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The Macro Brief – Future healthcare in focus
418 Plays1 day ago
From the rise of anti-obesity drugs to the impact of AI, Rajesh Kumar, Senior Global Life Sciences & Healthcare Analyst, looks at how the global healthcare industry is evolving at pace.
Click here for appropriate Disclosures, including analyst certifications, and Disclaimers that must be viewed with this podcast: https://www.research.hsbc.com/R/101/zWdnMjW
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Transcript
Introduction and Macro Brief Overview
00:00:00
Speaker
Healthcare spending is not seen as discretionary. For obesity, a lot of people are paying out of pocket now. What we don't know, this is the first time we'll test it how cyclical the sales of these obesity drugs are.
00:00:25
Speaker
This is the Macro Brief from HSBC Global Investment Research where we look at the issues driving financial markets across the world.
Healthcare Industry Evolution
00:00:32
Speaker
I'm Peter Stegall in London. Now, the global healthcare industry is evolving at pace. An ageing global population is creating new demands at the same time as technological advances promise to revolutionise treatment for conditions from obesity to HIV, triggering a wave of investor interest.
00:00:49
Speaker
These are among the reasons why future healthcare is the latest addition to our nine themes, the nine long-term drivers of change we track here at HSBC Global Investment Research. So to discuss the sector, I'm joined by Rajesh Kumar, Head of Life Sciences and Healthcare Equity Research. Rajesh, it's your first time joining the podcast. Welcome to the studio.
00:01:09
Speaker
Lovely to be here. Thanks, Peter, for having me. So Rajesh, why is there so much investor focus on healthcare today?
Key Healthcare Investment Areas
00:01:16
Speaker
If we look at what we're going through right now, we have got some phenomenal cancer drugs which are all coming close to their patent cliff. So a lot of investors are trying to work out which next generation cancer drugs are going to replace them, right, or improve on them. So healthcare investors want to know...
00:01:40
Speaker
whether it's antibody drug conjugates or, you know, some new types of antibodies which are called bispecific antibodies being developed by many companies which will improve upon these immuno-oncology drugs.
00:01:55
Speaker
The other area of focus, obviously, is on the weight loss medications. We have drugs which work beautifully and, you know, give phenomenal weight loss to a large proportion of people with BMI ah over 30 in many cases, over 27.
00:02:13
Speaker
And what we're trying to work out is how we can improve on them. They seem near perfect. And on autoimmune or immunology side, you you are already seeing, you know, ah the current generation of drugs which work on... be it irritable bowel syndrome or, you know, plague psoriasis, they work quite well. But then how do we improve on them? And at the moment, less than 20% of patients get treated by biologics. So how can we make these drugs oral and improve the access? So those are three main therapeutic areas where people are excited.
Oral Medications and Accessibility
00:02:52
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Then
00:02:53
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You know, if we can talk about drugs, we can go on talking for days and days and we'll not run out of topics. So there's a lot of innovation around the world, a lot of R&D dollars going into it and quite an exciting space to be looking at.
00:03:07
Speaker
So when you say a move to oral, that's a move away from injected drugs to drugs that patients can take in their own time, slightly less intrusive. Is that right? Yes, exactly. So at the moment, for example, you've got a drug, Skyrizi, which works in you know psoriasis. It works in but many other autoimmune indications, and people have to you know take these injectables, right? So the companies are trying to make subcutaneous versions of it so that patients can start more easily. But then there are other companies which are coming up with, you know, once annually or even, you know, an oral drug which works in the same indication. So that that will definitely increase the number of patients who can take it.
00:03:54
Speaker
So you spoke about obesity
Obesity Treatments Market Impact
00:03:56
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treatments there. Remind us, how did the latest generation of obesity treatments emerge and what was the market reaction? It has been a very interesting journey. None of the companies had thought that demand would be so great. And then let's not forget, these are not the first generation anti-obesity medications. So a lot of us talk about these are new breakthroughs. And then we have had similar, same signs behind these drugs in previous generation also, but we used to get 5% weight loss.
00:04:27
Speaker
But the moment you start getting over 15% weight loss, the amount of health benefits, be it reduction in cardiovascular risk, sleep apnea, You name it, and a lot of benefits start accruing to the patients. So when these drugs came to the market, the demand far outstripped the supply these companies had planned for. And that created a massive shortage.
00:04:52
Speaker
And then the companies came back by resolving the shortage and... Unfortunately, because of a loophole in the law, a lot of compounders came into the market with their copycat medications, some of them even illegal. So what where we are today is we have oral medications coming, we have got injectables, and almost everyone believes oral is going to...
00:05:15
Speaker
be taken up a lot more than injectable but I think that's a bit of a nonsense. The simple point to remember is the compliance you get with a daily oral pill is a lot less compared to compliance you get with a subcutaneous injection once a week.
00:05:32
Speaker
And so compliance you mean patients might forget? Yeah people forget And if you, say, have a drug which gives you 12% weight loss and you're not taking the medicine on time regularly, you won't get the 12% weight loss. And you say, hey, it doesn't work and people stop taking them, right? That's your risk with the orals. Was it injectable? You're taking once a week. You know how much weight you're going to lose. It's about 15 to 20%, depending on the drug. And you accrue the benefit. So...
00:06:00
Speaker
I think the big game changer is a lot of these drugs are going to go generic in countries like India, China, Brazil, and that will open up the market quite meaningfully. And, you know, the access to patients because of the price drop will be quite meaningful. And that will have meaningful societal impact.
AI in Drug Discovery
00:06:21
Speaker
So you talked earlier about money going into development and research. I'm going to ask you the inevitable question that no podcast would be complete without. How is artificial intelligence reshaping healthcare?
00:06:33
Speaker
So artificial intelligence has been involved in drug discovery, even at the time I was a scientist, which is long, long time ago, right? So so yeah we used neural networks back in the day to design drugs. And the AI today is a lot more powerful, right? So when you look at artificial intelligence and drug development. A lot of people are excited about that, that it will cut the timelines, improve the success rates, and then we'll see when that happens. At this junction, ah most of the investors and analyst community are quite sceptical about that. Where the potential for AI to impact healthcare is quite meaningful is, number one, in identifying which patients need treatment, diagnostics, right? Diagnostics can be improved. The number of scans, you know, when analysed by human eye, they might miss things. AI can definitely help there.
00:07:33
Speaker
Then number two, you're you're going to look at identifying patients which patients might need a treatment in the future, if you can access the medical data. So in terms of providing service to the patients, in terms of managing their time, in terms of ah getting healthcare. So there are a lot of peripheral applications of AI within healthcare, care and it should definitely help improve access to healthcare in remote areas as well. But ah the impact on whether it improves farmers' ability to discover drugs, we'll see.
00:08:08
Speaker
Wait and see, okay.
China's Role in Healthcare R&D
00:08:10
Speaker
yeah So another of the topics that you've covered in your research recently is about a shift eastwards in healthcare innovation. What's happening there? How is the role of Asia changing in the healthcare research and development pipeline?
00:08:25
Speaker
China is increasingly becoming the center of innovative R&D, be it cancer, autoimmune, obesity. Why is that? First, you've got a lot of scientists who are coming back from the US. A lot of young people who moved to the US got trained in their research system, be it great universities or great companies, R&D facilities or n NIH, are now finding that because their parents are growing older,
00:08:54
Speaker
and they probably were born at a time where there were only one child policy, they need to take care of the parents, so they need to perhaps come back home. Also, a lot of scientists of you know Asian extraction have been moving away from the US. They just want to be in a a slightly different place, and also opportunity-wise, there might be a bit more in China.
00:09:19
Speaker
On top of that, with the interest rate cycle, what we've seen is biotech funding in the US has been struggling a bit and over the last three or four years, but whereas China has continued to invest steadily in that space. And that means that a lot of these scientists could come back and work in world-class facilities and institutions close to their home where they could take care of their families and you know continue to work on the cutting-edge science with almost similar scientists they worked with back in the US back in the day. So basically, US has trained these scientists and these scientists are back home and replicating that innovation in a new ecosystem.
Consumer Spending and Obesity Drugs
00:10:01
Speaker
So finally, what's the one key debate you're watching out for in the coming months? So the most interesting thing we are watching out is how is the demand for obesity drugs sensitive to consumer spending?
00:10:17
Speaker
Because traditionally, drugs are paid by insurance and they are paid either by reimbursement or healthcare care systems. Because if you look at analysts predicting sales for these obesity drugs, people have numbers anywhere between $80 billion to $200 billion, dollars right? And if the healthcare care system were to pay that out of its own budgets, probably in the long term, it will have a lot more money because it will reduce the need for surgeries, cardiovascular, you know. But in the short term, a lot of the system will go bankrupt. So a lot of people are paying out of pocket at this junction.
00:10:55
Speaker
So what we saw recently is that one of the animal health companies in the U.S. faced a bit of challenge in terms of how much growth they were getting for their vet medicines, right right? So if people are spending less on their pets, you know companion animals, as we call them,
00:11:15
Speaker
I've got two dogs, and if I think about you know spending money on them, I would think as much as I would think about spending money on my children or myself. They're family members for a lot of pet owners. By the time you're delaying spending money on your pets, That tells you something about the state of consumer finances.
00:11:36
Speaker
Healthcare spending is not seen as discretionary. For obesity, a lot of people are paying out of pocket now. What we don't know, this is the first time we'll test it, how cyclical the sales of these obesity drugs are.
00:11:51
Speaker
One to watch. Rajesh, thank you so much for coming in today and sharing your insights. Thank you very much for having me.
00:12:03
Speaker
Rajesh Kumar there on future healthcare, care one of the nine key investment themes we track at HSBC Global Investment Research. And you can keep up to date on our latest research on those themes by subscribing to our monthly newsletter.
HSBC's Newsletter and Podcast Promotion
00:12:15
Speaker
Just go to LinkedIn, search HSBC Research Talking Points and hit subscribe. As well as the macro brief, we also release an Asia-focused podcast each week. Please check that out if you haven't already. It's called Under the Banyan Tree and you can find it wherever you get your podcasts.
00:12:32
Speaker
And finally, if you'd like to get in touch, please contact us at askresearch at hsbc.com. That's it for today. This episode was hosted by me, Peter Stegall, and produced by Tom Barton.
00:12:44
Speaker
Please like and subscribe to The Macro Brief wherever you get your podcasts. So until next week, thanks very much for listening.