Cancer and investing. They shouldn’t have much in common, but it’s possible they do. Simply put, they both seek growth for the sake of growth, and that’s not the extent of their relations. Investors may be able to profit on the failure of cancer.
Immunology is not a new subject. The science of teaching the human body how to fight disease, instead of just providing a substance to do the fighting, has been around since 1549, when the earliest accounts of smallpox inoculation were reported. This innovative and effective approach to infectious disease has eradicated smallpox from the planet, and nearly wiped out a quiver of other deadly disease. Next on the radar? Cancer.
Cancer is very basically uncontrolled cell growth. This occurs when the body’s normal breakdown system fails and old cells don’t die. The growth of cells then results in a tumor, which can go on to cause many other problems. Treating cancer has previously been extremely difficult and sometimes next to impossible. Traditional chemotherapy agents wreak havoc on the body; they can cause immune system suppression, hair loss, dry mouth, nausea and vomiting, among many other side effects.
Enter immunology. This revolutionary biotechnology has completely changed the game. Modern immunotherapy is able to target proteins specific to cancer cells, trigger the patient’s immune system, and suppress the tumor. Bevacizumab (Avastin) is a particularly interesting targeted immunotherapy. It works, in short, by laying siege to the tumor. Avastin teaches the body to block supply lines to the tumor site, thereby eventually starving and exhausting the cancer.
Genentech’s Avastin is not just interesting because of the way it works. The day Genentech announced the clinical success of this medication in trial, the stock prices rose $16.95. Stock prices rose an additional $7.02 when Avastin was approved in 2004. This targeted therapy, aimed at a small, specific set of patients, proved hugely profitable. Targeted immunotherapy is the new gold mine in investing. This new market has been growing consistently and is estimated to reach over $100 billion dollars in 2020.
So what does this mean for investors? A fabulous opportunity to take a risk and potentially reap great rewards? Or an unworthy risk that won’t result in the desired return? It all depends on the investment. Both Big Pharma and smaller, newer companies are experiencing great successes and great failures. Bigger pharmaceutical companies typically have more diversified portfolios. They have cushion for failure, but they also have other resource-requiring endeavors.
Some smaller companies that have completely devoted themselves to drug discovery may be more likely to see a great success;, however, their lack of diversification leaves little to absorb failures. This is not a new concept in the world of investing. The higher the risk, the higher the potential reward.
The biotech industry is booming and Genentech’s Avastin was just the start of immune-oncology’s contribution. Investors, be aware.
Quincy Ostrem, of Eagle, is a doctorate of pharmacy, master’s of business administration candidate at Idaho State University.