How to invest in the battle against ageing

MoneyWeek cover illustrationAs life expectancy increases, pharmas and biotechs pioneering treatments for the diseases of old age will profit handsomely, says Matthew Partridge.

If one statistic demonstrates our material progress over the past century more than any other, it’s life expectancy. If you were born in Britain in 1900, you could expect to die before you turned 50. Those born on the eve of World War II could hope to make it to 60. Today’s newborns have an average life expectancy of 78.3 years – and one in three will live to be 100, according to the Office for National Statistics.

Some of this is down to a drop in infant mortality. But the expected lifespan of those aged 65 and over has also risen. And it’s not just in wealthy countries.

As poorer nations play catch-up in terms of income, life expectancies are also rising. Asia has seen the biggest jump, going from 41.2 in 1950-1955 to 68.9 in 2005-2010, according to data from the United Nations Population Division. Latin America and the Caribbean have seen an increase of around 20 years over the same period.

In Africa, the Aids epidemic has masked improvements to an extent, but life expectancy is still more than 15 years higher than it was in the 1950s, and nearly five years higher than in the 1980s.

Growing prosperity and fewer premature deaths are clearly good news. However, as more and more of us are surviving long enough to realise, a longer life doesn’t necessarily mean a better overall quality of life – especially during those ‘extra’ years. Already two-thirds of UK hospital admissions involve the over-65s. This group also accounts for 70% of emergency bed use and more than half of all health-care spending.

As for the US, in 2012 the Centers for Disease Control and Prevention estimated that a quarter of those over 65 suffered from “fair or poor health”, compared with 10% of the population at large. A similar proportion of over-65s had visited a hospital emergency room at least once in the previous year.

All of this means that ageing populations will continue to present major challenges for health services and cash-strapped governments across the globe. However, it also represents a big opportunity for pharmaceutical and biotech companies.

None of us is getting any younger. That means ever-increasing demand for new ways to treat the diseases of old age – and relentless public pressure to dedicate resources to finding such treatments.

Some interesting – and potentially lucrative – research is taking place into three particularly common and damaging conditions: Alzheimer’s disease, osteoporosis, and strokes.

Alzheimer’s disease

Alzheimer’s disease is one of the most brutal age-related conditions of all. It involves the progressive degeneration of the brain, causing sufferers gradually to lose their memories and cognitive abilities. As the disease progresses, many experience mood swings and confusion. Towards the end, they lose the ability to perform simple tasks, such as feeding themselves, and may be unable to speak.

Because those with the disease will eventually need constant care, Alzheimer’s is emotionally draining and painful for both the patient and their close friends and family. It also places a heavy burden on social care systems.

Changes to behaviour, such as exercising more and avoiding smoking, can cut the risk of getting the disease. There is also evidence that taking part in socially and intellectually stimulating activity can slow down the onset of the disease.

But keeping fit and mentally active can only do so much – even the most optimistic studies suggest at least two-thirds of cases are not lifestyle related.

And social activity may only mask symptoms, rather than changing the overall outcome.
In America alone, the number of new cases is expected to rise from 4.8 million a year in 2010 to 13.8 million by 2050. According to the Alzheimer’s Association, the direct cost of treatment and social care for these patients is currently $214bn.

At this rate, the financial cost could reach $1.2trn dollars a year, never mind the scale of the human impact. So finding effective treatments is vital if we are to keep health-care costs under any sort of control.

So far, there has been little success. Researchers at Cleveland Clinic’s Lou Ruvo Center for Brain Health estimate that only one even modestly successful drug has emerged from 244 separate trials, a failure rate of 99.6%. But this may be about to change, thanks to some recent breakthroughs.

Many researchers believe Alzheimer’s might be treatable, if it is caught early enough. The problem here is that existing tests for the disease are expensive, and so not widely used. But two separate teams of researchers have now developed eye tests that look for a build-up of ‘tau proteins’, that have been linked with the disease.

While both tests produced a few false positives (people who didn’t have the disease) in clinical testing, they correctly identified all of those who were in the early stages of Alzheimer’s.

This means we now have a procedure that could be used as a cheap initial screening device. Those who were flagged up by the tests would then be targeted for more detailed and costly examinations, such as brain scans.

If these tests do make it easier to detect the disease early on, they could potentially be used in conjunction with a promising drug that may reach the market in the near future. This drug, Solanezumab, is being developed by the US pharmaceutical giant Eli Lilly & Co.

While a recent late-stage trial found that it had little impact on the progress of the disease in general, Solanezumab did work to slow down Alzheimer’s in its early stages.

A new ‘phase-three’ trial (phase-three trials represent the final stages of testing for a new drug, though many drugs at this stage still fail to get to market) has begun at the University of Kansas Medical Center. This test is aimed at those who have no symptoms, but do have plaques in their brain that many believe are an early warning sign.

Of course, what would be even better than early detection, or an improved treatment, would be a vaccine for those in groups who are at risk.

In January, biotech group AC Immune began trials of a vaccine (ACI-35) that aims to stimulate the body’s immune system against the aforementioned tau proteins. It is also trialling another vaccine (ACI-24), which targets plaques. Early tests suggest it can aid the destruction of plaques, and even help restore memory.

Osteoporosis

Osteoporosis is another progressive disease that targets the elderly. It reduces the density of bones, and is particularly common in women over 50. There are an estimated 75 million sufferers in Europe, Japan and the US.

In advanced cases, sufferers end up with a curved spine, causing them to stoop and forcing them to use a walking stick, frame, or even a wheelchair. It also makes sufferers’ bones brittle and far more vulnerable to breaking – in the UK alone, the condition is thought to be responsible for around 300,000 people a year being admitted to hospital with fractures.

While the condition is not directly fatal, it can have a major impact on quality of life. Broken hips are a particular problem, causing tremendous pain and drastically reducing mobility.

Around a fifth of elderly people who break a hip die within a year, while another 30% are forced into nursing homes. Overall, only 30% manage fully to recover from osteoporosis-related fractures.

A key problem with treating the condition is that it’s often picked up far too late, with diagnosis only occurring after a patient suffers a fracture (or in some cases, several). An Australian study suggested that only one in five women who had a post-menopausal fracture – a strong indicator of osteoporosis – were on appropriate treatments.

This ties in with similar findings that suggest that only around 20% of those with osteoporosis have been properly diagnosed. As a result, sufferers are denied the opportunity to take drugs that could slow bone loss in the early stages.

To try to detect the disease earlier, doctors increasingly use DEXA-BMD machines, which measure bone density via a body scan. Again, the problem is that these scans are pricey. So Californian firm Active Life Scientific has developed an alternative.

It uses a device contained in a syringe needle. This is inserted into the bone, with the needle’s penetration used to analyse the bone’s vulnerability to fractures. Already used by the Mayo Clinic, the hope is that this will be a cheap and reliable alternative to DEXA machines.

Several improved treatments are also being developed, such as Romosozumab, produced jointly by Amgen and UCB Pharma. This drug works by reducing the production of a hormone that slows bone growth. The hope is that this will boost production of new bones, rebuilding the damage caused by osteoporosis, rather than just slowing it down.

Preliminary results suggest the drug is extremely effective. At the moment it is going through phase-three trials, with final results expected in around 18 months.

Strokes

Strokes, where the flow of blood to the brain is temporarily cut off, affect a large number of elderly people. Only 5% of stroke victims are younger than 45, and two-thirds are over 65.

Strokes are the second most common cause of death (behind heart disease), but even when the victim survives they may be left with short- or long-term brain damage, including loss of speech and co-ordination. This means there are large secondary costs in terms of increased need for social care.

Many strokes occur when the blood vessels leading to the brain become blocked. As a result, the anticoagulant warfarin is regularly used to thin the blood. However, too high a dose of warfarin causes bleeding within the brain, which itself can lead to strokes.

And because the differences between the minimum effective dose and an overdose are so small, the level in the body has to be monitored constantly.

Warfarin also reacts in unpredictable ways with alcohol and other medications – not to mention the fact that it is also toxic, with long-term potential side effects, including gangrene and osteoporosis. So you can see why there’s demand for an alternative.

One safer, more effective treatment getting a lot of attention is Edoxaban, produced by the Japanese drug firm Daiichi Sankyo. Studies at the end of last year suggested that it cuts the risk of bleeding by up to half. While it resulted in slightly more strokes, the overall number of deaths among users was markedly reduced.

Another benefit is that patients are only required to take one pill a day. Already approved in Japan, Edoxaban is currently being considered by regulators in the US and EU, and is expected to be approved by both bodies.

Despite progress in prevention, those experiencing acute strokes have few treatment options, apart from clot-busting drugs and brain surgery. But scientists at University of Texas Southwestern Medical Center have recently found that drugs that block a key brain enzyme that helps nerve cells to communicate could limit the impact of strokes on the brain.

The therapy was so effective that when it was used on rats who had been deprived of oxygen for an hour, the majority of their brain function survived undamaged. We look at firms that could potentially profit from treatments for these three conditions below.

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Aim-listed Kromek (Aim: KMK) specialises in scanning technology based around cadmium zinc telluride crystals.

The benefit of this approach is that it produces higher-quality images with lower levels of radiation than other X-ray technologies. Its main product is a DEXA-BMD machine that detects creeping osteoporosis by measuring patients’ bone density.

But as well as its medical devices, Kromek is developing technology that can be used in airport security to detect explosive liquids, currently a major concern.

It is currently trading on around 11.3 times 2015 expected earnings. Dr Mike Tubbs, who writes the Research Investments newsletter, also strongly tips them.

Another company working in the osteoporosis field is Belgian group UCB (Belgium: UCB). One of its most promising drugs is Romosozumab, developed in partnership with Amgen, which aims to help the body rebuild bone lost through osteoporosis.

UCB also has a range of other treatments, which include Epratuzumab (which has had strong preliminary results in lupus patients) and epilepsy drug Brivaracetam. This strong pipeline more than compensates for the fact that it trades at 20 times 2016 earnings.

Biotech company Sangamo BioSciences (Nasdaq: SGMO) is conducting interesting work on Alzheimer’s. The company is carrying out phase-two (mid-stage) trials of CERE-110, which uses a virus to insert a gene into the brains of Alzheimer’s patients.

The hope is that this gene will protect and regenerate those neurons particularly affected by the condition. Results are expected next year. Other therapies include a gene therapy that helps the body fight the HIV virus, potentially removing the need for medication.

While the company hasn’t made any profits yet, it raised cash through a share offering in the spring. It also has partnership agreements with Shire and Biogen, which should help defray expenses.

Proteome Sciences (LSE: PRM) is a British biotech firm. Earlier this month it made headlines when it announced that it had developed a blood test that could predict the likelihood of Alzheimer’s disease with 87% accuracy.

While other groups are developing eye tests, their development is far less advanced than Proteome’s research. So if these results were replicated in further studies, Proteome’s product would become the standard test for several years.

Like Sangamo, the lack of profits makes this a highly risky investment. However, Edison Investment Research expects sales to grow at an annual rate of 80% until 2016.

Athersys (Nasdaq: ATHX) focuses on MultiStem, a range of adult-stem-cell-derived treatments for various conditions. One such treatment is designed to reduce the impact of strokes, with the hope that it could help the brain to repair the damage that strokes cause.

At the moment, the treatment is in phase-two trials and is due to report at the end of this year. While a recent trial for ulcerative colitis proved a failure, it did demonstrate that there are no side effects from the procedure. Athersys has $45m net cash on hand, which should help it bring any successful products to market.

ReNeuron (LSE: RENE) is also investigating the use of adult stem cells in combating the effects of strokes. A trial involving the Institute of Neurological Sciences, at Southern General Hospital in Glasgow, suggested that it is a viable treatment.

Specifically, it found that there was no evidence of additional side effects and that the therapy reduced the level of patient impairment. As a result a larger study has started, involving ten major UK treatment centres. The company currently has enough funds to last until the fourth quarter of 2016.

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