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Biotech: trials, tribulations and immunotherapies  

Immuno-oncology, which uses the immune system to treat cancer, has been hailed as the biggest advance in the fight against the disease since the development of chemotherapy.

Cancer immunotherapies, which create living drugs that grow inside the body to destroy tumours, were approved by regulators in 2014 and have given many desperately-ill patients hope. There is, however, a snag: at present immuno-oncology drugs are only effective on about a quarter of cancer sufferers.

As a result, pharmaceutical companies are exploring whether they can combine immunotherapies with other drugs – known as PD1 checkpoint inhibitors – to improve overall response rates.

“There is race where to find efficiencies within different combinations [in checkpoint inhibitors],” said CPR Asset Management portfolio manager Wesley Lebeau, who co-manages CPR Invest’s Global Disruptive Opportunities fund.

The Luxembourg-domiciled fund – which is distributed by Amundi – operates a multi-industry approach to disruption covering everything from AI to fintech to energy and life sciences and was launched at the end of 2016. It’s investments range in size from multinational giants to recently-listed Nasdaq small caps.

“We invest in how the world might be in the future,” Lebeau continued. “Instead of just looking at stocks or industries as they are today.”

Biotech investments

Investments in biotechnology – which uses biological processes to manufacture products intended to improve the quality of human life – currently make up about 5% of the fund’s portfolio, with a bias towards small and mid-cap companies that might develop into attractive M&A opportunities.

Lebeau expects the fund’s biotech investments to double over the next couple of years.

“The healthcare sector is at the crossroads of medical research and technology creating disruptive opportunities in areas like DNA sequencing, precision drugs, e-monitoring and new diagnostics,” he said.

“Over the next couple of years, we are going to see thousands of trials with different combinations of molecules. This is good for risk/reward and portfolio construction. More and more specific targeted diseases will come into scope so it’s going to be easier to invest in trials which are completely different from others.”

A key development in the immune-oncology space in the ability to test specific DNA mutations, Lebeau adds. “It means that you will not need to do a trial on a kidney or a lung or whatever. Instead, you will be able to do the trial on the specific DNA mutation – rather than the specific organ or body part – which is going to revolutionise how we test and adopt new drugs, he said.

“If you look at the capex and R&D investment that have been going into the immuno-oncology space in recent years it points to a lot of promising new drug developments.” 

Combined trials

The Global Disruptive Opportunities fund invests in multinational pharmaceutical groups – such as Merck, Roche or AstraZeneca – combined with investments in smaller listed biotech companies where research synergies can be found, in cutting-edge areas such immuno-oncology.

“A number of companies fall into this area with different technologies and approaches,” Lebeau Lebeau said.

Pharmaceutical giant Merck, for example, has successfully combined its checkpoint inhibitor with chemotherapy to improve survival rates in patients with lung cancer. But such combinations do not always work.

Merck also invested heavily in a trial that paired its drug with another experimental medicine developed by US biotech company Incyte in a closely-watched trial to boost survival rates in melanoma patients. However, Merck and Incyte announced in April that the trial had failed – and the share price of the two listed pharmaceutical companies tumbled.

CPR Invest’s Global Disruptive Opportunities fund has invested in both Merck and Incyte. “The idea was to look for a different combination with biotech and large cap pharmaceutical,” Lebeau said.

“We try to balance the risks of the approach with regards to the different trials and different data to see the different combinations that might enhance immuno-oncology-led drugs treatment.”

Another potentially revolutionary development in the field of immunotherapy is the CAR T-cell therapy which seeks to extract a patient’s blood cells, re-engineer them in a laboratory to identify and destroy cancer cells, and then re-insert them into the patient’s body. But despite its life-saving possibilities, some patients experience debilitating side-effects as might be expected in such as complex procedure.

Two versions of CAR T drug are on the market, made by Gilead Sciences and Novartis. Gilead acquired US biotech company Kite Pharma, which has been instrumental in developing the therapy last year for $11.9bn (€10.1bn).

The fund had investments in Kite Pharma. “We had the view that they were going to be bought because to you need scale to engineer the manufacturing processes needed for the CAR T-cell therapy,” Lebeau said. “Being part of a big pharmaceutical group is going to be quite helpful for them to develop drugs.”


David Robinson

David Robinson is the editor of Expert Investor. He has 18 years’ experience as a business journalist and editor. In the past he has written for the Guardian newspaper and The Telegraph, and worked as...

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