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Breonics’ Disruptive Organ Repair Technology: Potential Solution To Transplant Organ Shortage

Are chart showing the number of donors, transplants, and people on the transplant waiting list in the United States, 1991-2018. The number of organ donors in the United States increase from 6,953 in 1991 to 17,554 in 2018. The number of transplants performed in the United States increased from 15,756 in 1991 to 36,529 in 2018. The number of people on the US transplant waiting list increased nearly five-fold from 23,198 in 1991 to 113,759 in 2018. Data from the US Health Resources and Services Administration (HRSA)

Of the few options available to End Stage Renal Disease (ESRD) patients, transplantation is the most cost effective and offers a relatively better quality of life. Yet, the supply of transplant organs falls far short of demand and as a result the transplant waiting list has continued to increase over the past few decades. American bio-science company Breonics’ Exsanguinous Metabolic Support (EMS) technology, which is a medical device that could repair donor organs and test their viability, aims to address the global transplant organ shortage, starting with kidneys (more than 80% of patients on the U.S. transplant waiting list were waiting for kidneys). The company is currently raising its Series A capital to fund clinical trials.

The demand for organ transplantation has increased worldwide over the past few decades due to increased incidence of organ failure. However the supply of organs for transplantation has remained relatively stagnant resulting in an escalating shortage of organs for transplantation over the past few decades. In the U.S. alone there were about 113,000+ patients on the national transplant waiting list as of July 2019, up from 23,198 in 1991 (representing a nearly five-fold increase), and every 10 minutes another person is added to the list. This is despite the number of donors increasing from 6,953 to 17,554, and the number transplants more than doubling from 15,756 to 36,529 during the same period.

Are chart showing the number of donors, transplants, and people on the transplant waiting list in the United States, 1991-2018. The number of organ donors in the United States increase from 6,953 in 1991 to 17,554 in 2018. The number of transplants performed in the United States increased from 15,756 in 1991 to 36,529 in 2018. The number of people on the US transplant waiting list increased nearly five-fold from 23,198 in 1991 to 113,759 in 2018. Data from the US Health Resources and Services Administration (HRSA)

Part of the reason for the stagnant transplant organ supply is due to the fact that under current medical standards of care, donors have to be free of certain illnesses, have to be below the age of 75, and donor organs have to be harvested within 30 minutes of death. However, of the more than 2.5 million annual deaths in the United States, just 2% occur under circumstances that meet this criteria; for instance the death takes place outside the hospital where the deceased’s organs could be preserved, or they suffer from conditions such as most cancers or certain incurable infections that make the organ unfit for donation. As a result, most organ donors in the U.S. are from living donors or from donation after brain death and this means that more than 95% of potential organs are not being considered for transplantation given the limitations of the current standards of medical care.

Pie chart showing the number of deceased and living transplant organ donors in the United States in 2018. In 2018, the U.S. had 10,722 deceased transplant organ donors and 6,831 living organ donors.

The desperate situation has spurred a search for solutions ranging from offering incentives for organ donation to development of technologies and methods to increase organ preservation. There is also a growing interest in using suboptimal organs from donors which are currently not considered for transplantation.

American bioscience company Breonics’ EMS platform offers a potentially ground-breaking solution towards addressing the global transplant organ shortage by expanding the window of opportunity for harvesting the donor organ. According to Breonics, under the 30-minute window, less than 4% of all mortalities in the U.S. are potential organ donors, but with their technology, the addressable market expands to at least 15%. Although the technology can be used for the repair and regeneration of lungs and livers, Breonics is initially targeting kidneys which has the biggest waiting list and is the most transplanted organ. 83.7% of patients on the U.S. transplant waiting list are waiting for kidneys.

Pie chart showing the transplant waiting list by organ type in the U.S. As of July 2019. 83.7% of patients on the U.S. transplant waiting list were waiting for kidneys, 11.6% for livers, 3.3% for hearts, 1.2% for lungs, and 1.5% for other organs (pancreas, intestines, and combinations).

And at 21,167 transplants performed in 2018, kidney transplants were the most performed transplants in the U.S. last year, far exceeding the 8,250 liver transplants performed the same year.

Bar chart showing the transplants performed in the United States by organ type in 2018. Of the transplants performed in the United States in 2018, 21,167 were kidney transplants, 8,250 were liver transplants, 3,408 were heart transplants, 2,530 were lung transplants, 835 were kidney/pancreas transplants, 192 were pancreas transplants, 104 were intestine transplants, and 32 were heart/lung transplants.

The opportunity is not limited to transplant patients but also to the dialysis population in the United States which is estimated at over 600,000 people as of 2016, as well as those newly diagnosed with End Stage Renal Disease (ESRD) which is estimated at over 120,000 according to the National Kidney Foundation; 30 million or 15% of the U.S. adult population was suffering from Chronic Kidney Disease (CKD) in 2017 according to National Center for Chronic Disease Prevention and Health Promotion, and of the 30 million U.S. CKD patients, about 0.4% or 120,000 patients are in Stage 4 which will likely pave the way for ESRD or total kidney failure which means they will likely need a transplant or dialysis in the near future. CKD is an under-recognized public health crises that causes more deaths than breast cancer or prostate cancer.

Line chart showing the prevalence of Chronic Kidney Disease (CKD) stages 1-4 in the United States by year during the period 1988-2016 (% of prevalence). Between 1988-1994, U.S. CKD patients made up 11.8% of the population, of which 4.1% of CKD patients were in Stage 1; 3% were in Stage 2; 4.5% were in Stage 3; and 0.2% were in Stage 4. In 2015-2016, CKD patients made up 14.2% of the population of which 4.7% were in Stage 1; 3.4% in Stage 2; 5.8% in Stage 3; and 0.4% in Stage 4.

The incidence of ESRD has been on an upward trend in the United States which is the result of rising rates of diabetes and hypertension which are the two most common causes of kidney disease, according to data from the U.S. government’s Renal Data System.  The prevalence of ESRD more than doubled between 1990 and 2015, from 727 ESRD patients per million U.S. residents in 1990 to 2,087 ESRD patients per million U.S. residents in 2015 according to the United States Centers for Disease Control and Prevention – Chronic Kidney Disease Surveillance System, United States.

Column chart showing the incidence of end-stage renal disease in the United States from 1990 to 2015. In 1990 there were 727.4 end stage renal disease patients per million United States residents. By 2015 the figure had ballooned to 2087 point for end-stage renal disease patients per million U.S. residents.

There is no cure for ESRD and patients have three options: (i) no treatment which results in death; (ii) dialysis which generally has a negative impact on quality of life; and (iii) transplant which offers a relatively average longer life expectancy and better quality of life.

Dialysis is also more costly; the ESRD population in the U.S. represents 1% of the U.S. Medicare population, but they account for 7% of the Medicare budget. Medicare spending for ESRD patients stood at US$ 35 billion in 2016. 80% of this, equal to US$ 28 billion, was spent on hemodialysis care costs (approximately US$ 90,000 per patient annually). Spending for transplant patient care on the other hand stood at US 3.4 billion, equal to less than 10% of Medicare spend on ESRD patients. The U.S. government is reportedly exploring avenues to trim the relatively high cost associated with dialysis through measures such as improving care in the early stages of kidney disease, increasing access to kidney transplants and favor home dialysis over clinic-based dialysis treatment.  

Transplantation is generally accepted to be superior not just in terms of cost effectiveness but also in terms of life for the patient. However, the biggest barrier limiting greater access to transplants is the supply of suitable donor kidneys. 12 people die every day (roughly 5,000 annually) waiting for a kidney transplant according to the National Kidney Foundation.

Breonics is addressing this pressing problem by broadening the criteria for organ donation by expanding the window of opportunity for harvesting the organ from the current 30 minutes, to two hours post mortem. Under current medical standards of care (SOC) transplant surgeons cannot transplant kidneys that have been exposed to warm ischemia for more than 30 minutes as the damage caused to the kidney due the lack of blood supply for more than 30 minutes could potentially harm the patient. This is why the organ donor pool in the U.S. is currently largely dependent on living donors or donation after brain death (DBD) which represents just a small fraction of deaths from traumatic injuries each year, approximately 4%, while organs from deceased by cardiac arrest are not considered because the damage caused to the organs as a result of prolonged lack of blood flow make them unusable. In contrast, brain dead patients are usually in an ICU on life support until they are declared brain dead by brain criteria, and thus their organs do not experience significant warm ischemic damage because the restriction of blood flow to the organs is only for a relatively shorter period of time, often in terms of minutes.

Breonics’ EMS technology can repair damage to organs that have been damaged from warm ischemia for up to two hours. Thus, with Breonics’ technology, the donor pool can be expanded to include the currently huge yet untapped pool of potential donors who died from cardiac arrest and uncontrolled brain deaths (such as from a stroke) because the transplant team can be called to hospital immediately after the time of death, obtain family consent as needed and still harvest the organs within the expanded window afforded by Breonics’ technology. The company’s EMS platform is the first technology that can be used to intervene after cardiac arrest and repair ischemically damaged kidneys and other organs for transplantation. Brenonics’ perfusate medical device can also assess the viability of the kidney prior to transplantation, thereby reducing discard rates due to false negatives. The U.S. reportedly discards 3,500 kidneys annually, and 17% of donated kidneys were discarded during the 10 year period between 2004 and 2014. The reason for the waste was because doctors in the U.S. were less inclined to using lower quality kidneys, however a panel of transplanted experts found that as many as 50% of the kidneys that were discarded could have been transplanted according to the National Kidney Foundation. The discard rate has only been increasing according to the study; in 2016, the discard rate reached 20%. Breonics has successfully resuscitated and repaired over 100 human kidneys that were discarded for being too damaged for transplant. The company estimates its technology has the potential to increase the number of kidneys available for transplant in the United States from the current 19,000+ to an additional 150,000 per year by 2021. Breonics will be reimbursed by the Organ Procurement Organization for every kidney Breonics successfully repairs, and provides for transplant which is guaranteed under the Renal Care Act of 1982.    

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Healthy Opportunities In China’s Blossoming Healthcare Market

Bar chart showing the top 10 countries by health expenditure per capita and China’s health expenditure per capita (in US dollars), 2000, 2005, 2015 according to data from the World Health Organization. The top countries by per capita health spend as at 2015 are: Switzerland (US$ 9,818), U.S.A. (US$ 9,536), Norway (US$ 7,464), Luxembourg (US$ 6,236), Sweden (US$ 5,600), Denmark (US$ 5,497), Australia (US$ 4,934), Ireland (US$ 4,757), Netherlands (US$ 4,746), and Germany (US$ 4,592). By comparison, China’s per capita health expenditure in 2015 amounted to just US$ 426.

China, the world’s second largest healthcare market in the world after the United States, is growing rapidly driven by an ageing population, government support,  and rising urbanization (which is contributing to an increase in lifestyle diseases such as diabetes and cancer.

China is currently the fastest growing major healthcare market in the world with a five-year compound annual growth rate (CAGR) of 17% compared with just 4% for the United States and -2% in Japan according to 2015 information from the World Bank. Healthcare spending in China has risen four-fold from about CNY 1 trillion (US$ 126 billion) in 2006 to CNY 4.6 trillion in 2016 (US$ 698 billion).

Yet, the Chinese healthcare market is still relatively immature compared to developed economies such as the United States and Germany. China holds nearly 20% of the world’s population but the country accounts for just about 3% of the world’s healthcare spend.

As a percentage of GDP, China’s healthcare expenditure is about 5.6% of the country’s GDP compared with 17.1% for the United States, 11.3% for Germany and 10.3% for Japan according to 2013 data from the World Health Organization.

Furthermore, despite being the world’s second biggest healthcare market, China’s per capita healthcare spending is only a fraction of mature markets such as the United States, Luxembourg and Germany. China does not even make it to the list of the world’s top 10 countries with the highest per capita health expenditure indicating huge potential for spending increases.

Bar chart showing the top 10 countries by health expenditure per capita and China’s health expenditure per capita (in US dollars), 2000, 2005, 2015 according to data from the World Health Organization. The top countries by per capita health spend as at 2015 are: Switzerland (US$ 9,818), U.S.A. (US$ 9,536), Norway (US$ 7,464), Luxembourg (US$ 6,236), Sweden (US$ 5,600), Denmark (US$ 5,497), Australia (US$ 4,934), Ireland (US$ 4,757), Netherlands (US$ 4,746), and Germany (US$ 4,592). By comparison, China’s per capita health expenditure in 2015 amounted to just US$ 426.

China’s healthcare market is expected to continue its rapid growth in the years to come propelled by growth drivers such as an greying population, increasing lifestyle diseases as a result of increasing urbanization and government support.

China’s population is ageing with the country’s over-65 year olds accounting for 11.4% of the total population in 2017, up from 10.8% in 2016 and less than 8% in 2000 according to data from the statistics bureau. That equates to over 150 million Chinese over the age of 65 which is slightly less than half of the entire population of the United States. This number is expected to grow with the State Council expecting 25% of China’s population to be aged 60 and over by 2030, up from 13% in 2010 which is expected to drive healthcare costs going forward.

China’s urbanization rate has been on the rise and it currently stands at 59% according to the National Statistics Bureau. This compares with the United States which is at 82%, the United Kingdom which is at 83% and South Korea which is at 83%. China’s increasing urbanization has contributed to a greater incidence of lifestyle diseases such as diabetes and cancer. China has the most number of obese children in the world and has the world’s second -biggest population of obese adults after the United States according to the Global Burden of Disease report by a team at the University of Washington.

The urbanization process is continuing in China and thus as Chinese get increasingly wealthier and urbanized which leads to unhealthy diets and sedentary lives, the country’s lifestyle disease burden is expected to increase thereby driving China’s healthcare market.

Recognizing the need for a robust healthcare industry to meet the country’s increasing healthcare needs, the Chinese government has undertaken a series of reforms and supportive government policies such as the blueprint “Healthy China 2030” which aims to improve the level of health throughout the country by improving health services, expanding the medical industry and encouraging private investment in the local healthcare sector.

By 2030, the National Health and Family Planning Commission (NHFPC) estimates China’s health-related industries will reach CNY 16 trillion (approximately US$ 2.4 trillion).

These factors are expected to drive China’s healthcare industry going forward. According to a 2017 report by Research ad Markets, China’s healthcare market is poised to expand from around US$ 710 billion in 2016 to over US$ 1.11 trillion in 2020 creating numerous opportunities.

Pharmaceuticals

Pharmaceuticals is the largest sector of China’s healthcare market and China’s pharmaceuticals industry has been growing rapidly; the Chinese pharmaceutical market grew at a CAGR of 9.4% from 2013 to 2017 helping China overtake Japan to emerge as the world’s second largest pharmaceutical in the world after the United States.

Bar chart showing the world’s top 10 pharmaceutical markets in 2016 by market value (US$ billion). The top 10 markets are U.S.A. (US$ 461.7 billion), China (US$ 116.7 billion), Japan (US$ 90.1 billion), Germany (US$ 43.1 billion), France (US$32.1 billion), Italy (US$ 28.8 billion), U.K. (US$ 27 billion), Brazil (US$ 26.9 billion), Spain (US$ 20.7 billion), and Canada (US$19.3 billion).

Yet, China’s pharmaceutical market lags far behind the United States in sales; despite having a population that is three times the size of the United States, at US$ 122.6 billion in 2017, China’s pharmaceutical market was worth less than a quarter of the United States’ which was valued at US$ 466.6 billion the same year according to data from health information vendor IQVIA. However, with drug demand expected to grow due to factors such as a greater incidence of lifestyle diseases and faster drug approvals, IQVIA forecasts China’s pharmaceutical market to expand from US$ 122.6 billion in 2017 to reach US$ 145 billion to US$ 175 billion by 2022.

In 2017, China announced new rules aimed at speeding up the country’s inefficient drug approval process, which could be a revenue boost for pharmaceutical companies.

Foreign pharmaceutical companies in particular stand to benefit as the new rules allow foreign drug makers to file for drug approval in China using data from international, multinational trials (provided China is included as a study site) which enables them to gain greater inroads into the Chinese market and eliminates the necessity of conducting additional costly and often time-consuming clinical trials in China after receiving approval overseas.

Swiss pharmaceutical giant Novartis AG (VTX: NOVN) aims to double China sales over the next five years.

AstraZeneca (LON:AZN) has deepened its substantial China business with the announcement of a new company Dizal Pharmaceutical, which is a drug development joint venture with the Chinese Future Industry Investment Fund (FIIF).

French pharma giant Sanofi (EPA:SAN), one of the leading insulin providers in the world and in China, expects to maintain double-digit sales growth in China thanks to China’s growing diabetes population. One third of the world’s approximately 420 million diabetic population live in China which amounts to over 100 million diabetic Chinese, accounting for about 11% of Chinese adults as of 2015 up from less than 1% in 1980, a dramatic increase over the past 35 years. China’s growing insulin demand has been a boon to Sanofi’s rival insulin makers as well, Novo Nordisk (CPH:NOVO-B) and Eli Lilly (NYSE:LLY).

Local drug makers also stand to benefit from accelerated drug approvals.

Hutchison MediPharma, a subsidiary of Hutchison Meditech (LON:HCM) is expected to receive approval this year for its fruquintinib capsule for colorectal cancer, the second-most common prevalent cancer in China with about 380,000 new cases annually according to the National Central Cancer Registry of China. The market potential for cancer drugs in China is substantial with cancer rates rising nationwide as a result of aging, and environmental factors among other reasons. With China seeing approximately 700,000 new cancer cases annually, the country has one-third of new cancer patients in the world.

While China is the world’s biggest producer of APIs, the country lags behind the U.S. and other developed markets in drug innovation, and most innovative drugs are produced by foreign pharmaceutical companies. To help its pharmaceutical industry move up the global value chain, the Chinese government has been actively creating a supportive regulatory framework to galvanize homegrown pharmaceutical companies through grants and tax breaks for research, and through initiatives such as the ‘Made in China 2025’ plan which mentions innovation in pharmaceuticals, among 10 other key sectors, a national priority.

With the results of such initiatives likely to bear fruit in the long term, in the shorter term Chinese pharmaceutical companies’ expansion efforts are likely to remain focused on capturing market share in the global generic drugs market. China’s drugs market is dominated by generics, accounting for 85% of total drug sales as of 2016 according to data from Fitch, and over 95% of the 170,000 drug approvals by the China FDA according to data from the National Health Commission. China’s generics market is dominated by a large number of low-cost domestic pharmaceutical companies, and these Chinese pharmaceutical companies are now venturing out to overseas markets. In the United States, the world’s largest generics market, Chinese generic drug manufacturers have reportedly won approval for 38 generic drugs from the U.S. Food & Drug Administration in 2017, up from 22 in 2016. Jiangsu Hengrui (SHA;600276), Zhejiang Huahai Pharmaceutical (SHA:600521), Zhejiang Hisun Pharmaceutical (SHA:600267) are among the Chinese pharmas that received U.S. FDA approval.

Meanwhile the world’s largest exporter of generic drugs, India, (which won U.S. FDA approval for 300 drugs, roughly one third of the 927 generic drugs granted U.S. FDA approval in 2016)  has seen its imports of Chinese generic drugs soar 50% in dollar terms over the past four years (2012/2013 – 2016/2017) according to data from the Pharmaceuticals Export Promotion Council (Pharmexcil).

Medical devices

One of China’s fastest growing sectors, the Chinese medical device industry has grown in leaps and bounds, with the industry maintaining double digit growth for over a decade. According to data from China Medical Pharmaceutical Material Association, China’s medical device market expanded from CNY 53.5 billion in 2007 to CNY 370 billion in 2016, representing a CAGR of 23.97%, which is three times faster than the global average growth rate of 8%.

Bar chart showing China’s medical device market size (US$ billions) in 2014, 2015, 2016 and 2017 (estimate). China’s medical device industry has been growing at double digits over the past few years with the market valued at US$ 39.32 billion in 2014, US$ 47.38 billion in 2015, US$ 53.62 billion in 2016 and an estimated US$ 58.63 billion in 2017.

The stellar growth has helped boost sales of multinational medical device manufacturers such as Siemens (ETR:SIE), J&J (NYSE:JNJ), Philips, and General Electric (NYSE:GE).

Yet the Chinese medical device market is still at a relatively immature stage considering the fact that globally, the medical device market is about 42% the size of the pharmaceutical market but in China however, the percentage is considerably lower at about 14%, indicating an attractive growth opportunity for medical device manufacturers.

China is Johnson & Johnson’s second largest market after the United States and the company expects China to remain as a key growth engine in the years to come.

Carlyle Group (NASDAQ:CG) owned American in-vitro diagnostics company, Ortho Clinical Diagnostics plans to build manufacturing facilities in China, as it banks on the mainland to be its “No. 1 growth country”. China’s in-vitro diagnostics (IVD) market is expected to grow at a CAGR of over 14% by 2021 according to research firm Technavio, which could be a boon for Swiss healthcare giant Roche Holdings (VTX:ROG), which is the dominant player in China’s IVD market.

But much like China’s pharmaceutical industry, foreign-made medical device brands are perceived to be of superior quality compared to those produced by domestic manufacturers. Consequently, while Chinese medical device manufacturers dominate the local market in general, the vast majority of them compete in the low to mid-range medical device product categories (according to figures from the International Trade Administration, more than 80% of Chinese medical device manufacturers compete in the low to mid-end medical device categories).

Meanwhile foreign medical device manufacturers such as those from the United States, Germany and Japan tend to dominate the higher-end, high-value medical device product category; medical device brands from the United States, which is the number one foreign supplier of medical devices in China, rake in nearly 75% of their local revenue from China’s top tier i.e., Tier III hospitals with the rest from Tier II hospitals according to figures from the International Trade Administration.

In an effort to help local medical device manufacturers play a greater role in the higher-end medical device segment, the Chinese government unveiled its ‘Made in China 2025’ plan which focuses on domestic high-end medical devices in sectors such as diagnostic imaging, medical robots, wearable devices and telemedicine.

Under the plan, China hopes to increase the use of domestically produced medical devices in hospitals to 50% by 2020 and 75% by 2025. The move could further accelerate the rise of local device manufacturers which have been growing faster than multinationals, (albeit from a smaller revenue base), and as a result of continuous product improvement, they have been increasingly taking market share from foreign rivals in medium-level segments of the country’s medical device sector.

For instance, multinationals’ share of China’s orthopedic implant market has dropped from 80% to less than 50% over the past five years, multinationals’ share of China’s drug-eluting stents market (which stood at about 90% as recently as 2004), has declined considerably with local manufacturers such as Biosensors International, Lepu Medical, and MicroPort selling about 80% of China’s drug-eluting stents and multinationals’ share of China’s direct radiography market has dropped from 100% in 2004 to about 50% currently according to data from Boston Consulting Group.

Buoyed by their growing financial, technological and R&D capabilities and supportive government initiatives, Chinese medical device manufacturers appear poised to take further market share in more of China’s medical device sectors in the long term.