home - The Share Centre logo

Your share of investment news and views


Visit Share.com

There are two themes for today’s article: new forecasts for the size of the global medicine industry between now and 2017, and something else: something complementary; something truly remarkable, which all investors need to be au fait with.


Let me start with a report from the IMS Institute for Healthcare Informatics entitled ‘The global outlook of medicines through to 2017’. It turns out that two major trends are at work. In developed markets, we have seen certain patents expire, combined with policy changes. The upshot is increased penetration of generic drugs. As a result, spending on medicines in the developed world actually fell in 2012.

In the developing world we are seeing a rapidly expanding middle class, and this is expected to lift global demand for medicines. And as the developed world’s economy slowly picks-up, global demand for medicines is expected to exceed $1 trillion in 2014, and rise to $1.2 trillion by 2017. Actually, that growth rate is nothing special, compound annual growth over the next few years is predicted to average 3-6 per cent. “Annual spending growth of 1-4 per cent is expected among the markets of North America, Europe and Japan,” stated the report, “in contrast, pharmerging nations will experience 10-13 percent spending growth overall.”

But, and this is where it starts to get interesting, the report predicts that spending on speciality medicines is expected to reach $230-240 billion in 2017, which is up 38 per cent from the $171 billion spent in 2012.

The report also predicts that “biologics that are used for conditions requiring complex treatment – will be the single largest contributor to branded drug spending growth through 2017,” and, “an average of 35 new medicines with the potential to transform disease treatments is forecast to be launched annually.”

So far, so good.

Now let me change the mood a little. I have been reading a report produced by McKinsey earlier this year looking at disruptive technologies. And just read about this remarkable development. In 2003 the human genome project was completed. It cost $2.7 billion and took 13 years. Within a decade it is expected to cost $100 and take one hour to sequence a human genome.

You know all about Moore’s Law, of course. It predicts that computers will double in speed every 18 months or so. And ever since Gordon Moore at Intel made his initial prediction about processing power in the 1960s, Moore’s Law has become widely accepted. If the average family car had seen its top speed increase at a rate commensurate with the increase in the speed of computers since the 1960s, I calculate that it would now be able to travel faster than the speed of light. So that’s heady stuff… but forget Moore’s Law, a doubling in speed every 18 months is trivial compared to advances in genetics. In fact, the time it takes to double the speed of genome sequencing is a mere 10 months.

There are two important points here. Firstly, advances in genetics were only possible thanks to modern computers. Moore’s Law made it possible for genetics to progress at a rate faster than that described by Moore’s Law. Secondly, the rate of progress continues, and as various technologies converge, it may even accelerate.

McKinsey estimates that the costs of global health care that will be disrupted by genetics are worth $6.5 trillion. Its report also reckons that genetics will disrupt industries related to agriculture (wheat, rice, maize, soy, and barley) worth $1.1 trillion.

In 2025 alone, McKinsey estimates that next generation genetics’ impact upon the economy will be between $0.7 and $1.6 trillion.

These are massive numbers, and it sounds clichéd but on this occasion I am talking serious game changers. The impact on medicine will, and I do not exaggerate in saying this, be enormous.

These views and comments are those of the author alone and do not necessarily reflect the view of The Share Centre, its officers and employees


Showing no comment

Add a comment

* - Required Field.

 
feminacy-vanir

Tags