Listen to The Bid – BlackRock’s investment podcast

The Bid - Investing In The New Age of Neuroscience

Episode Description

A combination of public and private investments in neuroscience, government grants, and charitable donations are helping accelerate a wave of advancements and opportunities in the field of neuroscience. Recent clinical trial success for the second significant, disease-modifying drug to treat Alzheimer’s is a critical milestone and a positive sign for the future of neuroscience. So, what does this mean for the healthcare investment landscape?

Jeff Spiegel, US Head of BlackRock Megatrend, International and Sector ETFs across index and active strategies talks about these latest breakthroughs in neuroscience and why it demands a closer look when considering healthcare opportunities in your portfolio.

Sources:

United States Census Bureau, Older People Projected to Outnumber Children for First Time in U.S. History, March 13, 2018.

United Nations, 2022 Revision of World Population Prospects, 2022.

Eli Lilly, Lilly's Donanemab Significantly Slowed Cognitive and Functional Decline in Phase 3 Study of Early Alzheimer's Disease, May 3, 2023.

FactSet, Springer Adis Insight, 2022; BlackRock analysis.

Alzheimer’s Association, 2023 Alzheimer’s disease facts and figures, April 19, 2023.

Data Bridge Market Research, Global Traumatic Brain Injuries Treatment Market - Industry Trends and Forecast to 2029, February 2022.

Kuehn, Bridget M. WHO: Pandemic Sparked a Push for Global Mental Health Transformation. JAMA 328.1 (2022): 5-7.

Biogen, FDA Approves ZURZUVAE^TM (zuranolone), the First and Only Oral Treatment Approved for Women with Postpartum Depression, and Issues a Complete Response Letter for Major Depressive Disorder, August 4, 2023.

PLOS One, Adversarial confound regression and uncertainty measurements to classify heterogeneous clinical MRI in Mass General Brigham, March 2, 2023.

U.S. Food and Drug Administration, New Drug Therapy Approvals 2022, January 2023.

Written disclosures in each podcast platform and each episode description:

This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities, funds or strategies to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The opinions expressed are as of the date of publication and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the reader. Investing involves risks. BlackRock does and may seek to do business with companies covered in this podcast. As a result, readers should be aware that the firm may have a conflict of interest that could affect the objectivity of this podcast.

In the U.S. and Canada, this material is intended for public distribution.

In the UK and Non-European Economic Area (EEA) countries: this is Issued by BlackRock Investment Management (UK) Limited, authorised and regulated by the Financial Conduct Authority. Registered office: 12 Throgmorton Avenue, London, EC2N 2DL. Tel:+ 44 (0)20 7743 3000. Registered in England and Wales No. 02020394. For your protection telephone calls are usually recorded. Please refer to the Financial Conduct Authority website for a list of authorised activities conducted by BlackRock.

In the European Economic Area (EEA): this is Issued by BlackRock (Netherlands) B.V. is authorised and regulated by the Netherlands Authority for the Financial Markets. Registered office Amstelplein 1, 1096 HA, Amsterdam, Tel: 020 - 549 5200, Tel: 31-20- 549-5200. Trade Register No. 17068311 For your protection telephone calls are usually recorded.

For Investors in Switzerland: This document is marketing material.

In South Africa: Please be advised that BlackRock Investment Management (UK) Limited is an authorised Financial Services provider with the South African Financial Services Board, FSP No. 43288.

In Singapore, this is issued by BlackRock (Singapore) Limited (Co. registration no. 200010143N). This advertisement or publication has not been reviewed by the Monetary Authority of Singapore. In Hong Kong, this material is issued by BlackRock Asset Management North Asia Limited and has not been reviewed by the Securities and Futures Commission of Hong Kong. In Australia, issued by BlackRock Investment Management (Australia) Limited ABN 13 006 165 975 AFSL 230 523 (BIMAL). The material provides general information only and does not take into account your individual objectives, financial situation, needs or circumstances. Refer to BIMAL’s Financial Services Guide on its website for more information. Before making any investment decision, you should assess whether the material is appropriate for you and obtain financial advice tailored to you having regard to your individual objectives, financial situation, needs and circumstances.

In Latin America: this material is for educational purposes only and does not constitute investment advice nor an offer or solicitation to sell or a solicitation of an offer to buy any shares of any Fund (nor shall any such shares be offered or sold to any person) in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities law of that jurisdiction. If any funds are mentioned or inferred to in this material, it is possible that some or all of the funds may not have been registered with the securities regulator of Argentina, Brazil, Chile, Colombia, Mexico, Panama, Peru, Uruguay or any other securities regulator in any Latin American country and thus might not be publicly offered within any such country. The securities regulators of such countries have not confirmed the accuracy of any information contained herein. The provision of investment management and investment advisory services is a regulated activity in Mexico thus is subject to strict rules. For more information on the Investment Advisory Services offered by BlackRock Mexico please refer to the Investment Services Guide available at www.blackrock.com/mx

©2023 BlackRock, Inc. All Rights Reserved. BLACKROCK is a registered trademark of BlackRock, Inc. All other trademarks are those of their respective owners. 

TRANSCRIPT

<<THEME MUSIC>>

Oscar Pulido: Welcome to The Bid, where we break down what's happening in the markets and explore the forces changing the economy and finance. I'm your host, Oscar Pulido.

Neurological diseases and disorders are among the world's most prevalent health conditions. The need to address them is mounting amid an aging global population and as the world grapples with mental health challenges that were exacerbated by the pandemic. A combination of public and private investments, government grants and charitable donations are helping accelerate a wave of advancements and opportunities in the field of neuroscience.

Recent clinical trial success for the second significant disease modifying drug to treat Alzheimer's is a critical milestone and a positive sign for the future of neuroscience. So, what does this mean for the healthcare investment landscape?

Jeff Spiegel, US Head of BlackRock, Megatrend International and Sector ETFs, joins me to talk about these latest breakthroughs in neuroscience and why it demands a closer look when considering healthcare opportunities in your portfolio.

Jeff, welcome back to The Bid.

Jeff Spiegel: Thanks for having me back.

Oscar Pulido: So, Jeff, today we're talking about the brain, and I'm not a neuroscientist or a neurologist, but I do know that it is a very important organ and I also know that it's a bit of a mystery. I don't think there's been much progress in terms of treating neurological issues. So, what are some of the catalysts that are now bringing neuroscience to center stage?

Jeff Spiegel: So, I'm not a neuroscientist either, I just get to play one on The Bid. my wife though, actually is both a neurologist and a psychiatrist, so we had a little bit of a conversation about this last night, and she was very excited to hear today's discussion once it comes out.

The fundamental issue when I think about neuroscience is aging populations. And really, I think about this as an issue for lots of areas of medical innovation and medical breakthrough. Just to throw a couple of stats out there, I'll start maybe with my favorite, by the end of this decade, there'll be more grandparents than grandchildren in this country.

¹So that's more people over the age of 65 than under the age of 18. And about five years or so after that, the same phenomenon will be true all around the world.²

And there's some things we can predict as a result of that. We know that older populations are much more likely to suffer from a range of neurodegenerative conditions, in particular like Alzheimer's, which is a subset of dementia The good news about this is obviously people are living longer, the challenge is on us to make those years more fulfilling, more productive and healthier. Again, good news over the last 20 years we made more progress in genomics than anyone could have ever imagined. 20 years ago, we had a very limited understanding of the human genome, I would say today we seem to have a very limited understanding of the brain, and the next 20 years are going to be the story of us really getting that understanding and big leaps forward in mental health and in neuroscience. And just to set the stage, there's really three main areas that are relevant.

The first is neurodegenerative, things like dementia. The second is neuro traumatic, think traumatic brain injuries, there's a physical issue, or moment that's involved. And then traditional mental health, a lot of the conditions that affect so many people around the world, like depression, anxiety, and all of this fits into this bucket, of neurology, of neuroscience and I'm incredibly excited about the progress that we're seeing.

Oscar Pulido: Let's talk about that progress. We have seen some treatments for neurological diseases and disorders. In fact, there's been a few FDA approvals recently. So, can you go into a little bit more detail about what some of these advances are?

Jeff Spiegel: Sure. So, we have read about that and it's incredibly heartening, to see the amount of progress that we're making, especially because there's been virtually no progress over the course of the last 20 or 30 years. Consistently for a long time, we've been using cholinesterase inhibitors. These effectively are a performance booster for the brain, they're chemicals that allow the transmission of thoughts across neurons and we can use them to amp up the brain's capabilities in the short term, but we're not actually warding off the sort of degeneration that happens over time from some of these conditions.

But a lot of what you've read about, and it's so exciting in the field, is monoclonal antibodies. A lot of people first heard about these during the covid pandemic, and effectively what you're talking about is taking antibodies that exist within us, to fight various conditions, and inserting them from the outside. So, inserting very powerful antibodies that can come from you, that can come from another person who has particularly strong antibodies, and they're designed to fight particular issues in the body. One of the issues with Alzheimer's specifically is a form of dementia is we know that plaque, otherwise known as beta amyloid, builds up in the brain. Two drugs that have recently gotten approvals, Aducanumab and Leqembi, are monoclonal antibody treatments.

You can think of them as almost preventing and cleaning off this plaque that we see in Alzheimer's, they can slow the decline of the condition of Alzheimer's by about 35%.³ So, if you think about the expected survival rate of someone who's diagnosed with Alzheimer's, it's about eight years.

If you can get two or three more years that are really high quality with your family, where you're getting to engage and have that end of life, even if ultimately this condition is going to be a part of the rest of your life, if we can stretch out that period where you're still really engaged in the world, that's a game changer. Not just for the people who are afflicted, but really for their families. Because we know it's such a difficult disease, for loved ones.

So, if we think more broadly beyond just Alzheimer's, there are about 50 phase two drugs looking at neurodegenerative conditions.⁴ There's about a hundred phase three drugs.⁵ And think about across things like ALS, Parkinson's, Multiple Sclerosis and what's also heartening that we haven't made quite enough progress here yet, I think it bodes really well.

About 70% of cases of a lot of these conditions are linked to genetic factors.⁶ So, to go back to where I started the last 20 years of amazing breakthroughs in areas like genomics, that's also going to pay off as we can use some of that to better understand these neurogenerative conditions. And to give you a sense of the size of the market, it's about $40 billion in sales of these sorts of drugs today.⁷ That's a lot. It's expected to grow at a CAGR of 7.5% a year until 2031.⁸ So, this is a big market with a lot of hope ahead.

Oscar Pulido: You've mentioned Alzheimer's and you touched on this term neurodegenerative. So, these are afflictions of the brain that are more progressive and more chronic. But then you also said, something around neuro traumatic, conditions for the brain, which I think is more something caused by a trauma event, an impact. So, are there similar advances in treatments for those types of conditions?

Jeff Spiegel: Different advances, but no less exciting. This has gotten a lot of press recently in places like the NFL or children's sports, where we're hearing about so much more care and focus than there used to be around things like concussions.

I got a concussion when I was a kid playing sports, and I was basically just sent home and told to rest. That is not how we think of these conditions today, we think of them as very serious, we think of them as potentially having long-term devastating consequences. It doesn't just have to be a physical hit of the type you might get in sports- blood clots, strokes- these things can all cause brain injury. And interestingly, brain injuries are one of the leading deaths of young people. Diseases don't tend to afflict younger people in as great a portion, but traumatic injuries do because they're more active, sports obviously being a big part of that.

What can this cause? It can cause diminished cognitive capabilities, diminished motor capabilities, behavioral problems, sometimes things like paralysis, and a lot of secondary conditions that come on later or eventually like dementia, like depression.

And here one of the most important areas of breakthrough is actually less on the treatment and more in the diagnostics. Better, more advanced CT scanners and MRI machines so that immediately after a trauma we can have a much better sense of what's going on and be a lot more active in diagnosing some of these conditions.

Beyond that, when you think about the treatment, there's a lot of new tools, minimally invasive cranial surgeries, spinal tools that allow us to get in there with that better understanding from better diagnostics and actually have more of an impact on preventing bad outcomes.

And then a little further ahead, but we're starting to see it already, things like robotic neurosurgery, computers and monitoring, and I think we'll talk about AI a little bit later, but this is also playing a role here. And the last category that's exciting, is digital stimulation. So, if you're paralyzed, being able to control your limbs through digital stimulation even if you can't get back the traditional motion and regenerative cell therapies. So actually, getting to regenerate parts of the body that are impacted by these conditions. just to put some numbers around it, we think this is a $200 billion market by roughly 2029.⁹

Oscar Pulido: There was a third category which was mental health. I can't help but just think back through the pandemic this is a topic that, really seemed to rise in prominence in people discussing it and really trying to de-stigmatize it. You see a lot of companies that are making mental health treatment a comprehensive part of the benefits that they offer to their employees. So how is the healthcare industry trying to address it, and then how does it impact the investment landscape?

Jeff Spiegel: So, there's estimated to be about a billion people in the world who live with mental health challenges.¹⁰ And actually, one of the reasons I'm proud to work at BlackRock, is that is a big focus of our benefits, and the firm does take it really seriously.

I'm actually a mental health ambassador, here at the firm, which is a program that we have so that you have people to talk to. and a lot of that is about de-stigmatizing, to your point, I think a lot of companies are really starting to take this a lot more seriously, but stigma is a huge piece of it.

 There was so much sudden onset of issues like depression and anxiety during the pandemic that it was more talked about. A lot of celebrities came out and really talked extensively, about their challenges in this space. One of the things that's different from the two areas we were talking about before that gives me a lot of hope, is more people seeking treatment period.

Treatment with a lot of existing drugs, existing antidepressants, existing anti-anxiety drugs. A lot of them were very effective, but people just hadn't been getting them because they weren't willing to come out and have this conversation. Look, this is true in developed markets, it's even more true in a lot of emerging markets, where the stigma is even larger. So, this market for these sorts of drugs and the ability of people to get help is really going to grow significantly.

One drug that I think is really interesting on a forward-looking basis is zuranolone.¹¹ so new generations of antidepressants tend to just be minor adjustments. And those minor adjustments are usually focused on side effects. This is really a new class of antidepressants, we're already in phase three trials, and the really interesting innovation is for anyone who's taken antidepressant drugs, you get told, okay, you've been diagnosed, here's a pill, in four to six weeks, it'll start to have an impact. That's a long time. This drug actually has shown to reduce symptoms of depression in a matter of days. That's a massive breakthrough especially if you think about the very strong link between depression and other behaviors, be it drug and alcohol use, be it suicide, being able to have a faster intervention, is really going to be a huge differentiator.

Oscar Pulido: So, you've highlighted across a number of these different dimensions of neurodegenerative disease, neuro traumatic, mental health. There's a lot of progress being made. I have to ask you about artificial intelligence, partly because you came on The Bid early in the year and were telling us about how you used ChatGPT over the holidays and now artificial intelligence is everything we talk about. How is AI advancing the neuroscience field, if at all?

Jeff Spiegel: AI is advancing so many fields, and I think a lot of investors have focused to begin with, on tools like ChatGPT these large language models, on the benefits to software companies that produce them, to semiconductor companies responsible for the hardware that goes into enabling them. But when you start to think about the downstream implications, there's a lot of industries that are impacted. And healthcare, I would argue, in an incredibly positive way.

 It's not just that, artificial intelligence is helping us do better research on the brain, the way that artificial intelligence is developing is actually teaching us directly about the brain. So, what exactly do I mean by that, because it's a little bit hard to unpack.

Artificial neural networks, the way that they interpret visual stimuli, neuron by neuron, works very much the same way that humans do it. you've got something in front of you and I start to think about the shapes in my brain, then the colors, and I could piece it together until eventually I say, okay, that's a car. That's a dog or that's a banana. Interestingly though, these artificial neural networks aren't designed to mimic the brain, they follow that same sequential process, which is fascinating because we're actually learning about how there are some natural ways that neurons process that information is processed, they're actually being replicated by artificial intelligence without any input in that way. I would also note that, maybe that makes things a little less scary. AI kind of thinks like we do. Hopefully that's a good sign for us getting along well into the future. But even on how artificial intelligence works itself and how it's evolving and developing, we're learning more about how our own brains work.

Let me give you another example, smarter drug discovery and development. A lot of drug discovery is fundamentally trial and error. Machine learning is way faster at assessing that trial-and-error process that's going to allow people to move forward much faster with various drugs.

Also, one thing that's great about modern AI is it's great at spotting patterns. In particular, it's better than people at spotting patterns, so being able to look at a large set of sample data and have artificial intelligence analyze it for those patterns and what's actually happening to people who are being monitored for underlying conditions, also going to be a really significant push forward, We estimate that it's possible that the artificial intelligence application in medical innovation writ large, this isn't specific to neuroscience, could reduce time to drug discovery by roughly 90%. And I started with this idea of how little we know about the brain to begin with. Part of the reason we know so little about the brain is just because it's incredibly complicated. Again, the modeling and the mapping capabilities of artificial intelligence are going to help us improve that understanding.

Actually, mass General Hospital up in Boston has been using artificial intelligence in MRIs to spot Alzheimer's. So, to sort of look for those telltale signs in the brain like plaque and successfully identify it, which can be challenging, especially in early cases. The AI is 90% accurate at this, approaching the success rate of humans and it's only going to get better.

So, drug discovery, better monitoring, just a better fundamental understanding of how the brain works through modeling, is really going to be a major push forward in how fast we can bring drugs to market, how fast we can do the research.

Oscar Pulido: And the important thing is it's not only helping get the right drugs to market, or better drugs to market. You mentioned the trial-and-error element, being able to be done quicker, more efficiently, but it’s helping doctors understand this very complicated organ in a way that humans alone can't do.

Jeff Spiegel: Exactly.

Oscar Pulido: Jeff, you’ve mentioned there's a number of really positive advancements going on in this space, but when you look ahead, what's your near term and longer-term outlook on this space?

Jeff Spiegel: Bullish, would be to put it mildly. I'm thinking specifically about areas like biopharmaceuticals and medical devices. Aside from everything we've discussed, there's just a lot of great tailwinds that are happening. And again, to go back to this fundamental problem of how we're going to treat and care for aging populations in which we know what diseases are going to be more prevalent. Faster approval of drugs this is actually a positive legacy of the COVID 19 pandemic. The idea that for drugs in which there really is no better solution, getting earlier in the phase trial process that available to people, 65% of novel drugs are actually taking advantage of FDA programs to do exactly that.¹²

So, you're going to see things getting to market more quickly, you're going to see those faster approvals. And then, from a market's perspective, just thinking about performance, everyone has been focused on how do you capitalize on this artificial intelligence opportunity in your portfolios? And I talked about some of the traditional software and hardware that's really been the focus of that conversation. But again, these second order beneficiaries just aren't being recognized. If you look at themes like neuroscience, themes like genomics this year, biotechnology, the performance has massively lagged technology and even massively lagged the broader market. I think investors really should be focused on where are these major breakthroughs going to come from? What's AI going to enable? And I actually think that neuroscience is going to be one of the most exciting spaces for that.

Oscar Pulido: Jeff, as usual, you've come on and enlightened us on a topic that I thought I knew a little bit about, but you've made me realize I actually didn't know that much. You get an A plus from me. I think your toughest critic is going to be your wife who you said is a neurologist. So let us know how she grades you.

Jeff Spiegel: Hopefully gently, but she's a trained mental health professional, so I'm sure she can deliver whatever the news is appropriately.

Oscar Pulido: Great. And thank you again for joining us on The Bid.

Jeff Spiegel: Thanks. Oscar.

Oscar Pulido: Thanks for listening to this episode of The Bid. If you enjoyed this episode, check out last year's episode on healthcare investing featuring MIT Professor Andrew Lo, discussing the funding of new drug development as he works to accelerate the pace of change in biomedicine.

And don't forget to subscribe to The Bid wherever you get your podcasts.

<<THEME MUSIC>>

<<SPOKEN DISCLOSURES>>

This material is intended for information purposes only, and does not constitute investment advice, a recommendation or an offer or solicitation to purchase or sell any securities, funds or strategies to any person in any jurisdiction in which an offer, solicitation, purchase or sale would be unlawful under the securities laws of such jurisdiction. The opinions expressed are as of the date of publication and are subject to change without notice. Reliance upon information in this material is at the sole discretion of the listener. Investing involves risks. BlackRock does and may seek to do business with companies covered in this podcast. As a result, listeners should be aware that the firm may have a conflict of interest that could affect the objectivity of this podcast.

For more information go to Blackrock.com/corporate/compliance/bid-disclosures

1 United States Census Bureau, Older People Projected to Outnumber Children for First Time in U.S. History, March 13, 2018.

2 United Nations, 2022 Revision of World Population Prospects, 2022.

3 Eli Lilly, Lilly's Donanemab Significantly Slowed Cognitive and Functional Decline in Phase 3 Study of Early Alzheimer's Disease, May 3, 2023.

4 FactSet, Springer Adis Insight, 2022; BlackRock analysis.

5 Ibid.

6 Alzheimer’s Association, 2023 Alzheimer’s disease facts and figures, April 19, 2023.

7 Allied Market Research, 2023 Neurodegenerative Drugs Market, March 2023.

8 Ibid.

9 Data Bridge Market Research, Global Traumatic Brain Injuries Treatment Market - Industry Trends and Forecast to 2029, February 2022.

10 Kuehn, Bridget M. WHO: Pandemic Sparked a Push for Global Mental Health Transformation. JAMA 328.1 (2022): 5-7.

11 Biogen, FDA Approves ZURZUVAE™ (zuranolone), the First and Only Oral Treatment Approved for Women with Postpartum Depression, and Issues a Complete Response Letter for Major Depressive Disorder, August 4, 2023.

12 U.S. Food and Drug Administration, New Drug Therapy Approvals 2022, January 2023.