A tornado caused significant damage to a Pfizer Inc. plant in North Carolina in July and may have worsened the existing drug shortage in the United States. The Pfizer plant was responsible for producing 25% of the company’s sterile injectables used in U.S. hospitals. Pfizer is currently assessing the extent of the damage and its impact on production.
At least 129 sterile injectable drugs, including crucial cancer treatments, are currently in short supply in the United States. Drug shortages have reached their highest levels since 2014, affecting a wide range of medications. The U.S. Food and Drug Administration is monitoring the situation and collaborating with Pfizer to understand the potential impact on the drug supply. The issue is also being considered by a White House task force, and Congress has conducted hearings on the matter.¹
In other White House-related news, in a bid to lower healthcare costs the Biden administration has proposed new regulations that would reverse the expansion of short-term health insurance plans introduced by the previous administration. The new rules would rescind a 2018 policy that made these plans accessible to millions of Americans for up to 12 months instead of the previous limit of three months and which made such short-term coverage renewable.
Critics argue that the expansion of short-term coverage undermines protections for patients with pre-existing conditions, as outlined in the Affordable Care Act (ACA). These short-term plans do not offer benefits like maternity coverage and guaranteed insurance regardless of health. The proposed measures are part of a larger package aimed at addressing healthcare expenses in the United States.²
And it was revealed in July that Google’s medical AI chatbot, Med-PaLM 2, has been undergoing testing in research hospitals, including the Mayo Clinic, since April of this year. This AI tool is designed to provide answers to medical questions and is built around an updated version of Google’s LLM, which powers their Bard AI.
Med-PaLM 2 was trained on expert medical demonstrations, making it more adept at healthcare conversations compared to generalized chatbots like Bard, Bing, and ChatGPT. Google believes this AI could be particularly valuable in regions with limited access to doctors. Testers of Med-PaLM 2 will have control over their encrypted data, ensuring Google won’t have access to it.
While not yet ready for market, and while early data indicates that Med-PaLM 2 still faces the kind of accuracy issues seen in large language models, it generally performed as well as actual doctors in various metrics, such as evidence of reasoning and providing consensus-supported answers.³
Company Specific Updates
Eli Lilly & Co
Eli Lilly’s experimental Alzheimer’s drug, donanemab, showed promising results in a late-stage clinical trial by slowing cognitive decline in patients in the early stages of the disease. Patients receiving the drug demonstrated a 29% reduction in Alzheimer’s progression after 18 months compared to those receiving a placebo. However, the study also revealed some serious side effects, including brain swelling and bleeding. The drug appeared more effective than Eisai and Biogen’s recently approved drug, Leqembi, but its safety profile needs further review.
Both donanemab and Leqembi are monoclonal antibodies targeting Alzheimer’s-related amyloid plaques in the brain. The hope is that by breaking down amyloid, the progress of the disease can be halted. Alzheimer’s affects around 6.7 million adults aged 65 and older in the U.S., making the search for effective treatments critical.⁴
AstraZeneca is set to acquire a selection of rare disease gene therapies from Pfizer Inc., signalling the company’s focus on future revenue and growth prospects. The agreement, valued at up to $1 billion with tiered royalties on sales, is expected to be completed in Q3. This move builds upon AstraZeneca’s significant investment in rare diseases following its $39 billion acquisition of Alexion in 2021.
Rare diseases, 80% of which are caused by genetic mutations, comprise over 7,000 known conditions. The acquired portfolio from Pfizer targets genetic disorders affecting the central nervous system, heart, kidneys, liver, and muscles.
AstraZeneca’s CEO, Pascal Soriot, sees this deal as a strategic step to advance the company’s presence in cell and gene therapies. Gene therapies have the potential to play a crucial role in addressing rare diseases with significant genetic components, broadening the range of conditions that can be effectively addressed.⁵
LIFE ETF: Investing in Global Healthcare
Investing in ETFs can be one way to add cutting-edge healthcare to your portfolio.
Evolve Global Healthcare Enhanced Yield Fund (LIFE ETF) provides investors with exposure to twenty global blue-chip companies in the healthcare industry, with a covered call strategy that is actively managed to provide increased yield potential while helping mitigate risk. For more information about the Evolve Global Healthcare Enhanced Yield Fund or any of Evolve ETF’s lineup of exchange-traded funds, please visit our website or contact us.
Portfolio Strategy and Activity
For the month, AbbVie Inc made the largest contribution to the Fund, followed by Danaher Corporation and Amgen Inc. The largest detractors to performance for the month were Merck & Co Inc, followed by Stryker Corporation, and Intuitive Surgical Inc. On last rebalance, Vertex Pharmaceuticals Inc was added to the portfolio.
1. Cattan, N. & Swetlitz, I., “Key Pfizer Plant Damaged in Tornado Amid Drug Shortage,” Bloomberg, July 19, 2023; https://www.bloomberg.com/news/articles/2023-07-19/pfizer-injectables-plant-damaged-in-tornado-amid-drug-shortage
2. “Biden to crack down on short-term health insurance plans, Politico reports,” Reuters, July 6, 2023; https://www.reuters.com/world/us/biden-crack-down-short-term-health-insurance-plans-politico-2023-07-06/
3. Davis, W., “Google’s medical AI chatbot is already being tested in hospitals,” The Verge, July 8, 2023; https://www.theverge.com/2023/7/8/23788265/google-med-palm-2-mayo-clinic-chatbot-bard-chatgpt
4. Lovelace Jr., B., “Eli Lilly’s experimental Alzheimer’s drug slows progression of the disease, study finds,” NBC News, July 17, 2023; https://www.nbcnews.com/health/health-news/eli-lillys-alzheimers-drug-slows-memory-decline-study-finds-rcna94530
5. Ring, S., “Astra Strikes $1 Billion Pfizer Deal, Dismisses Trial Concerns,” Bloomberg, July 28, 2023; https://www.bloomberg.com/news/articles/2023-07-28/astrazeneca-strikes-rare-disease-gene-therapy-deal-with-pfizer