The next big investment theme could be a cancer treatment

by  Lucinda Shen

One of the most promising long-term investment opportunities could be a cancer treatment known as immunotherapy, according to UBS’s global chief investment officer.

“This emerging science offers the potential for attractive returns,” said Mark Haefele, who overseas the investment policy and strategy for $2 trillion.

Immunotherapy is an increasingly popular cancer treatment that, roughly put, trains the body’s immune system to aggressively attack cancerous cells that wouldn’t ordinarily be recognized as threatening.

The immune system often overlooks cancer cells, but multiple types of immunotherapy have been developed in the past decade to address that.

Some treatments create proteins that bind to cancerous cells, marking them for the immune system. Another treatment involves extracting the white blood cells most active against tumors in the patient’s body, and genetically modifying the cells to specifically attack cancerous cells.

‘A hope they couldn’t have fathomed’

The treatment came into focus just a few years ago, when clinical trials started showing promising results. In a 2013 test by Bristol-Myers Squibb, 22% of the 1,800 advanced melanomapatients treated with immunotherapy Yervoy were alive three years later.

“For physicians accustomed to losing every patient with advanced disease, the numbers bring a hope they couldn’t have fathomed a few years ago,” wrote Jennifer Couzin-Frankel for Science Magazine, after naming cancer immunotherapy as the breakthrough of 2013.

“The market for cancer treatments is expanding rapidly as populations age, and governments, insurers, and individuals are spending more on treatments that can extend life,” Haefele said.

“The spending per cancer patient rose by about 60% between 2010 and 2014 in the US, Germany, and Canada.”

For many, the promising technique could offer another chance for patients that have exhausted traditional options. And the therapy is expected to cost nearly double the average per patient rate in the US.

“Early versions of immunotherapies can be expected to command a high price – upward of $100,00 per patient per year,” Haefele wrote.

Wall Street has already caught on. The first ETF dedicated to tracking companies that develop and research the treatment, the Loncar Cancer Immunotherapy Index, began trading on the Nasdaq exchange in October.

Biotech giant Amgen gained FDA approval for its immunotherapy drug targeting leukemia, Blincyto, in 2014. Large-cap pharmaceutical company AstraZeneca also has a heavy platform in immunotherapy. The company struck a deal with Sosei’s biotech unit for the right to start experimental treatment with immunotherapy in August in a deal that could be worth upward of $500 million.

In recent months, Germany’s Merck & Co. gained accelerated FDA approval for its immunotherapy treatment for lung cancer, Keyruda. Embattled Canadian pharmaceutical giant Valeant also owns the rights to a metastatic prostate cancer immunotherapy known as Provenge.

And Business Insider reported this week that Bristol-Myers Squibb had received FDA to expand the use of a new type of immuno-oncology drug.

“We believe some of these drugs will hit the market in the coming two years with multi-billion dollar sales potential,” Haefele said.

“Companies highly exposed to successful immunotherapy drugs are likely to offer above-GDP earnings growth, elevated returns on capital, and growing dividends.”



Nuria Pujol