. For Gilead Sciences, the two products amounted to a big success. Harvoni and Sovaldi together generated USD 19.1 billion in sales in 2015. The figures reflect the pricing clout that comes from being first to market. A course of treatment initially came with a price tag of USD 90 000 (gross) per patient. The launch of rival products – AbbVie’s Viekira Pak and Merck & Co’s Zepatier – has added to the competition and brought down prices. After discounts, the drugs now fetch net prices amounting to about 50% of the original list prices. Gilead countered recently with a triple combination, Epclusa, a pan-genotypic (i.e., covers every variant of hepatitis C) HCV therapy for 12-week treatment. Any further innovations can only be achieved through shorter treatment times with no loss of effectiveness. A flatter growth curve overall is likely in the medium to long term as market penetration rises.

While a new generation of drugs is already under clinical development in hepatitis C, a breakthrough in the treatment of hepatitis B is yet to come. Gilead is developing a drug candidate in clinical Phase III and is banking on the HIV drug Viread to replace its hepatitis B drug Hepsera when the latter’s patent expires. A three-drug combination is now the standard of care in the treatment of HIV. Gilead has topped sales rankings since 2007 for drugs that have transformed HIV infection from a fatal disease to a chronic medical condition, but is facing increasing competition from new products from GlaxoSmithKline. Gilead has launched three new drugs in this area since 2015, i.e., Odefsey, Genvoya and Descovy.