Growth, innovation and investment opportunities in the battle against cancer
Investors looking for an attractive investment opportunity in health care should consider the oncology market. Oncology is the most important and one of the fastest-growing categories in the pharmaceutical industry. The need for new and better treatments continues, and so does the commercial opportunity.
Health care, with oncology as the dominant category, is an indispensable and innovative sector in our society.
Liesbeth Van Rompay, Thematic Portfolio Manager KBC Asset Management
Why oncology is and continues to be important
In Belgium alone, thousands of people battle cancer every year. And despite great progress in recent years, cancer remains the second leading cause of death worldwide, after cardiovascular disease. Oncology therefore dominates the pharmaceutical market and pipeline. ‘Oncology accounted for some 44% of the clinical trials launched last year. In total, no fewer than 200 oncology drugs have been launched over the past ten years,’ says Liesbeth Van Rompay, Thematic Portfolio Manager at KBC Asset Management.
‘The already immense oncology market is forecast to continue growing strongly, driven by factors such as an ageing population and the associated increase in disease incidence,’ Van Rompay adds. Despite huge R&D efforts, many treatments are often still unable to provide a cure. The disease continues to impose a heavy burden, both human and economic. Hence the need for new and better treatments, and hence the commercial opportunity.
Pioneering innovations will ensure growth
We continue to rely largely on traditional chemotherapy to treat cancer, despite its shortcomings. Chemotherapy indiscriminately damages not only the cancer cells but also healthy tissues in the body, which can lead to hair loss, nausea or anaemia.
A wide array of innovative technologies and molecule types are being thrown into the fray to treat patients.
Liesbeth Van Rompay, Thematic Portfolio Manager KBC Asset Management
‘Fortunately, we are learning more and more about the disease process and possible underlying genetic causes of many cancers. New therapies, such as immunotherapy or 'smart chemotherapy' focus on improving outcomes and quality of life for cancer patients,’ says Van Rompay. ‘The increase in life expectancy of cancer patients is largely due to advances in cancer screening, disease management and treatment.’
- Immunotherapy
Many cancers inhibit the body’s immune system, allowing cancer cells to grow undisturbed. Most patients receiving immunotherapy are given ‘checkpoint inhibitors’. These drugs remove the ‘brake’ that is applied by the cancer cells, effectively ‘resetting’ the body’s immune system, which is reactivated to recognise and destroy the cancer cells. The body’s defensive cells will continue to recognise and attack cancer cells throughout your entire life, provided they do not mutate. ‘An example of a checkpoint inhibitor is the drug Keytruda from the US biopharmaceutical company Merck & Co,’ says Van Rompay. ‘Keytruda is the most valuable oncology drug right now. It is used to treat various types of cancer. It can be used alone or in combination with other drugs to treat advanced cancers, cancers that have spread within the body or cancers that are no longer responding to conventional treatment. Keytruda generated revenue of around 25 billion USD in 2023. That’s an increase of around 20% compared to 2022.’
The breakthroughs in immunotherapy are promising and could accelerate cancer research efforts.
Liesbeth Van Rompay, Thematic Portfolio Manager KBC Asset Management
‘There are several types of immunotherapy. Many of them are still in development and are therefore only available in research settings,’ Van Rompay adds. ‘With cancer vaccines, for example, the patient's own immune cells are manipulated in a laboratory to enable them to better recognise and destroy cancer cells.’ Immunotherapy unfortunately does not yet work for everyone, but the research continues. Specialists are learning more and more, and the number of patients who benefit from immunotherapy is growing.
- Smart chemotherapy using Antibody Drug Conjugates (ADCs)
Antibodies are an important part of the body’s immune system. Smart chemotherapy combines antibodies with traditional chemotherapy drugs to target cancer cells much more accurately, limiting the damage to healthy tissues.
‘Think of it as a kind of biological missile,’ explains Van Rompay. ‘Antibody drug conjugates, or ADCs, combine the best of both worlds: the precision of targeted therapy and the power of traditional chemotherapy. The antibodies work as a kind of tracker that detects the cancer cells very specifically, after which the chemotherapy destroys the cancer with an ‘explosive charge’.’
Large biopharmaceutical companies are increasingly aware of the huge potential of ADCs. Look at Pfizer's recently announced acquisition of Seagen, for 43 billion USD. Investment is bound to accelerate, given the widespread expiry of patents in the biopharma sector by 2028.
Liesbeth Van Rompay, Thematic Portfolio Manager KBC Asset Management
The ADC technology and market are evolving rapidly, as borne out by the exponential growth in ADC drug development. ‘The first ADC drug was approved in 2000. However, it took almost 20 years to perfect its action,’ says Van Rompay. Today, we are on the cusp of a rich period of clinical data. ‘Smart chemotherapy has the potential to eventually replace conventional chemotherapy, opening up a market of more than 140 billion USD, compared with a base of 5 billion USD in 2022,’ says Van Rompay.
Artificial intelligence (AI) is playing an increasing role
As well as already being widely used to develop new drugs faster, AI can also improve cancer diagnosis, prognosis and treatment. AI processes images very accurately and can detect tiny cancer nodules or lesions at an early stage, at levels that are sometimes overlooked by the human eye. It integrates personalised genomic and biomarker information and guides the best treatment algorithms for each patient. AI can also improve the integration and effectiveness of new therapies such as ADCs.
‘A practical example is Google Health's AI-powered system,’ says Van Rompay. ‘This is being deployed in breast cancer screenings, for example, enabling radiologists to detect breast cancer more quickly and consistently. The AI system was trained using thousands of anonymised mammograms, with the aim of learning to recognise the complex characteristics of cancer. In new mammograms, AI can then spot signs of breast cancer that some specialists might not yet be able to see with the naked eye.’
Opportunities for investors
‘The oncology market is dominated by biopharmaceutical companies, such as AstraZeneca, Merck & Co orGenmab,’ Van Rompay says.
Many of the leading players in oncology have achieved impressive results in recent years.
‘The oncology market is also very competitive and dynamic, with the expiry of patents and the entry of biosimilars (ed.: a biological drug that is similar to the original whose patent has expired),’ Van Rompay adds.
The sector still has great potential, helped by continued innovation and advances in biotechnology.
Liesbeth Van Rompay, Thematic Portfolio Manager KBC Asset Management
Investing in health care can therefore make more sense than ever. ‘We use health care regardless of the stock market climate,’ explains Van Rompay. People get sick whatever the economic conditions, creating a constant demand for care. ‘Moreover, the growing focus on health is one of the megatrends on KBC's radar. People are living longer, leading to increased demand for health products and services. Technological advances and a host of new biological discoveries are providing sustained support for that growth.
Cancer can affect anyone. In this sense, investing in oncology can not only be financially rewarding, but also supports a noble cause. ‘As an investor, by investing in oncology you are contributing a little to the future of our health care sector,’ concludes Van Rompay optimistically.
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This article is informational only and should not be considered investment advice.
