An April 10 private report to prime investors Goldman Sachs noted poor profit returns on “cures,” but provided concrete ideas on how to make hay where the sun don’t shine.
It was a busy news weekend, what with the Friday night news dump being the American President’s solemn announcement of an airstrike on Syria and his Saturday evening “Mission Accomplished” tweet. So if you were scraping the media for someone to say something meaningful or even convincing about what it all meant, there were some things you might have missed.
Here at the blog we’ve made a commitment not to make news stories of exotic and expensive new gene-therapy treatments for illnesses not limited to but heavily represented by cancers. Our sole reason was not to make the common man all excited about a treatment he could not in the imaginable real world afford.
There’s science, we though, and there’s business, and the twain were welcome to meet elsewhere. Then, in an April 10 Goldman Sachs report, “The Genome Revolution,” prepared for its preferred customers, an analyst posed the question, “Is curing patients a sustainable business model?” In case that went by you, we thought you should know.
If you’re not a Goldman Sachs preferred customer or a corporate hacker, you’ll scour the web futilely for the report. But its existence and substance was reported by CNBC news story by Tae Kim on April 11, and by the weekend in question, the story was all over the avenues of the net people interested in health issues seldom walk down.
The report: asked and answered
Kim nailed the basics for CNBC. Here are his lead paragraphs (verbatim):
“Goldman Sachs analysts attempted to address a touchy subject for biotech companies, especially those involved in the pioneering ‘gene therapy’ treatment: cures could be bad for business in the long run.
"’Is curing patients a sustainable business model?’ analysts ask in an April 10 report entitled ‘The Genome Revolution.’
"’The potential to deliver “one shot cures” is one of the most attractive aspects of gene therapy, genetically-engineered cell therapy and gene editing. However, such treatments offer a very different outlook with regard to recurring revenue versus chronic therapies,’ analyst Salveen Richter wrote in the note to clients Tuesday.
"’While this proposition carries tremendous value for patients and society, it could represent a challenge for genome medicine developers looking for sustained cash flow.’"
The analyst’s example was Gilead Science’s successful treatment for hepatitis C, which, Kim continued, “achieved cure rates of more than 90 percent. The company's U.S. sales for these hepatitis C treatments peaked at $12.5 billion in 2015, but have been falling ever since. Goldman estimates the U.S. sales for these treatments will be less than $4 billion this year, according to a table in the report.
"’GILD is a case in point, where the success of its hepatitis C franchise has gradually exhausted the available pool of treatable patients,’ the analyst wrote. ‘In the case of infectious diseases such as hepatitis C, curing existing patients also decreases the number of carriers able to transmit the virus to new patients, thus the incident pool also declines … Where an incident pool remains stable (e.g., in cancer) the potential for a cure poses less risk to the sustainability of a franchise.’
“The analyst didn't immediately respond to a request for comment.”
Kim pulled Goldman’s three suggestions for biotech firms:
This last warrants the exact Goldman language: “There are hundreds of inherited retinal diseases (genetics forms of blindness) … Pace of innovation will also play a role as future programs can offset the declining revenue trajectory of prior assets."
We’re quoting Kim extensively because in the lay media he got there first and got there with all the basics.
What others report about the report
Cory Doctorow’s story arrived at boingboing.net on Saturday, April 14, with his competition piling on the same weekend. Doctorow said that “in a rare moment of public frankness,” Goldman analysts “are making a commonsense observation: capitalism is incompatible with human flourishing."
Doctorow continues, taking the story directly into the opinion category (verbatim):
“Markets will not, on their own, fund profoundly effective cures for diseases that destroy our lives and families. This is a very strong argument for heavily taxing the profits of pharma companies' investors and other one percenters, and then turning the money over to publicly funded scientific research that eschews all patents, and which is made available for free under the terms of the Access To Medicines treaty, whereby any country that devotes a set fraction of its GDP to pharma research gets free access to the fruits of all the other national signatories.”
Generalized outrage from the predictable “liberal” quarters followed.
The market responded
You could say coolly, if you were talking only of emotionality.
Biotech stocks soared.
The US Stock Info article that appeared the same date as the Goldman report was headlined, "Goldman Sachs Shares Its Top Genome Stock Ideas, Including Biomarin." Here are its lead paragraphs (verbatim):
“Gene therapy stocks are a huge opportunity for growth-oriented investors, according to Goldman Sachs. The firm is optimistic about this new innovative area of biotechnology, where scientists create disease treatments by editing or replacing human genes.
“’We continue to see upside for the best positioned companies based on the combination of catalysts, rising TAMs [total addressable markets] and M&A potential.’ [Analyst] Richter estimates the market size for gene therapies could be as large as $4.8 trillio [sic].”
Just so you know.
https://stockboardasset.com/insights-and-research/goldman-sachs-asks-curing-patients-sustainable-business-model/ (the basics, with charts and graphs)