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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 is a branch of medicine dealing with cancers, of which there are more than 150 different kinds. Novel targeted therapy and immunotherapy approaches developed in biotech labs are taking their place alongside conventional treatment and have massively improved patient survival rates in some cases. There is still a vast unmet medical need for new, more effective therapies in oncology. In continuation of an ongoing trend, the greatest advances are expected from the various immunotherapy approaches. Incyte Pharma, Macrogenics and Five Prime Therapeutics are among the top biotech firms involved in developing a new class of drugs called checkpoint inhibitors.

In terms of pivotal regulatory trials, all eyes are on our core investment Incyte, which plans to present top-line results for Epacadostat in the treatment of melanoma by mid-2018. The biggest recent breakthrough has been a gene therapy technology based on chimeric antigen receptor T-cells (CAR-T). Immune cells taken from a patient are genetically engineered to target and destroy cancer cells and then re-infused to the patient. Unlike with conventional treatments, clinical trials of CAR-T therapies have demonstrated a complete disappearance of cancer cells in up to 40% of patients who were no longer responding to standard-of-care treatments. Pioneers of CAR-T therapy include our portfolio investments Juno Therapeutics and Kite Pharma. 2018 will be a crucial year for Juno Therapeutics if JCAR017 is approved to treat non- Hodgkin's lymphoma. Kite Pharma was acquired by our longtime core investment Gilead Sciences in August 2017. The product developed by Kite was granted US FDA approval two months later under the brand name Yescarta. Yescarta's earning power could soar to new heights if the product receives EU approval in 2018.

US company Agios specializes in anticancer drugs that attempt to exploit the differences in metabolism between cancer cells and healthy cells. The company's main efforts have focused on IDH proteins in acute myeloid leukemia (AML). Agios filed for US FDA approval of ivosidenib (an IDH2 inhibitor) for the treatment of relapsed/refractory AML in December 2017.

Orphan diseases

Orphan diseases are rare conditions that affect no more than 5 out of 10 000 people. More and more biotech companies are engaging in research & development in orphan diseases. Half of the medicines approved last year were developed for this sector. Therapies for inherited rare diseases (orphan diseases) have seen a number of seminal breakthroughs in recent years. The top beneficiaries included our three of our portfolio companies: Ionis Pharmaceuticals, Alnylam Pharmaceuticals and Vertex Pharmaceuticals.

Our core investment Ionis specializes in antisense RNA technology, which is a natural means to control the production of a protein through its genetic code. In collaboration with Biogen, Ionis launched its first potential blockbuster in late 2017 with the approval of Spinraza for the treatment of spinal muscular atrophy. 2018 could be the year Ionis achieves the ultimate breakthrough in the commercialization of its antisense platform if the two products Inotersen and Volanesorsen are approved. The latter is commercialized by Akcea.

Alnylam’s share price more than tripled in the space of a year. The major catalyst here was the announcement in September 2017 of positive top-line results for Patisiran for use in the treatment of TTR amyloidosis, a condition resulting in damage to the nervous system or the heart muscle. Alnylam filed for approval in December 2017 and is expecting approval decisions for the US and Europe in the second half of 2018. Pivotal regulatory data for Givosiran, a drug to treat acute hepatic porphyria, should be out by mid-2018. Alnylam has constructed its product pipeline around its proprietary technology platform for developing therapeutics based on RNA interference (RNAi). This treatment approach selectively blocks the synthesis of specific disease-causing proteins.

Vertex has successfully established itself in a medical and commercial niche market. The company's two drugs Orkambi and Kalydeco for the treatment of cystic fibrosis, a metabolic disorder of the tissues lining the respiratory tract caused by a genetic mutation, are generating billions in sales revenues. New sources of revenue could be tapped in 2018 if a new combination therapy is approved.

Neurological diseases

Neurological diseases include conditions such as Alzheimer’s, Parkinson’s and multiple sclerosis for which few effective treatment options currently exist. Biotech firms are starting to deliver new treatment approaches for neurological disorders and may help in this way to meet the high unmet medical need.

For many years, neurology was a medical sector in which the setbacks in pivotal clinical trials far outnumbered the successful outcomes. The latest development at our portfolio company Sage Therapeutics is proof, however, that a product candidate that has failed to show the hoped-for clinical activity in one therapeutic indication can still make a huge breakthrough in a different disease area. The US biotech company has specialized in drugs that modulate GABA and NMDA receptors on neurons. Its stock price came under pressure in September 2017 when Brexanolone, the most advanced candidate in the pipeline, failed to achieve clinical trial endpoints in the treatment of super refractory status epilepticus, a life-threatening seizure condition in epilepsy patients. The positive turnaround came in November following the publication of very good efficacy data for Brexanolone in the treatment of women with moderate to severe depression after childbirth (postpartum depression, PPD). More good news followed in December with the announcement of positive top-line efficacy results from a clinical trial in patients with depression. An approval decision for the injectable drug in PPD is expected in 2018. The nextgeneration product for oral use, SAGE-217, is also being tested for PPD and major depression, essential tremor and Parkinson’s disease. Promising Phase II results in major depression were reported in December 2017.

Neurocrine Biosciences, another BB Biotech investment whose focus areas include neurological disorders, has also delivered a stellar stock performance. Neurocrine received the green light from the US FDA in early 2017 for Ingrezza for the treatment of tardive dyskinesia. Dyskinesia is characterized by involuntary movements occurring as a side effect of treatment with psychotherapeutic drugs. Another milestone in the company’s history is awaited in 2018 with the decision on US approval of elagolix for endometriosis (a painful condition where the tissue lining the uterine cavity grows outside the uterus). Elagolix is expected to generate billions in peak annual sales. Neurocrine licensed the product to pharmaceutical company AbbVie and would receive royalties on product sales if approval is granted.

Metabolic diseases

Metabolic diseases may be hereditary or acquired. The spectrum ranges from «lifestyle diseases» like diabetes to rare, fatal hereditary disorders. The Western lifestyle, i.e. a high caloric intake combined with a lack of physical activity, has over the past few decades led to a condition called metabolic syndrome, which isa life-threatening risk factor for coronary heart disease.

Most drug development activity in the metabolic disease area focuses on the treatment of diabetes. New drugs in combination with monitoring devices are a stepping stone along the difficult and ultimately perhaps insurmountable path to developing an artificial pancreas. The new systems are designed to enable patients to regulate their blood sugar and insulin levels on a continuous basis in future and thus prevent life-threatening deviations from normal levels.

Type 2 diabetes mellitus is the most common disorder of blood glucose metabolism, accounting for 90% of diabetes cases. New agents such as SGLT2 inhibitors, DDP-4 inhibitors and GLP-1 receptor agonists are being developed to regulate insulin levels in type 2 diabetes. In addition, the drug class of GLP-1 receptor agonists also promote weight loss. This drug class, like SGLT2 inhibitors, leads to a definite reduction in obesity-related mortality, the rate of which is increased in people with diabetes.

The Danish pharmaceutical company Novo Nordisk is the global market leader in insulins with a market share in excess of 40% and is also at the very forefront of the GLP-1 analogue market. With its broad diabetes drug portfolio, the company achieves operating margins far above the pharmaceutical industry average. Ozempic, the GLP-1 agonist approved in the US in early December, gives Novo Nordisk excellent chances of sustaining their leadership for a long time. While the product has been available to date for administration with a once-weekly injection pen, Novo Nordisk plans to submit top-line results for Ozempic in tablet form during the course of 2018. If Ozempic in this more patient-friendly form receives approval, there is a good chance that the product will advance to become the top-selling diabetes drug outright.

Infectious diseases

Infectious diseases have declined due to improved hygiene, vaccines, and the use of antibiotics, but new epidemics still break out. Biotech drugs have transformed potentially fatal infectious diseases into chronic conditions with a practically normal life expectancy (HIV) or cured them outright (hepatitis C).

Thanks to the latest treatments, hepatitis C is now a curable infectious disease. The new drugs are taken in pill form once a day over a period of several months and eliminate the virus completely in more than 95% of all cases. Gilead Sciences is the undisputed market leader with a global market share of more than 60%. Its three drugs Harvoni, Sovaldi, and Epclusa generated aggregate sales of USD 12.8 billion in 2016. However, Gilead can no longer take advantage of its first-mover status on the pricing front, as it was able to do when it launched Sovaldi and Harvoni. Net prices for the drugs, after discounts and other concessions, amounted to less than half of the initial listing price of USD 90 000 per patient. After regulatory approval was granted to other products, the market is now split between Gilead and the pharma manufacturers AbbVie and Merck & Co. In view of the growing market penetration rate as the number of cured patients rises, the slowdown in market growth observed over the past few quarters will gain momentum going forward. New products entering the market will only be able to capture some market share if they shorten the treatment time while delivering the same effect or, in other words, if they offer a complete cure at lower cost.

In the global market for HIV drugs, which have turned this once fatal disease into a chronic medical condition, Gilead has topped the global sales rankings since 2007, but it is facing increasing competition from GlaxoSmithKline’s new drug combination therapies. Approval of Gilead’s B/F/TAF combination HIV therapy in the US and Europe in 2018 could lead to a renewed upturn in sales. In the anti-inflammatory market, Celgene and its promising Ozanimod treatment are on the verge of a breakthrough. An FDA decision on Celgene’s filing of Ozanimod for the treatment of multiple sclerosis (MS) will be announced in 2018. The key question is whether Ozanimod can demonstrate the same efficacy and a more favorable safety profile than Gilenya, a competing product from Novartis that has already been approved.

Cardiovascular diseases

Cardiovascular diseases are still the leading cause of death worldwide. A westernized lifestyle is one of the main risk factors. Timely prevention, detection, and treatment are major goals. New treatment approaches from biotech labs stand to benefit patients and the healthcare system. In the United States alone, more than 10 million people need new medicines because conventional treatments have failed to achieve cholesterol reduction targets.

Cholesterol-lowering drugs are one of the most lucrative drug classes from an investor's point of view, although the market for these drugs is also fiercely competitive. Amid eroding prices for chronic disease drugs, new cholesterol-lowering drugs have blockbuster potential provided they are an alternative to statins, which inhibit cholesterol synthesis in the liver.

A new mechanism of action developed by Regeneron Pharma and Amgen is based on monoclonal antibodies that inactivate the protein PCSK9. This enables LDL receptors to develop more effectively, with the result that liver cells are better able to absorb and degrade harmful LDL cholesterol. PCSK9 inhibitors can reduce cholesterol levels by up to half. The primary target group for the agent is high-risk patients in stable health with a history of heart attack or stroke. Another BB Biotech portfolio company, Alnylam, has developed a new therapeutic approach that switches off specific gene fragments that cause disease. Ionis Pharma has already received marketing authorization for Kynamro, a lipid lowering agent, in a niche indication, and is conducting clinical trials with another drug candidate based on the company's proprietary antisense technology platform.

Among the companies in BB Biotech's portfolio, Esperion Therapeutics has the most exciting potential stock catalysts going into 2018. The active substance bempedoic acid for oral use is intended mainly for patients who are unable to tolerate conventional statins or who still have high cholesterol despite statin treatment. This catalyst will depend on whether the next clinical readings for the substance as monotherapy and in combination with Ezetimibe are sufficient to obtain fast-track approval next year.