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Global Health and Biotechnology Fund
David Asplin June, 2001
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Why invest in Health? Superior long term capital growth
Defensive earnings Hedge against future liabilities
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Medicine - a healthy investment prospect
Ageing Populations Exceptional long-term growth Biotechnology revolution
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Elderly on the increase
Number of people aged over 65 in US (m) Source: US Census Bureau
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Sales growth driven by volume demand, not price
Source: IMS, Pharmaceutical Pricing Index Update
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Drugs save costs: ulcer treatment
Annual Costs per Patient Surgery Drugs 1970 First ulcer drug invented Only option Not available 1974 Surgery reduced by 80% 1980 $28,000 $900 (Tagamet Zantac) 1990 Antibiotics combination treatment $140
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Medicine - a healthy investment prospect
Ageing Populations Exceptional long-term growth Biotechnology revolution
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Biotechnology: what is it?
New(ish) area of medical research: Based more on biology than chemistry Companies sell: Drug discovery technologies (“tools”) Drugs
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Biotechnology then and now
Run by academics Capital constraints Few drugs Celebrated implosions Investor fatigue Now Experienced management 10yrs of capital inflows Technologies and products generating cash flows Strong balance sheets Demonstrated medical benefits Explosive growth phase just begun
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New technologies grow exponentially Genomics at an earlier stage than computing
Transistors/Sequences (m) Source: Intel, Genbank (US NIH), Colonial First State
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Biotechnology: commercial growth drivers
Big Pharma facing R&D productivity gap Pipelines too thin to sustain historic growth rates (viz. GSK, Roche) Huge demand for late-stage (Phase II/III) drugs Biotechnology companies striking tougher deals Traditional pharma research methods inefficient 95% failure rate for drugs $70bn market for providers of the new bio-technologies
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Biotechnology: commercial growth drivers - continued…..
Genomics / proteomics drives uptick in drug opportunities Previous century: 500 drug targets Next five years: 5000 new drug targets Focus now on sifting new targets to find which are “drugable” Some new drugs already produced (cancer, arthritis, sepsis, lymphoma)
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Biotechnology is already profitable
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Colonial First State Investments Global Health & Biotechnology Fund
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GHAB fund sub-sectors
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GHAB performance (+22.4% in first 10 months)
160 150 140 130 120 110 100 90 Jun 00 Jul 00 Oct 00 Jan 01 Apr 00 May 00 Aug 00 Sep 00 Nov 00 Dec 00 Source: Colonial First State, MSCI
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GHAB versus All Ordinaries
Source: Colonial First State, MSCI
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GHAB versus benchmark 90 100 110 120 130 140 150 160 Apr 00 May 00
Jun 00 Jul 00 Aug 00 Sep 00 Oct 00 Nov 00 Dec 00 Jan 01 MSCI Healthcare Index $A Colonial First State Source: Colonial First State, MSCI
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GHAB versus benchmark and biotech index
90 100 110 120 130 140 150 160 Apr 00 May 00 Jun 00 Jul 00 Aug 00 Sep 00 Oct 00 Nov 00 Dec 00 Jan 01 MSCI Healtcare index $A NASDAQ Biotech index $A Colonial First State Source: Colonial First State, MSCI
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Biotech decoupling from Nasdaq?
From 19 January 1998 To 12 February 2001 Weekly Rebased 1998 1999 2000 2001 1000 3000 4000 5000 6000 7000 8000 9000 NASDAQ COMPOSITE - PRICE INDEX NASDAQ BIOTECHNOLOGY - PRICE INDEX Source: Datastream
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Pharma stocks (Av. CAGR 15-17%)
We look for: Strong Revenue Growth Innovative drugs US exposure Strong R&D Pipeline Low profit margin risk Low patent risk Divestments rather than M&A
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World leading blue chip
Impressive drugs portfolio 7 drugs > $1bn 5 drugs > $500m No patent expiries for 5 yrs Global R&D World-class sales force From 11 February 2000 TO 12 February 2001 Daily FEB APR JUN AUG OCT DEC 30 32 34 36 38 40 42 44 46 48 50 HIGH / 7/00 LOW / 3/00 LAST 46.12 Source: DATASTREAM
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King: mid-cap “specialty” pharmaceuticals
KING PHARMS. From 11February 2000 To 13 February 2001 Daily Adds value to mature drugs Acquired 36 branded drugs since 1993 Big pharma co.s set to sell more Focus on promotion-sensitive drugs Big hit with heart drug - Altace Only ACE drug to reduce death rate Big marketing partner (AHP) Expect growth of 34% in Acquired Jones Pharmaceuticals Expanded sales force Improved Balance Sheet FEB APR JUN AUG OCT DEC 20 25 30 35 40 45 50 55 HIGH /12/00 LOW / 3/00 LAST 44.02 Source: DATASTREAM
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Biotechnology stocks (Av. CAGR 24%)
We look for: Partnerships with big cap pharma Platform technology Products Services Upfront payments Milestones License fees Royalties
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GHAB Biotech holdings (at 22/01/01)
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Millennium: world-class genetic “tools”: company
MILLENNIUM PHARMS. Contract genomics R&D boosts client’s R&D productivity $1.8bn fees from Big Pharma In-house drug development 5 products in clinical testing Leukaemia, stroke, asthma Leader “predictive medicine” From 11 February 2000 To 12 February 2001 Daily FEB APR JUN AUG OCT DEC 20 30 40 50 60 70 80 90 HIGH /11/00 LOW / 4/00 LAST 41.31 Source: DATASTREAM
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IDEC: drug-producing biotechnology company
Profitable First antibody (smart- bomb) for cancer (Rituxan) Radioactive version soon Good marketing partner - Genentech Good R&D pipeline 5 drugs in clinical development Focus on immune disorders IDEC PHARMACEUTICALS From 11 February 2000 To 12 February 2001 Daily 80 70 60 50 40 30 20 10 FEB APR JUN AUG OCT DEC FEB HIGH /12/00 LOW / 4/00 LAST 61.75 Source: DATASTREAM
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Global health & biotechnology shares in an investment portfolio
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A long-term history of strong returns
Annual investment returns of MSCI Health Care index to 31 December 2000 in Australian dollars Source: Morgan Stanley Capital International
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An attractive risk/return profile
Source: IRESS, MSCI. Calculated for period - 10 years to 31 December 2000
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Global health & biotechnology enhances returns from Australian shares
Source: Colonial First State, MSCI, IRESS. Calculated for period 10 years to 31 December 2000
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Global health & biotechnology enhances returns from global shares
Annual return (%pa) Annualised standard deviation (%pa) Source: Colonial First State, MSCI, IRESS. Calculated for period 10 years to 31 December 2000
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Summary: health stocks offer
Enormous long-term growth potential Defensive, stable earnings Revolutionary technology A hedge against future liabilities
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Disclaimer This information has been prepared without taking into account your particular financial situation. Before making an investment decision based on this advice, you should assess your own position, and if appropriate, seek the assistance of a financial adviser.
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