The coronavirus pandemic has triggered a race for disruptive innovation in diagnostics, new therapies and novel vaccines, but the global life sciences industry was already expected to reach more than $2 trillion in gross value by 2023, up from $1.6 trillion before the crisis.
The pharmaceutical sector has long been attractive for family office investors, either directly or as part of their diversified portfolio. More than a quarter (27%) of families surveyed by Campden Wealth with UBS for The Global Family Office Report 2019 said they directly invested in health care and social assistance. It was the fourth most popular sector for families behind technology (49%), real estate and rental/leasing (42%) and finance and insurance (30%).
Dr Annalisa Jenkins MBBS, MRCP is a life sciences thought leader with more than 25 years of biopharmaceutical industry experience. The former surgeon lieutenant commander in the British Royal Navy during the Gulf War said new entrepreneurial healthcare and biotech investment opportunities were opening for family investors from the disruptive revolutions in technology, stem cell therapy and mental health.
In an interview held before the coronavirus outbreak, the Chair of the Court of the London School of Hygiene and Tropical Medicine at the University of London, and chair or board member of Cellmedica, Vium and Cocoon Biotech, among others, tells CampdenFB which areas of investment she is personally interested in, the innovative trends she is seeing and what family investors need to know before entering the sector.
What is your outlook for investments in 2020?
I’m hugely optimistic moving into the next decade. Whilst I think that one can always recognise that the geopolitical environment that we now operate in has markedly evolved in the last few years, whether that be the notion of risk, uncertainty, unpredictability, there’s no doubt that has significantly evolved. Some of the driving factors behind that include global leadership, the climate evolution we’re living through, but ultimately the world of investment and the opportunities continue to be exciting.
When one looks across the field of health and innovation, we’re living in the so-called Fourth Industrial Revolution, and there is probably no sector that exemplarises that more than the health tech and life science sector. Today I would say the innovation coming out of our academic universities is as broad and as advanced as I have seen in the last 30 years of my career. I think the ability to access capital is just remarkable on a global basis, there are trillions of dollars that are out there in different parts of the economy, looking for innovation and looking for leaders to invest in. And, of course, we have a technology revolution that is ongoing, particularly driven by our ability to generate, curate and process data and deliver insights which are going to transform how we access and deliver healthcare and think about keeping people on a global basis well and healthy for longer and deliver improved therapeutics to reduce suffering.
I don’t think I could be really more optimistic entering this new decade when it comes to thinking about the combination of equity with innovation and disruption and the evolution of the world I operate in.
What are the headwinds for investments in healthcare and life science?
The biggest concerns are around the well-publicised debates on pricing of technologies, particularly in the US, and how to ensure every individual can get equal access to health. Those two areas will continue to be debated and drive short-term cyclical uncertainty. There is no doubt global leadership, and that includes the US, recognise that for stable societies, access to universal healthcare and the ability of populations to be happy, healthy and flourishing lies as the centre of their political ambition.
Which healthcare investments are you excited about?
The cross-cutting themes that I am particularly excited about when it comes to technology are the ability for machine-learning and AI [artificial intelligence] to generate algorithms and therefore products that can be placed into the hands of individuals for them to manage, track and improve their health.
For example, there are products coming along in the area of mental health and wellness where individuals increasingly in the future will be able to access through their mobiles programmes and support services which will help them track their mood and maintain their wellness. We know that many diseases, for example, of the gastrointestinal system like irritable bowel syndrome, are markedly impacted by mental health and wellbeing. Interventions such as digital therapeutics, such as apps that are regulated and provided as therapeutics, are set to transform the way these diseases are managed. I am consistently looking for technologies that can be placed into the hands of individuals for self-directed and personalised prevention and care management.
Secondly, the ability of technology to improve the way we plan and conduct research and development on a global basis truly again going to be disrupted in the future by our ability to get large datasets in an ethical way to translate that into pre-clinical discoveries of new therapeutics. And then in the clinical setting to conduct novel clinical trials and to really change the way we bring new therapies to market, like new therapeutics, medical devices, diagnostics, biochemical markers across the board, so I am very interested in companies that are pursuing that.
Thirdly, the area of how do we optimise healthcare utilisation, the efficiency and the effectiveness, whether that be here in the UK in the NHS [National Health Service] or globally. It’s absolutely clear that if we want to ensure affordable access to the top quality healthcare and outcomes for populations, we’re going to need embrace digital innovations, so companies that operate in that space are very attractive.
Those are the cross-cutting themes. If I look at the verticals, I would say to you, of course, there are very good investments to be made in the area of cancer and oncology. However, there is a marked amount of money in that space, it’s a little bit overpopulated. So for family offices and alternate sources of capital I would not be placing my money there at this point. I would be looking at counter cyclical trends, so areas that are perhaps now emerging. Areas such as women’s health, otherwise known as Femtech, clearly now emerging as an area for investment and has been systematically underinvested in over the last 10-15 years. Cardiovascular disease continues to be the biggest killer and cause of illness on a global basis and yet it really hasn’t received a lot of attention in investment. We’re now seeing a wave of innovations and we’re starting to see more about the biology of heart disease, stroke and diabetes so again I would see that as an area of interest [as is] stem cells in therapeutics across a whole spectrum of diseases. I’m particularly interested in Type 1 diabetes and the ability to generate beta cells for the production of insulin in patients with Type 1 diabetes. We are starting to see companies emerging and exploring that space so really stem cells and the cell therapy space, along with gene therapy is very interesting.
For family offices, the whole area of mental health and wellness is enormous and growing. The reason is it’s now becoming apparent people are talking about mental health and wellness in a way that’s reducing stigma and then allowing money to flow into this space. How we deal with the human brain and preserving the health and wellness of the brain, both from an emotional and physical point of view, whether that be the prevention of degenerative brain disorders like dementia or the management of anxiety and all the related diseases known as depression, is a very interesting space for investment and it’s where I am investing in a lot.
How can family offices enter and succeed in the healthcare and biotech investment market?
It’s extremely difficult as a family office to make an initial move into the sector, largely because it’s extremely complicated and it really rather depends on what the investment goals are and the returns that are desired. The sector is highly fragmented and family offices have traditionally and largely invested in the more sustainable, long-term world of pharma as part of a general equity portfolio. We’re talking about a very different sector which is largely based on entrepreneurship, a lot of risk and deep science, so I think the first thing to say is that family offices, before moving into or when in this space, should ensure they have the access to the right expertise around the table. They can gain that either through their own networks of advisers or by participating through investments in a fund.
Often the best way to get started is to find a fund that meets the investment criteria of a family office and to start to invest through that. Not through a traditional VC fund, there are number of funds coming together with the sole purpose of accessing family offices, sovereign wealth funds, alternate sources of capital and then investing through that because it’s really important in the risky healthcare and life science sector to have a portfolio view that is very strategically put together. You have to be prepared to fail and to be prepared to be a long-term patient investor that’s willing to along five-to-seven years for the ride.