2021 has been a difficult year for the healthcare sector globally. As investors hoped for the economy to reopen, significant inflows have been seen in the energy sector, while rising inflation – and interest rates – have also bolstered the financial sector. Although the health sector has acted defensively in this environment, the manager believes that in 2022 this relative defensive attitude could become a significant advantage for investors as the year progresses.
We expect inflationary pressures to continue in 2022 as labor shortages put pressure on wages, raw materials rise and globalization slows albeit to a limited extent. This will require central banks to take action. The US Federal Reserve, in particular, has made it clear that it takes its mandate to control inflation very seriously, and fixed income markets are pricing in several US rate hikes in 2022. .
Therefore, the current investor appetite for outperforming sectors is likely to be disturbed by the reality of monetary tightening in combination with the scaling back of government stimulus programs introduced during the height of the pandemic. They don’t think this is going to lead to an economic collapse and indeed the economic data is still strong, but in the end the Fed has no choice but to cool down this economic boom as long term inflation expectations cannot be derailed.
this is where defensive sectors, especially health, will benefit, as its relative lack of economic sensitivity will be a strong pull for investors looking to sustainably preserve returns. Although it is always difficult to pinpoint the exact moment of this possible change in market orientation, at Candriam they expect that from the second half of 2022 these sectors will once again perform well. We’re already seeing this happen in some large-cap pharmaceutical companies with the largest companies in our oncology strategy, which are generally doing very well. Combined with some of the high-growth names becoming more accessible again in terms of valuations, we see that the sector is well poised for the future.
New research developments
Bispecific Antibodies and Antibody Drug Conjugates (ADC)
Of the 51 new drugs approved in the United States by the FDA regulatory authority in 2021, a third were anticancer drugs. One example is the 100th antibody. Antibodies remain an attractive therapeutic modality with rapid innovation, with two in particular drawing attention in oncology: bispecific antibodies and antibody-drug conjugates.
The increase in clinical trials with bispecific antibodies is notable. This is not a surprise, since bispecific antibodies offer the possibility of killing two birds with one stone. On the one hand, they target the tumor and, on the other, the immune system, which they force to fight the tumor. This approach has been very effective in treating blood cancers, an area where we expect new approvals in 2022. However, it is not limited to blood cancers. In 2021, the first bispecific antibody, developed by Johnson & Johnson and Genmab, was approved for lung cancer.
Another compelling innovation in the field of antibodies is ADCs. ADCs combine the potency of chemotherapy with the specificity of antibodies, attaching a toxic payload to a highly tumor-selective antibody. The goal is to selectively kill cancer cells and avoid the collateral damage that classic chemotherapy causes in healthy tissue.
One of the most striking examples of the power of ADCs in 2021 is given by data from Enhertu in second-line HER2+ breast cancer, which reduced the risk of disease progression or death by 73%, which It represents a huge advance for patients.
Early diagnostic
Early diagnosis is one of the most essential pillars in the fight against cancer: the earlier it is detected, the better the chances of survival after treatment. This underscores the importance of establishing cancer screening programs, which are greatly encouraged by public health organizations.
For colorectal cancer, the second deadliest type of cancer in the EU and US, screening is recommended for all adults aged 50-75 years. Colonoscopy is the reference method for the detection of this type of cancer. Despite its great accuracy, colonoscopy is only used as a screening method by 40% of the target population. This highlights the need to look for alternatives that increase adherence to colorectal cancer screening. There are already companies with important advances and revolutionary methods such as the Cologuard test from Exact Sciences.
liquid biopsy
Pioneering science has shown that tumor cells also shed materials, such as DNA, into the bloodstream. Advanced nucleic acid sequencing makes it possible to detect these tumor cell materials from a simple blood sample. This method is the so-called “liquid biopsy”. In recent years, we have witnessed important advances in this area. Guardant Health is one of the leading companies in the development of liquid biopsy tests.
In preliminary studies, Guardant’s LUNAR test showed that it can detect colorectal cancer in blood samples in 90% of cases. The company will present the final results this year which, if confirmed, could lead to the approval of this method as an alternative for screening in adults aged 50 to 75 years. In addition to early cancer diagnosis, liquid biopsy has several applications in oncology that are being developed by Guardant Health and others.
By last, the Covid-19 pandemic has affected hospital care around the world. The prioritization of the ability to treat patients suffering from the virus has obstructed the treatment needed for other conditions, especially cancer.
As nations continue to recover from the pandemic, there must be a rapid rebalancing within the healthcare sector to ensure there are no further disruptions to patients in need of life-saving treatment.
Candriam maintains its commitment to tackle one of society’s great problems through its oncology fund. However, we don’t just limit ourselves to financial returns, we also want to make a positive impact by donating a portion of net management fees to leading cancer organizations.
In the case of Spain, said donation is made to the Spanish Association Against Cancer. The ultimate goal of the manager is to make cancer a totally curable disease.
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