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CRISPR-Cas9 genome editing a 2-edged sword

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  • CRISPR-Cas9 genome editing technology discovered in 2012 has revolutionized biological science and brought hope to millions of people born with incurable inherited killer diseases
  • In July 2018 the UK’s Nuffield Council on Bioethics endorsed the technology to make changes at the cell level in the human body that are heritable
  • This alarms bioethicists because there is no universally agreed regulation for CRISPR and the technology is cheap, easy-to-use and accessible and the line between “therapy” and “enhancement” is blurred
  • CRISPR was invented in the West but is rapidly being transformed into therapies in China where regulation is less than stringent
  • Will genome editing be used to enhance off-springs that satisfy parents’ preferences for children with specific characteristics?
 
 
CRISPR-Cas9 genome editing a 2-edged sword 
 

The genie is out of the bottle!
 
On the 17th July 2018 the UK’s Nuffield Council on Bioethics published a report entitled, Genome Editing and Human Reproduction: Social and Ethical Issues, which concluded that germline editing, a process by which every cell in the human body could be altered in such a way that the change is heritable, is “morally permissibly” under certain circumstances. The Council was referring to developments of an invention made in 2012 by scientists Jennifer Doudna, and Emmanuelle Charpentier. They discovered how to exploit an oddity in the immune system of bacteria to edit genes, which resulted in CRISPR-Cas9, (an acronym for Clustered Regularly Interspaced Short Palindromic Repeats), which is generally considered the most important invention in the history of biology. Since its discovery, modified versions of the technology have found a widespread use to engineer genomes and to activate or to repress the expression of genes. Clinical studies testing CRISPR-Cas9 in humans are underway.
 
In this Commentary

In this Commentary we: (i) describe CRISPR-Cas9 and indicate how it has impacted medicine, biotechnology and agriculture, but suggest that it is most famous for its potential to modify human embryos to provide therapies for inherited killer diseases for which there are no known cures, (ii) suggest that although the technology is gaining regulatory support for its use in humans, there is no universal regulatory agreement. Some countries remain opposed to using CRISPR to edit human embryos while in China regulations is less than stringent. This patchy and loose state of affairs raise concerns among bioethicists, (iii) describe a non-profit agency that has significantly increased the accessibility of the technology, which has helped to democratise CRISPR, but also makes it easier for less stringently controlled laboratories to acquire it, (iv) briefly describe the Chinese scientists first use of the technology in humans and some of the unintended consequences which resulted. We provide examples of research that followed and briefly describe the US-China race to transform CRISPR into viable therapies, and suggest that China, helped by laxed regulation, is winning the race, (v) suggest that these factors, plus the fact CRISPR blurs the distinction between ‘therapy’ and ‘enhancement’, seems to convince bioethicists that the technology at some point in the future will be used to create ‘designer babies’, (vi) conclude by noting that for millennia people have been using radical and painful methods to modify their own and their children’s bodies and this seems to suggest that in time, germline editing will be perceived as a logical extension of these customs and practices, the genie is out the bottle and customize children are likely to become the norm.
 
CRISPR-Cas9

CRISPR is a mechanism deployed by bacteria to identify the DNA of invading viruses and is used by scientists to target a specific gene. Cas-9 is an enzyme, which acts like a pair of molecular scissors to cut out a piece of DNA and, if need be, replace it with a new gene. The process is faster, cheaper and easier to use than traditional genetic modification and has been likened to editing a Word document on a computer. Thus, gene editing has been taken away from highly skilled and tightly regulated molecular biologists and made more widely available. This not only democratizes science but also heightens ethical concerns.
 
CRISPR technologies impact medicine biotechnology and agriculture
 
Since the breakthrough was made in 2012, CRISPR-Cas9 has quickly development into a powerful, cheap and accessible tool in genetics. The technology is programmable, efficient, precise and scalable and has driven significant advances across medicine, biotechnology and agriculture throughout the world. As the world’s population and average temperatures increase, the demand for larger, more nutritious harvests and climate-adaptable crops will grow. The application of CRISPR technology to agriculture allows for an efficient and accurate mode of genetic manipulation to meet these increasing needs. The technology also has been used in the fight against malaria. According to a 2018 World Health Organization report, in 2016 there were 216m cases of malaria worldwide and 445,000 deaths from the disease. Malaria is spread by the female Anopheles-gambiae mosquito, which is one of 3,500 species of mosquitoes. Scientists have used CRISPR technology to edit the genes of this specific type of mosquito to avoid the malaria causing parasite. In a study carried out at Imperial College London and published in the September 2018 edition of Nature Biotechnology researchers succeeded in destroying a population of trapped Anopheles mosquitoes by using CRISPR  technology to genetically alter cells  to spread a genetic modification that blocks female reproduction so, over time, the malaria spreading Anopheles mosquitoes die out. The research demonstrates how a specific CRISPR application can propagate a particular suite of genes throughout an entire population or species and empower scientists in the war against diseases. “It provides hope in the fight against a disease that has plagued mankind for centuries,” says Andrea Crisanti, lead author of the Imperial study.
 
But the one application, which has made CRISPR famous is the modification of the human genome, which promises to cure some of the world’s deadliest diseases for which there are no known therapies. There are some 10,000 genetic diseases of which less than 6% have approved treatments.
 
Regulatory support
 
CRISPR genome editing technologies have been gaining regulatory acceptance for their use in humans and an increasing number of scientists in the US, UK and China have reached conclusions similar to those of the Nuffield Council, and suggest that if germline editing is shown to be safe and there are no medical alternatives, it should be permitted to prevent children being born with fatal diseases. In 2017, the UK’s Human Fertilization and Embryology Authority approved an application to use genome editing, which allows scientists to change an organism’s DNA in research on human embryos. Also, in 2017 a report from the US National Academy of Sciences (NAS) stated that clinical trials for editing-out heritable diseases could be permitted in the future for serious conditions under stringent oversight. At the same time as the Nuffield Council published its findings, - July 2018 - the US Food and Drug Administration (FDA) Commissioner Scott Gottlieb announced a new regulatory framework for genome editing for rare diseases. The following month, - August 2018 - the FDA along with the US National Institutes of Health (NIH) issued joint guidelines for a new streamlined process for assessing the safety of gene-therapy human clinical studies.  And in an August 2018 New England Journal of Medicine editorial Gottlieb and NIH Director Francis Collins argue that, “there is no longer sufficient evidence to claim that the risks of gene therapy are entirely unique and unpredictable - or that the field still requires special oversight that falls outside our existing framework for ensuring safety.”
 
No international regulatory framework for CRISPR triggers concerns
 
Despite increasing support for genome editing, to-date no internationally agreed regulatory framework exists that addresses the ensuing scientific, socio-ethical and legal challenges CRISPR technologies pose for regenerative and personalised medicine. Regulation is on a country-by-country basis and most nations struggle to assess whether gene editing may or may not be different from classical genetic engineering. Several nations remain opposed to the use of the technology in humans. The most contentious issue is human germline editing.

In Canada human germline editing is a criminal offence and sanctions range from fines of US$400,000 and up to ten years imprisonment. However, there is mounting pressure from Canadian scientists to change the law. France restricts genome editing research and supports the Oviedo Convention, which is the first multilateral binding instrument entirely devoted to bio-law. It came into force in 1999, backed by the Council for Europe and aims to prohibit the misuse of innovations in biomedicine. The treaty states that, “An intervention seeking to modify the human genome may only be undertaken for preventive, diagnostic, or therapeutic purposes and only if its aim is not to introduce any modification in the genome of any descendants”. In Germany germline editing is constrained by its 1990 Embryo Protection Act, which prohibits the generation and use of embryos for basic research, and also prohibits the harvesting of embryonic cells. South Korea’s Bioethics and Biosafety Act prohibits genetic experimentation, which modifies human embryos. Western observers suggest that regulation in China is “thin” and tends to be at the provincial and hospital levels. It has been reported that Chinese hospital review boards have approved clinical studies involving gene-editing and cancer patients without fully understanding the nature and power of the technology.
The “dark-side” of CRISPR technology

Weak regulation raises concerns about the level of ethical conduct in clinical studies and the potential dangers this holds for future therapies. Cognisant of CRISPR’s powerful capabilities, its relative cheapness and accessibility, (see below) James Clapper, the former US Director of National Intelligence describes CRISPR-Cas9 gene editing in the 2016 and 2017 Agency’s Worldwide Threat Assessment reports submitted to the US Congress as, “a potential weapon for mass destruction”. Jennifer Doudna, one of the inventors of CRISPR-Cas9 says that there are things which you would not want the technology used for and, “most of the public does not appreciate what is coming”. These sentiments resonate with bioethicists concerned about the absence of stringent universal regulation and the technology getting into the “wrong hands” and resulting in “designer babies”, an escalation of societal inequalities and increased safety and biosecurity issues.
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Democratizing the CRISPR technology
 
Notwithstanding, many scientists view the ease of access to CRISPR technologies as a significant driver of cutting-edge research and the speed at which therapies for life-threatening diseases will enter clinics. The organization most responsible for CRISPR’s widespread accessibility is Addgene, a self-sustaining, non-profit plasmid repository, which facilitates the exchange of genetic material between laboratories throughout the world. (A plasmid is a small DNA molecule within a cell that is physically separated from a chromosomal DNA. It can replicate independently and is used in the laboratory manipulation of genes). It is free for scientists to deposit plasmids in Addgene and a nominal fee is charged for requests. This allows for maintenance and growth of the repository without reliance on grants or external funding. Founded in 2004, Addgene has significantly reduced the frustration scientists experience sharing plasmids with one another. The organization has developed into an important one-stop-shop for depositing, storing, and distributing plasmids globally and this has significantly enabled the democratization of CRISPR technologies. More than 6,300 CRISPR-related plasmids have been developed by over 330 academic laboratories throughout the world and deposited with Addgene. Since 2013, the organization has distributed over 100,000 CRISPR plasmids to some 3,400 laboratories in more than 75 countries. 
 
Mixed results when CRISPR was first used in humans
 
CRISPR technology was first used in humans in China, when a group of scientists led by Junjiu Huang from Sun Yat-sen University in Guangzhou, attempted to modify the gene responsible for β-thalassemia, a potentially fatal blood disorder. Although the genomes of human embryos edited by the scientists could not be developed into a foetus, the researchers had difficulties publishing their findings because of ethical concerns. After being rejected by the journals Science and Nature their paper was published in 2015 in the journal Protein & Cell. The work triggered an international debate, but the research had a low success rate: only 4 of the 54 embryos that survived the technique carried the repaired genes. Huang and his colleagues identified two challenges. One was unintended genetic modifications - off target effects - when CRISPR either changes a gene scientist did not want changed or it fails to change a gene that they did. The second was that embryos, which did not get edited correctly mixed with those that did and became what is referred to as a “mosaic”.  
 
New study discovers the deletion of thousands of DNA bases
 
Initially, these anomalies were thought to be minimal and improvements to the technique were thought to be able to reduce them so that they were virtually undetectable. Indeed, since 2015 the science of human genome editing has advanced significantly and there has been an explosion of research. In 2017 alone, there were some 3,500 research papers published on CRISPR technologies but concerns about CRISPR’s accuracy remain. During the past three years of intense research CRISPR-Cas9 became popularly perceived as a technique that can edit genetic code to correct defects inside individual cells and prevent and heal many intractable illnesses. Notwithstanding, also there has been a growing concern among scientists that because Cas9 enzymes reprogram the DNA of a cell, which is the fundamental building block for the development of an organism, the technique, if inaccurate, may cause more harm than good. Recent research supports this view. A study published in the July 2018 edition of  the journal Nature Biotechnology discovered deletions of thousands of DNA bases, including at spots far from the edit. Some of the deletions can silence genes that should be active and activate genes that should be silent, including cancer-causing genes. This suggests that previous methods for detecting off-target mutations may have underestimated their true scale and therefore the potential for unintended consequences when using CRISPR technologies might be higher than originally thought. This finding poses a significant challenge for developing policy associated with CRISPR because you do not know what off-target effects will occur in humans until you use the technology.
 
Who is developing CRISPR-Cas9 therapies?
 
Notwithstanding, CRISPR–Cas9 is fast entering mainstream R&D and is perceived as a principal technology for treating diseases with a genetic basis and is increasingly playing a significant role in drug discovery. Scientists use the technology to either activate or inhibit genes and can determine the genes and proteins that cause or prevent specific diseases and thereby identify targets for potential therapies. Notwithstanding, drug development is a long and expensive process: it can take more than a decade and cost some US$2bn for researchers to move from the discovery of a target molecule to the production of a clinically approved therapy.  So, it could be some time before the first drugs using CRISPR–Cas9 gene editing make it to the clinics. Notwithstanding, a lot has been achieved in a relatively short time.
 
Research examples

UK examples of research using CRISPR technology include scientists from the Huntington’s Disease Centre at University College London’s Institute of Neurology, who in 2017 completed the first human genetic engineering study, which targeted the cause of Huntington’s disease and successfully lowered the level of the harmful huntingtin protein that irreversibly damages the brains of patients suffering from this incurable degenerative condition.  In another study using CRISPR technology and published in a 2017 edition of the New England Journal of Medicine, researchers from Barts Health NHS Trust and Queen Mary University London  made a significant step towards finding a cure for haemophilia A, a rare incurable life threatening-blood disorder, which is caused by the failure to produce certain proteins required for blood clotting. 
 
Human clinical studies
 
Although CRISPR has proved its worth as a research tool, its use as a therapeutic is still uncertain. This is partly because the technology is so new there is a dearth of data upon which to base clinical evaluations. Notwithstanding, since Chinese scientists first used CRISPR to edit a human embryo's genome, new and more accurate variants of CRISPR have been developed. At about the same time - 2015 - that Huang published his findings using CRISPR for the first time in humans, two children with Acute Lymphoblastic Leukaemia, an incurable cancer, were treated at Great Ormond Street Hospital (GOSH) in London with a version of CRISPR called CAR-T cell therapy. This entails extracting blood cells from patients, then using CRISPR technologies to edit the T cells outside the body - ex vivo gene therapy - in order to transform the cells into enhanced cancer fighters before reintroducing them back into the patient’s blood stream. The treatment proved to be such a success that in 2018 CAR-T cell therapy was made available on the NHS. A US clinical study using the same technique started in August 2018 for people with Acute Lymphoblastic Leukaemia. 
 
Over the past three years scientists in China have used newer versions of CRISPR to genetically engineer cells of at least 86 cancer and HIV patients. These cases form part of eleven human clinical studies using CRISPR-Cas9 technologies, ten of which are being undertaken in China. Another development of CRISPR is ‘base-editing’, which chemically modifies rather than cuts DNA. An August 2018 edition of the journal Molecular Therapy, describes how scientists in China used  base editing, to remodel the DNA of human embryos to treat patients with the Marfan syndrome, which is a relatively common inherited connective tissue disorder with significant morbidity and mortality. A further milestone for the technology was reported 2018 when a study, led by Zheng Hu of the First Affiliated Hospital, Sun Yat-Sen University, Guangzhou, Guangdong, China, was the first to edit human cells while inside the body in an attempt to eliminate the human papilloma virus, which is the main cause of cervical cancer.
 
Company activity and clinical studies
 
Since the first publications in 2012 showcasing CRISPR-Cas9 as a gene editing tool, a number of companies have been set up to leverage the technology to develop innovative therapies. For example,  Editas Medicine, was founded in 2013 by Feng Zhang, Jennifer Doudna, David Liu, George Church, and J.Keith Joung. However, just a few weeks after the company’s formation, Doudna stopped all involvement with Editas after Zhang was granted a number of CRISPR patents and issues concerning intellectual property began to appear. In October 2018 Editas filed an Investigational New Drug (IND) application with the US Food and Drug Administration (FDA) for a clinical study of a CRISPR genome editing medicine called EDIT-101 for the treatment of Leber Congenital Amaurosis type 10 (LCA10). This is a serious eye disorder that affects the retina, which is the specialized tissue at the back of the eye that detects light and colour. People with LCA10 typically have severe visual impairment from infancy.

In 2018 the European Patent Office granted Cellectis, a French biopharmaceutical company, the first patent to use CRISPR technology in human T cells.The patent will protect the application of CRISPR gene editing for T cell research until 2034, meaning every other company employing similar systems will need a license from Cellectis. Also, in 2018 CRISPR Therapeutics, co-founded by Emmanuelle Charpentier began a clinical study using CRISPR genome editing technologies and a similar ex vivo approach to target the blood disorder β-thalassemia. As yet no CRISPR therapies have reached the clinic.
 
US-China competition
 
There is intense and growing scientific competition between the US and China. Although CRISPR was invented in the West, it is more rapidly being transformed in China into therapies that can be used in clinics. An article in a January 2018 edition of the Wall Street Journal suggests that regulation governing genome editing of human embryos in China is much less stringent than in the West where researchers have to pass muster with hospital review boards, ethics committees and government agencies before receiving approval. In China it is not unusual simply for hospital committees to give such permissions. According to Carl June, director of translational research at the Abramson Cancer Center, University of Pennsylvania and well-known for his research into T-cell therapies for the treatment of cancer, “We are at a dangerous point in losing our lead in biomedicine. It is hard to know what the ideal is between moving quickly and making sure patients are safe”. Western scientists believe that the less that stringent regulation in China gives Chinese researchers a significant competitive advantage in the race to get CRISPR therapies into clinics and bioethicists believe that loose regulation will result in unintended consequences that will harm patients and lead to “designer babies”, which could set-back the field for everyone.
 
Blurred line between therapy and enhancement
 
What makes regulation challenging is that CRISPR technologies blur the distinction between “therapy” and “enhancement”. Indeed, the 2018 Nuffield Council report referred to at the beginning of this Commentary suggests that such a distinction between therapy and enhancement cannot be expected to hold. Thus, it seems reasonable to assume that sometime in the future, CRISPR technologies, which are cheap, easy to use and accessible could be used to genetically enhance off-springs. In the first instance this solely might be focused on eradicating life-threatening diseases, but in the longer term it seems probable, especially in the absence of any universally agreed and tightly administered regulations, that genome editing will be used to create off-springs, which satisfy parents’ preferences for children with specific characteristics. Further, CRISPR technology is becoming popular among DIY scientists and biohackers – people who experiment on themselves - which exacerbates the concerns of bioethicists.
 
People have been radically altering bodies for millennia
 
Another reason to believe that germline editing will be used for ‘cosmetic’ enhancements rather than medical therapies is that for millennia people have used radical techniques to modify their own and their children’s bodies for cosmetic rather than therapeutic purposes. Here we illustrate the point with a few examples.
 
From the Song dynasties, which ruled China between 960 and 1279 until the early 20th century, the Chinese practiced the custom of breaking their first daughter’s toes and tightly binding them under the soles of their feet in order to stunt growth so that when the girl grew up she would walk diffidently, which was perceived as attractive. In England during the Victorian era between the mid 19th and the beginning of the 20th century, women, to make themselves attractive to men, corseted their bodies so tightly to create twelve-inch waists that their internal organs were redistributed with potentially dangerous consequences. Girls as young as 4 from the Kayan tribe of Myanmar use heavy brass coils to elongate their necks; a painful tradition dating back to the 11th century. The brass coils, that weigh an average of 10 kilos, deform their collar bones and neck and shoulder muscles. The Mursi tribe in Africa cut the lower lips of girls and insert plates to stretch the lips up to 12 cm in diameter.
 
In the 1970s and 1980s elective cosmetic surgical procedures gained popularity among wealthy people on the East and West coasts of America in order to enhance their appearance. The trend soon became global through the explosion of mass media. According to the International Society of Aesthetic Plastic Surgery in 2017 there was a 9% overall annual increase in surgical and nonsurgical cosmetic procedures globally. The US was the leader, accounting for 17.9% of all procedures. The top five countries were the US, Brazil, Japan, Italy and Mexico, which together accounted for 41.4% of all cosmetic surgical procedures worldwide. Russia, India, Turkey, Germany and France completed the top ten countries. In 2017, 400,000 American women elected to have breasts augmentation surgery; a 41% increase since 2000. About 1m rhinoplasties are carried out each year, with high volumes in Brazil and Mexico. The International Society of Aesthetic Plastic Surgery also reported that in 2016 surgeons in South Korea carried out the most cosmetic surgical procedures per capita: 20 per 1,000 people. V-shaped chins, with minimal jaw or cheekbone, round skulls, lifted lip corners, petite lips and slight puffiness under the eyes have been popular surgeries in South Korea, but recently the demand for such procedures has decreased while simpler and less invasive surgeries have increased. The Society also reported that labiaplasty showed the biggest (45%) increase since 2015. Lower body lift procedures increased by 29%, while upper body lift, breast augmentation using fat transfer, and buttock lifts increased by some 20%.

Such examples suggest that body enhancements, using a range of techniques, have been practiced in many cultures throughout the world for millennia. Thus, it seems reasonable to assume that in the absence of stringent regulation CRISPR will be perceived by some as just another enhancement technique.
 
Takeaways

The discovery of CRISPR Cas9 has revolutionized the way we think about developing therapies for the world’s deadliest diseases. This powerful technology has significant advantages over traditional medical technologies; it is cheap, easy-to-use and accessible, and these factors have helped to drive CRISPR’s global acceptance and use as a tool for new and innovative therapies. Over the past three years CRISPR R&D and clinical studies have developed at a pace and bring huge promise and significant hope to millions of people living with conditions with high rates of morbidity and mortality. Notwithstanding, bioethicists warn that with the absence of stringent universally agreed regulation, all these advantages could easily pivot into significant disadvantages and lead to parents enhancing the genetic composition of their children to make them taller, more intelligent etc. This could be a small step away from reigniting the ‘Charles Galton movement’. Galton was an English scholar and cousin of Charles Darwin. He lived during the Victorian era and died in 1911. Among other things, Galton studied anthropology and sociology and suggested that the elevated social position and heightened intelligence of the English upper classes and the criminality and lack of intelligence of the English under classes were all inherited traits and the result of superior and inferior genetic make-up respectively. According to Galton societies could be improved by selective breeding. Bioethicists are concerned that CRISPR technologies could be used for a 21st century version of Galtonism.
 
The genie is truly out of the bottle.
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2 weeks, 5 days ago

Base-editing next-generation genome editor with delivery challenges

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Medical Technology
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base editing
commentary
CRISPR Cas
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  • ‘Base editing’ is a more efficient version of CRISPR Cas-9 technology
  • CRISPR Cas-9 is a ground-breaking gene editing technology that was discovered in 2012
  • CRISPR Cas-9 operates like molecular scissors to cut and remove mutant strands of DNA and creates space for functioning genes to be inserted
  • CRISPR technologies raise hope for new therapies to replace traditional medicines and provide a one-time procedure to cure devastating inherited disorders that have no cure or few treatment options
  • Recent studies suggest that CRISPR Cas-9 is not as accurate as initially thought and can introduce thousands of unintended ‘off-target’ mutations into the genome
  • Base editing significantly reduces ‘off-target’ mutations because it does not cut the DNA but uses a chemical process to convert just one letter (base) of DNA into another
  • 66% of genetic illnesses involve mutations where there is a change in a single letter of DNA
  • A significant challenge for base editing is in the delivery of the technique
 
Base-editing next-generation genome editor with delivery challenges

Since the first human genome was sequenced in 2003 there has been a revolution in human genomics, which has transformed the way we think about diseases and their causes and has paved the way for the development of therapies that target both the illness and the patient. It has also led to the introduction of the genome-editing tool CRISPR Cas-9 in 2012. This transformed gene editing from a devilishly difficult task to an easy and inexpensive “day-to-day” laboratory technology, which allows scientists to cut-out and change sections of DNA at specific sites in an organism or cell. CRISPR technology revolutionized genetic research and raised hope that it could provide a powerful therapeutic tool for millions of people living with inherited debilitating diseases for which there are either no cures or few treatment options. Recently, next-generation gene-editing technologies have been developed, which have reignited the hope that gene therapies could eventually replace traditional medicines and be used by physicians in clinics as a one-time procedure to cure some of the most devastating inherited disorders. Notwithstanding, scientists have cautioned that the therapeutic use of CRISPR technologies have significant technical, safety, regulatory, ethical and delivery obstacles to overcome before they can be used as therapies.
 
In this Commentary
 
This Commentary describes a new and expanded gene editing technology called base editing or chemical surgery, which compliments CRISPR Cas-9, but instead of cutting strands of DNA it provides a more accurate and predictable means to rewrite single letters (bases) of DNA and RNA. This enables scientists to make more targeted and precise alterations to DNA and RNA with less unintended consequences, referred to as “off-target” effects.  Base editing has significant therapeutic potential for thousands of human disorders known to be caused by a single genetic error and range from sickle-cell anaemia to metabolic disorders to cystic fibrosis, which currently lack options. The new base editing techniques are described in three research papers, which appeared in scientific journals in late 2017. One was published in the November 2017 edition of the journal ‘Protein and Cell’, another in the October 2017 edition of the ‘Nature’ and a third in the October 2017 edition of the journal ‘Science’. Research reported in these papers represents an important advance in our ability to alter single letters (bases) in peoples’ DNA and RNA. Notwithstanding, scientists caution that before base editing techniques become standard clinical practice the technology will require more research, extensive clinical studies and significant advances in delivery methods.
 
CRISPR and intellectual property battles

Base editing is a development of CRISPR Cas-9 technology, which was developed by a group of researchers from University College Berkeley, the Max-Plank Institute, Harvard University and The Massachusetts Institute of Technology (MIT) and others. The Broad Institute, a non-profit disease research facility established jointly by Harvard University and MIT, obtained the basic US patents on CRISPR Cas-9 in February 2017 after a heated patent dispute between two of the technology’s originators. On one side Jennifer Doudna of University College Berkeley and Emmanuelle Charpentier of the Max-Planck Institute in Berlin. On the other side Feng Zhang of the Broad Institute. While the Broad Institute has been considered the winning party in the US, the European intellectual property landscape is a different story.  Due to technical errors associated with listed CRISPR inventions and claimed priority dates, the European patents filed by the Broad Institute have been revoked. 

The Broad Institute is expected to appeal the decision and the gene-editing intellectual property battles continue. Notwithstanding, this has not slowed the development and commercialization of the technology.
 
Technologies to edit the genetic code and some ethical challenges

CRISPR Cas-9, discovered in 2012, is a particularly versatile and inexpensive gene editing technology. Since its discovery it has been used extensively by scientists throughout the world in an attempt to further their understanding of the role played by genes in disease. The technology works by slicing through the two strands of bases that spiral to create DNA’s famous double-helix and is especially useful when the goal is to insert or delete DNA bases. CRISPR acts like a genetic GSP: a guide molecule made of RNA that allows a specific site of interest on the DNA double helix to be targeted. The RNA molecule is attached to a bacterial enzyme called Cas-9 that works like a pair of “molecular scissors”, which can cut out strands of DNA at an exact point. This allows scientists to target and remove faulty genetic material and create space for functioning genes to be inserted in a similar way a word processor allows you to correct and enhance documents. Although CRISPR Cas-9 is increasingly being used in studies of genetic disorders, it has been challenging for the technology to fix a point mutation, caused by a change in a single DNA letter in a given gene. Further the technology’s cutting mechanism can result in “off-target” activity, which either can make changes to a gene you do not want changed or fail to change a gene that you do. This represents a significant challenge for scientists, and a major concern for the technology’s therapeutic applications.

For example, research published in the July 2018 edition of  the journal Nature Biotechnology discovered unintended deletions of thousands of DNA bases, including at spots far from the edit. Another study reported in the May 2017 edition the journal Nature Methods found that CRISPR Cas-9 introduced hundreds of unintended mutations into the genome. And a third study published in December 2017 in the Proceedings of the US National Academy of Sciences suggested that genetic variation between patients may affect the efficacy and safety of CRISPR-based treatments enough to warrant custom treatments. In addition to these technical concerns, ethical concerns about the technique also have been raised. In the March 2015 edition of the journal Nature, Michael Werner, the executive director of the Washington DC based Alliance for Regenerative Medicine suggested that ethical and safety issues should put germline editing research (a process by which every cell in the human body could be altered in such a way that the change is heritable) off limits because, “It’s still a little premature to say that we’ve resolved all these safety issues now,” says Werner. Notwithstanding, in July 2018 the UK’s Nuffield Council on Bioethics suggested that germline editing is “morally permissibly” under certain circumstances.
 
CRISPR triggers intense commercial activity

Despite safety and ethical concerns about CRISPR, genome editing has rapidly become a large fast-growing global market. In late 2012, Charpentier  suggested to a few colleagues, including Doudna, Zhang and George Church, professor of genetics at Harvard University Medical School who is credited with developing the first direct genomic sequencing method in 1984, that they should start a company to accelerate the gene editing technology into clinics.  They did not, but later the same scientists and others started separate genome editing companies. Four have become publicly traded companies and have successfully raised billions. For example, in 2013 Charpentier founded Crispr Therapeutics. Based in Switzerland, the company has become a US$2bn Nasdaq traded company. The other three, all based in the US are: Editas Medicine, which has a market cap of US$1.3bn and was founded by Zhang, Church and David Liu, Professor of Chemistry at Harvard University, a core member of the Broad Institute, and the first to describe base editing in research published in the May 2016 edition of the journal Nature. Doudna is  a founding member of Intellia Therapeutics, which today has a market cap of US$1bn,  and Juno Therapeutics, which has a market cap of US$10bn was founded in 2013 through a collaboration of the Fred Hutchinson Cancer Research Center, Memorial Sloan-Kettering Cancer Center and the Seattle Children’s Research Institute.

Since their inceptions, big pharma companies have been competing to invest in them. In January 2018 Celgene, which already owned 9.7% of Juno agreed to acquire the rest of its stock for US$9bn in cash in order to gain access to Juno's pipeline of CAR-T cancer drugs. This technology entails extracting blood cells from patients, then using CRISPR to edit T cells (immune cells) outside the body - ex vivo gene therapy - in order to transform the cells into enhanced cancer fighters before reintroducing them back into the patient’s blood stream. Earlier Bayer, a German pharmaceutical company, acquired a US$35m equity stake in Crispr Therapeutics, which it increased in January 2018. In 2016 Bayer invested US$335m over 5-years in a joint venture with Crispr Therapeutics called Casebia, with the intention to discover, develop and commercialize new breakthrough therapeutics to cure blood disorders, blindness, and congenital heart disease. Casebia also expects to develop new delivery mechanisms for CRISPR technologies, which will be critical to future drugs meant to target cells in the human body. Crispr Therapeutics retains a 50% interest in the joint venture, and also gains access to Bayer’s state-of-the-art delivery technologies and protein engineering knowhow.
According to market analysis the global genome editing market is expected to grow at a CAGR of 14.5% to reach US$6.3bn by 2022. Market drivers include rising government funding and the growth in the number of genomic projects, high and increasing prevalence of debilitating and often fatal diseases, technological advancements, increasing production of genetically modified crops, and growing application areas of genomics.
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CRISPR positioned to eliminate human papilloma viruses that cause cervical cancer

Tens of thousands of devastating diseases are the result of a single minute error in one letter the human genome
 
While big pharma competes to commercialize CRISPR Cas-9 technologies, scientists compete to develop ever-more versatile and efficient versions of the technology. One result of the competition among scientists is “base editing”, which is predicated upon the same basic mechanism as the standard CRISPR technology but differs because it does not require the DNA to be physically cut. Instead, base editing uses a chemical process to directly convert a single base (letter) of DNA to another without deleting and inserting random bases in the process.  Think of base editing as similar to changing one letter in a vast WORD document. The technique allows scientists to edit the body’s genes one letter at a time with exquisite precision.  Base editing rewrites single errors in the genetic code instead of cutting and replacing whole strands of DNA. The technique is not a replacement for CRISPR, but a complementary technology for altering the genome in an attempt to correct disease. Converting one letter to another may not sound significant until you consider that there are billions of letters in the human genome, and tens of thousands of diseases can be traced to a single minute error in just one letter in the human genome. Indeed, of more than 50,000 genetic changes currently known to be associated with disease in humans, 32,000 are caused by the simple substitution of one base letter for another. Base editing is significantly more efficient than standard CRISPR systems at making single base substitutions.
 
DNA molecules as a sequence of letters

Your genes are an instruction manual for your body. Hidden inside every cell in your body is a chemical called DNA. Genes are short sections of DNA, which are the biological templates your body uses to make the structural proteins and enzymes needed to build and maintain your tissues and organs. Genes influence how you look on the outside and how you function on the inside. The DNA that makes up all genomes is composed of four related chemicals called nucleic acids: (i) adenine ‘A’, (ii) guanine ’G’, (iii) cytosine ‘C’, and (iv) thymine ‘T’.  A sequence of DNA is a string of these nucleic acids (also called “bases” or “base pairs”). These bases connect in a specific way: ‘A’ always pairs with ‘T’, and ‘C’ always pairs with ‘G’. The letters represent the “alphabet” scientists use to write genetic code. The principal biological function of a base is to bond nucleic acids together. Nucleic acids are complex organic substances present in living cells, especially DNA or RNA. There are some 24,000 genes in the human genome, which are bundled into 23 pairs of chromosomes all coiled up in the nucleus of every one of your cells. There are about 37trn cells in the human body. Only about 1.5% of your genetic code, or genome, is made up of your genes. Another 10% regulates your genes to ensure that they turn on and off in the right cells at the right time.
 
The November 2017 Protein and Cell study

In the April 2015 edition of the journal Protein and Cell, scientists led by Junjiu Huang from Sun Yat-sen University in Guangzhou, China, reported research where he and his colleagues used CRISPR Cas-9 to correct abnormal β-thalassemia genes in human embryos without much success. Researchers suggested, “our work highlights the pressing need to further improve the fidelity and specificity of the CRISPR Cas-9 platform, a prerequisite for any clinical applications of CRISPR Cas-9-mediated editing”. In the November 2017 edition of Protein and Cell Huang and colleagues demonstrated that they had enhanced the fidelity of CRISPR and used the new base editing technique for the first time in human embryos to repair a faulty gene that gives rise to β-thalassemia. They suggested that, “their study demonstrated the feasibility of curing genetic disease in human somatic cells and embryos by a base editor system”.
 
Β-thalassemia

Β-thalassemia is a serious blood disorder, common in China and southeast Asia, which can be caused by a single mutation in the DNA code. The disorder reduces the production of haemoglobin, which is an iron-containing protein in red blood cells that carries oxygen to cells throughout the body. Without treatment, patients with a severe type of β-thalassemia, usually die before age 5. Correcting this mutation in human embryos may cure people with the disorder and also prevent the disease being passed on to future generations.

Innovative approach

Humans carry two copies of every gene, and in many cases both versions have to be “healthy” to avoid disease. Because it is challenging for researchers to find a lot of embryos, which all have a rare double mutation, Huang’s team created a batch of cloned embryos, then took skin cells from patients with β-thalassemia, removed their DNA-containing nuclei, and introduced them into donor eggs that had their own nuclei removed. The eggs then developed into early stage embryos, which carried the β-thalassemia mutation. Despite the study’s success to effectively edit the embryos and repair the mutations it was only about 20% efficient. Huang noted that the base editing technique he and his colleagues used was not uniform across all cells in the embryos, and their endeavours only sometimes repaired one faulty gene instead of 2. This created what is called “mosaic embryos”, which have both normal and mutant cells and result in a patchwork of cells with different genetic make-up and is potentially dangerous. 

Huang concluded that more research is required to improve the safety of the study’s base editing approach. Notwithstanding, scientists believe Huang’s research represents a significant advance, and that base editing techniques hold out the potential to treat and prevent a number of serious and debilitating inherited human diseases, which are more common than some people realise. For example, 1 in 25 children are born with some genetic disorder, which includes β-thalassemia, cystic fibrosis, genetic blindness, sickle cell anaemia, muscular dystrophy, and Tay-Sachs disease.
 
The October 2017 Nature study

In October 2017, David Liu, and colleagues from the Broad Institute published a paper describing their latest and improved base editing research in the journal Nature. Liu's group genetically transformed base pairs at a target position in the genome of living cells with more than 50% efficiency, with virtually no detectable ‘off-target’ effects such as random insertions, deletions, translocations, or other base-to-base conversions. The work of Liu and his team is significant because it, “introduced point mutations more efficiently and cleanly, and with less off-target genome modification than a current Cas-9 nuclease-based method, and can install disease-correcting or disease-suppressing mutations in human cells”. This clears the path for scientists to use base editing to address many more single-letter mutations than was previously possible. “What we’ve developed is a base editor, a molecular machine, that is a programmable, irreversible, efficient, and an extremely clean way to correct mutations in the genome of living cells,” says Liu.
 
Delivery is the challenge

Notwithstanding, Liu suggests that the status of base editing is like Amazon without UPS, its principal delivery agent, “Creating a machine that makes the genetic change you need to treat a disease is an important step forward, but it’s only one part of what’s needed to treat a patient. We still have to deliver that machine”, says Liu, and further, “We have to test its safety, we have to assess its beneficial effects in animals and patients and weigh them against any side-effects. We need to do many more things. But having the machine is a good start.” Liu is hopeful that base editing of DNA and RNA could be used as complementary approaches for a “broad set of potential therapeutic applications.” He and his colleagues are exploring base editing to fix blood and neurological disorders as well as hereditary deafness and blindness.
 
The October 2017 Science study and the advantages of editing RNA
 
In a paper published in the October 2017 edition of the journal Science, Feng Zhang, of the Broad Institute who is one of the original architects of CRISPR, and senior author describes a variant of base editing, which acts on RNA in human cells instead of DNA. RNA acts as a temporary genetic messenger within cells and naturally degrades in the body. This means that editing RNA instead of DNA does not result in a permanent change to a person’s genome, and therefore has significant potential as a tool for both research and disease treatment. Zhang’s base editing technique makes a temporary correction of a disease-causing mutation without permanent alteration to the genome. According to Zhang, editing DNA is, “permanent and very difficult to reverse, which poses a safety concern, while editing RNA is not.” Zhang’s approach is a potentially safer option when it comes to gene-fixing therapeutics, although any treatment using the technique would need to be administered repeatedly. But Zhang believes repetition could be an advantage because it allows for a therapy to be “upgraded” as scientific knowledge increases and provides a better understanding of specific disease states. The system can change single RNA nucleotides in mammalian cells in a programmable and precise fashion and has the ability to reverse disease-causing mutations at the RNA level, as well as other potential therapeutic and basic science applications.
 
Zhang and colleagues made one RNA-editing enzyme into a programmable gene-editing tool. “There are 12 possible base changes you can do,” says Omar Abudayyeh, a researcher at the Broad Institute and one of the paper’s authors. Having edited one, “we’re now thinking about the ways to do the other eleven.” By operating on RNA, Zhang and his colleagues avoid ‘off-target’ effects. “With RNA, you have to think about ‘off-targets’ a little differently.” says Abudayyeh. “If some of the RNA gets edited incorrectly the cell will have at least some amount of the right protein. If things go really wrong, the edit is reversible. You can always remove the system and the RNA will eventually degrade and recycle and revert back to normal,” says Abudayyeh. Liu and his team call their new creation REPAIR. They tested it on human cells growing in dishes and edited up to about 27% of the RNAs of two genes. The researchers did not find any ’off-target’ effects and suggest, “REPAIR presents a promising RNA editing platform with broad applicability for research, therapeutics, and biotechnology.”
 
Delivery challenges

Liu and other medical researchers have stressed the significant challenges associated with delivering CRISPR technologies, which have yet to be resolved before gene editing techniques become viable therapies. The conundrum researchers face is that your body’s biological barriers, which protect you from diseases are the same barriers that create significant obstacles for the delivery of genetic editors. Let us explain. Your DNA is like Fort Knox gold in that it is extremely well protected. For a harmful agent to access your DNA it first has to get under your skin and into your bloodstream. It then has to travel through your bloodstream without being detected by your immune system, which is comprised of networks of cells, tissues, and organs that work together to protect your body. One of the important cells involved in your immune system are white blood cells, also called leukocytes, which come in two basic types that combine to seek out and destroy disease-causing agents. Assuming the harmful agent successfully gets past all these biological barriers, it then has to penetrate your cell membrane and find a way to the nucleus of the cell. These biological defences help to keep you healthy by preventing harmful agents penetrating and transforming your cells into disease-making entities. But, they are the same obstacles that prevent scientists getting gene editors to the right place at the right time in the right quantity. Although delivery technologies are improving, Crispr Therapeutics, Editas Medicine, and Intellia Therapeutics, as well as, Casebia are all investing in delivery mechanisms, which remain significant challenges to overcome before gene editing becomes a regular therapy.  This is not only a concern for private companies, but also for the public sector. In January 2018 the US National Institutes of Health announced it will be awarding US$190m in research grants over the next six years, in part to “remove barriers that slow the adoption of genome editing for treating patients”.
 
Takeaways

Researchers have made substantial scientific advances in embryo gene editing technologies, which have significant potential for next-generation therapeutics. Base editing, described in this Commentary, is one advance, which has the potential to provide effective therapies for a range of disorders known to be caused by the mutation of a single letter in a gene, which currently have either little or no means of a cure. This is important because about 66% of genetic illnesses in humans involve mutations where there is a change in a single letter (or base). Notwithstanding, before such technologies become regular therapies in clinics there are major technical challenges, which need to be overcome in the delivery mechanism for these gene editors.
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Can Western companies engage with and benefit from China?

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  • China will not challenge the economic supremacy of the US in the near to medium term
  • But with a GDP of US$14trn growing at 6.9% a year China is a substantial economy and a significant trading partner of the US
  • China is replacing imported high-tech products with domestic ones and incentivizing Chinese companies to dominate high value global industries
  • China’s large and increasing supply of appropriately qualified human capital gives it a competitive edge
  • Beijing’s US$8trn-30-year Belt and Road (B&R) strategy aims to make China the centre of a new world order in which knowledge-based Chinese companies dominate high-value global markets
  • China is challenged by substantial debt and significant credit it has extended to economically weak nations
  • Notwithstanding, Western companies seeking growth outside their current wealthy markets need to develop constructive trading relationships with China
  • Lack of understanding and cultural differences are barriers to productive West-East trading relations
 
Can Western companies engage with and benefit from China?
 
Previously we described how Beijing had offered Western companies a ‘poisoned challis’: either localize your value chain and help China achieve its goals to dominate key industries globally or be progressively squeezed out of markets. Washington responded by levying punitive tariffs on products manufactured in China and marketed in the US in an attempt to force Beijing to change. China hit back, cross fire ensued, more US tariffs were levied, markets became nervous and a ‘flight for liquidity’ seems a possibility. This is when equity players become nervous about uncertainties in markets and move their investments into more liquid securities in order to increase their ability to sell their positions at a moment’s notice. To some observers the current trade conflict between the world’s two largest trading nations must seem like Stanley Kramer’s 1952 epic ‘High Noon” movie. The difference being the 2018 showdown could affect the lives of billions and threaten the global economy. The fact that the world can be brought to such a position in such a short time is partly due to a profound lack of understanding and cultural differences between Washington and Beijing and vice versa. The differences manifest themselves as: (i) competition versus harmony, (ii) short-termism versus long-termism, (iii) tactics versus strategy and (iv) nationalism versus globalism. These differences pervade organizations, institutions and mindsets in the respective regions.
 
In this Commentary

This Commentary is divided it into 3 parts.
  • Part 1: China’s penetration of emerging markets discusses the implications of China’s stated aim to become a major global high-end, knowledge-based economy and describes how, for the past three decades, the nation has been preparing for this by systematically upgrading its human capital. From a perceived position of strength Beijing suggested to Western companies seeking or increasing their franchises in China that unless they are prepared to localize their value chains, not only will they be squeezed out of the China market, but they will also encounter challenges in other large emerging markets as China’s presence and influence in these markets increase. This is significant because the world’s emerging economies are the growth frontiers of many high-tech industries. 
  • Part 2: China’s economic rise and its strategic objectives briefly describes China’s phenomenal transformation from a centrally managed economy to the world’s second largest economic power and a significant commercial partner of the US. We provide glimpses of some aspects of China’s recent history in order to convey the scale of its industrial reforms and its well-resourced, central government-backed long-term strategies to establish China as a world leader in knowledge-based high-value industries. We describe China’s planned slowdown of its economy and how Beijing is systematically upgrading its human capital. Indicative of China’s increasing trading prowess are its new technology companies. We describe three, which are likely to have a significant global impact in the next 5 years. We conclude part 2 with a description of the Pearl River Delta, China’s high tech production hub, in order to provide further insights into China’s achievements, the nature and scale of its projects to upgrade its economy and the thinking that drives China’s economic transformation. 
  • Part 3: China’s ‘Belts and Road’ (B&R) initiative. B&R is a bold ‘neo colonialist’ initiative to build a 21st century ‘Silk Road’ of infrastructure and trade-links between China and Eurasia. This is expected to stimulate trade, economic growth and domestic employment in some of the least developed regions of the world, which have suffered from post-colonial decline and are neglected by the West. Beijing expects that the B&R project will position China at the centre of a newly formed global trading network. We review some of the concerns raised by the R&D initiative including China's increasing exposure as a principal creditor to economically weak nations. This, together with China's mounting debt, presents Western companies with a dilemma: China is too big to be ignored but its structural weaknesses could be damaging.   
 

Part 1
 
 China’s penetration of emerging markets
 
 
Made in China 2025 (MIC25) incentivizes Chinese enterprises to develop their competences and capacities in order to respond to the pivotal needs of global customers to reduce costs while maintaining value by providing affordable quality product offerings.  It also encourages Chinese companies to become ‘global champions’ and help China establish itself as a dominant international force in knowledge-based technologies of the future. As a result, Chinese companies are successfully taking share of key segments in emerging markets. So, Beijing’s industrial strategies not only increase the challenges for Western companies in China, but also provide potential barriers for them to penetrate and increase their franchises in other large emerging markets such India and Brazil, which are the future growth frontiers.
 
China’s investment in human capital

Beijing’s well-resourced strategies to transition China from a manufacturing-based economy to a high-end, innovation-driven, knowledge-based economy could not be achieved without a significant supply of relevant human capital. It is instructive that for the past three decades China has been systematically upgrading its human capital, while Western nations have not been doing so at a similar pace.
 
According to the World Economic Forum, China has committed massive resources to education and training. In 2016 China was building the equivalent of one university a week and graduated 4.7m citizens, while in the US 568,000 students graduated. In 2017, there were 2,914 colleges and universities in China with over 20m students. The US had 4,140 with over 17m students enrolled. Significantly, between 2002 and 2014 the number of students graduating in science and engineering in China quadrupled. In 2013, 40% of all Chinese graduates completed a degree in science, technology, engineering or mathematics (STEM), whilst in the US only 20% of its graduates did so. In addition to China producing more STEM graduates than either the US or Europe, which are vital for high-tech knowledge-based industries of the future, the gap between the top Chinese and US and European graduates is widening. Projections suggest that by 2030 the number of 25 to 34-year-old graduates in China will increase by a further 300%, compared with an expected rise of around 30% in the US and Europe. This represents a substantial shift in the world's population of graduates, which was once dominated by the US, and gives China a potential competitive edge in high-tech growth industries of the future.
 
Further, US students struggle to afford university fees. Many American colleges and universities are struggling financially and as a consequence actively recruiting foreign students. In recent years, the number of Chinese students admitted to US universities has increased significantly. In 2017 for instance, some 350,000 Chinese students were recruited. Most graduates return to China with quality degrees. European countries have put a brake on expanding their universities by either not making public investments in them or restricting universities to raise money themselves.
 
Shanghai students are world’s best in maths, reading and science

Supporting this competitive edge is China’s world-beating performance of its 15 and 16-year-olds. According to an internationally recognised test, Shanghai school children are the best in the world at mathematics, reading and science. Every three years 0.5m students aged 15 and 16 from 72 countries representing 80% of the global economy sit a 2-hour examination to assess their comparative abilities in these three subjects. The examination, called the Program for International Student Assessment (PISA), is administered and published triennially by the Organisation for Economic Co-operation and Development (OECD). When the 2009 and 2012 PISA  scores were released they created a sensation, suggesting that students in Shanghai have significantly better mathematics, reading and science capabilities than comparable students in any other country.  Although these scores have been contested, and the most recent test scores suggest Shanghai students have slipped down the rankings, in the 2012 tests Shanghai students performed so well in mathematics that the report compared their scores to the equivalent of nearly three years of schooling above most countries.
 
Human capital strategies challenged by aging populations
Human capital strategies in China, the US and Western Europe are all challenged by aging populations. According to the United Nations, China’s population is ageing more rapidly than any country in recent history. America’s 65-and-over population is projected to nearly double over the next three decades, rising from 48m to 88m by 2050. The UK’s population also is getting older with 18% aged 65-and-over and 2.4% aged 85-and-over. In 2014, 20% of Western Europeans were 65 years or older and by 2030 25% will be that age demographic.
 
Taking share of high-value MedTech markets
 
Many Western MedTech companies are late-bloomers in emerging markets. This can partly be explained by the two decades of economic growth the industry experienced from developed markets and the continued buoyancy of the US stock market.  Thus, Western MedTech companies have felt little pressure to adjust their strategies and business models and venture into territories committed to “affordable (low priced) medical devices”. Beijing seems determined to take advantage of this and Chinese companies are increasing their share of large fast growing and underserved emerging markets by: (i) increasing their innovative go-to-market strategies and (ii) making sure they “localize” their product offerings. We briefly describe these two strategies.
 
Innovative go-to-market approaches

According to OEDC data, between 2000 and 2016 China doubled its R&D investment to 2% of GDP, which is more than the EU but less than America. In 2016, the US spent 2.7% of its GDP on R&D, which is more than any country. Individual Chinese domestic companies are also increasing their investments in R&D as part of their growth strategies. For instance, over the past decade, Mindray, China’s largest MedTech company has spent more than 10% of its annual revenues - currently US$1.7bn - on R&D. The company has a large R&D team of over 1,400 located in 2 centres: 1 in Mahwah, China and another in Seattle, USA. BGI, China’s largest manufacturer of next-generation gene-sequencing equipment, devotes more than 33% of its revenues to R&D, double that of its US competitor Illumina. In aggregate, however, Chinese companies are a long way behind their Western counterparts when it comes to R&D spending.
 
Supercomputers
High-tech companies require supercomputers to assist with their R&D and innovative strategies. These are powerful and sophisticated machines with enormous processing power, which can support medical and scientific R&D. According to an internationally recognised ranking, which has been conducted biannually by leading scientists since 1993, China leads the world with its installed-base of supercomputers. China has 206 and  America has 124. In 2000 China had none. The most recent rankings show that the US has regained the top performance position from China with an IBM-system-backed supercomputer now running at the US Department of Energy’s Oak Ridge National Laboratory. 
 
Increasing number of Chinese patents
Although the US maintains a lead in scientific breakthroughs and their industrial applications, innovation is increasing in China. The number of invention patent applications received by China in 2016 was 1.3m, which was more than the combined total from the US (605,571), Japan (318,381), South Korea (208,830), and the EU (159,358). Patents from these five countries accounted for 84% of the world total in 2016. 
 
Increasing share of high-tech markets
Emboldened by enhanced processing power, increased patents, greater R&D capacity and improved capabilities, Chinese MedTech companies are increasingly represented across a broad spectrum of high-end medical technologies and have made significant inroads into emerging markets. Some manufacture Class III product offerings such as orthopaedic implants and are beginning to compete in medium-level technology markets in Brazil, India, Japan and the UK. For instance, SHINVA markets its linear accelerators globally. Sinocare is #6 in the global market for blood glucose monitoring devices. In 2008 Mindray paid US$200m to acquire the patient monitoring business of US company Datascope, making it the third-largest player by sales in the global market for such devices. Also, Mindray has increased its share of the ultrasound imaging market to 10%, behind GE and Phillips. MicroPort broke onto the world stage in early 2014 when it acquired Wright Medical’s orthopaedic implant business for US$290m. In 2015 China overtook Germany to become Japan’s second largest supplier of MRI devices, behind the US, and Biosensors International is among the largest suppliers of drug-eluting stents in France, Germany, Italy, Spain and the UK.
 
Localized product offerings in India
 
Mindray, which positions itself as a world-class MedTech solutions company, has established a significant presence in India where it has built local operations, tailored its line of affordable high-quality patient monitoring, ultrasound and in vitro diagnostic devices to address India’s unmet needs, hired local engineers and operators and built a local marketing and sales team, which provides a 24-7 customer service. Mindray has understood that many of the factors, which drive China’s MedTech market growth are mirrored in India and other rapidly growing emerging markets that share a similarly high disease burden, aging demographics and a desire to reduce healthcare costs.
 
Mindray was one of China’s earliest MedTech companies to list in New York in 2006. However, the company felt its shares were undervalued and privatized in 2016 in a deal, which valued the company at US$3.3bn. A funding round shortly after its delisting valued Mindray at US$8.5bn. The company employs over 8,000 and its 2017 revenues were US$1.7bn.
 
India’s MedTech market
 
The attraction of India to MedTech companies is easy to understand. India’s MedTech market is the 5th largest in the world and could rival that of Japan and Germany in size by 2022 if it continues its 17% annual growth. Although India mainly has been an out-of-pocket healthcare market this is changing. In September 2018, the Indian government launched one of the world’s largest publicly funded health insurance schemes, which will provide some 0.5bn poor people with health cover of US$7,000 per year (a sizable sum in India) for free treatment of serious ailments. India’s medical device markets, like those of China’s, will benefit from this, but also from the country’s large and growing middle class with relatively high disposable incomes in an economy growing at around 7 to 7.5% annually.
 
In 2016 India’s middle class was estimated to be 267m - 83% of the total population of the US - and projected to increase to 547m by 2025. Further, India has a large and growing incidence of lifetime chronic diseases, which expands the need for medical devices. Between 2009 and 2016, China emerged as India’s 3rd largest supplier of medical devices (behind the US and Germany) and is currently India’s leading provider of CT scanners, representing 50% of the US$69m that India spent on imports of these high-tech devices during 2016. India’s orthopaedic devices market is estimated to be around US$375m and is projected to grow at about 20% each year for the next decade to reach US$2.5bn by 2030. In contrast the global orthopaedics industry is estimated to grow at 5% annually.

China is positioned to increase its share of MedTech markets in India and other emerging countries. This suggests that unless Western companies are prepared to transform their strategies and change their business models similar to what Medtronic and GE Healthcare have done, they will not only be squeezed out of the China market but shall encounter challenges to penetrate and increase their franchises in other large emerging MedTech markets. This is significant because the world’s emerging economies are the growth frontiers of the MedTech industry.


Part 2

China’s economic rise and strategic objectives: background

 
“How long can China sustain its rise?”. We broach this question in the next two parts of this Commentary. Here in Part 2, we describe some relevant aspects of China’s recent commercial history, its success in producing high tech global companies and we also provide a glimpse of its urban communities for creating and developing companies of the future.

It was not until the early 1980s, after the death of Mao Zedong in 1976, that China started to dismantle its centrally planned economy and began implementing its free market reforms and opened its economy to foreign trade and investment. Shortly afterwards China: (i) became the world’s fastest growing market-based economy with real annual GDP growth averaging 9.5% through 2017, (ii) lifted 800m citizens out of poverty and (iii) overtook Japan to become the world's second largest economy. By 2010 China had become a significant commercial partner of the US and is now America’s largest merchandise trading partner, its biggest source of imports and America’s third largest export market. Also, China holds US$1.7trn of US Treasury securities, which help fund the federal debt and keep US interest rates low. It is worth noting that China has a long history dating back more than 2,000 years BC. In more recent times, Adam Smith the father of modern capitalism, described China in The Wealth of Nations (1776) as a country which is, “one of the most fertile, best cultivated, most industrious, most prosperous and most urbanized countries in the world”.
 
Avoiding a middle-income trap
 
Over the past decade China’s economy has matured and Beijing has managed a planned slowdown of its growth rate to what it calls the “new-normal”. In 2017 China’s GDP was 6.9% and is projected to fall to 5.6% by 2022. The orchestrated slowdown is less based on fixed investment and exports and more on private consumption of China’s large and growing middle class, enhanced services and innovation. A previous Commentary described Beijing’s Made in China 2025 (MIC25) initiative and other policies, which prioritised innovation and the systematic upgrading of its domestic industries whilst decreasing its reliance on foreign technology. This is essential for China to avoid a ‘middle income trap’, which happens when nations achieve a certain level of economic growth, but then begin to experience diminishing returns because they are unable to restructure their economies to embrace new sources of growth.
 
Baidu, Alibaba and Tencent: BAT

An example of China’s ability to upgrade its economy and avoid a middle-income trap is its new technology companies, which are positioned to have significant global roles in the next five years. We briefly describe three: Baidu, Alibaba and Tencent: collectively referred to as BAT. Baidu, is a Chinese language Internet search provider incorporated in 2000, which has grown to  become the world’s 8th largest internet company by revenue. It has a market cap of US$80bn, annual revenues US$13bn and has the world’s largest Internet user population of about 800m. Alibaba, was founded in 2000 as a business-to-business (B2B) portal connecting Chinese manufacturers to overseas buyers. Today, the company is a multinational conglomerate with a market cap in excess of US$500bn and annual revenues of US$13bn. It is the world’s largest e-commerce company in terms of gross merchandise volume (GMV). For the fiscal year ended March 31, 2017, Alibaba had a GMV of US$0.43trn and 454m annual active buyers on its marketplaces. Alibaba’s long-term vision is to become a global company providing solutions to real world problems and using e-commerce to help globalization by making trade more inclusive. The company expects GMV to reach US$1trn by 2020, and to serve 2bn consumers(one-third of the world’s total population)and to support the profitable operation of 10m businesses on its platforms by 2036. Alibaba is sometimes referred to as the "Amazon of China," but the company’s founder Jack Ma suggests there are differences. "Amazon is more like an empire: everything they control themselves. Our philosophy is be an ecosystem”, says Ma. Tencent, founded in 1998, has become a multinational investment holding corporation with a market cap of US$556bn, annual revenues of US$22bn and specializes in various internet-related services, entertainment, AI and technology.  
 
The Pearl River Delta
 
Tencent has its HQs in Shenzhen, a megacity in the Pearl River Delta, which is China’s hub for high tech production. We briefly describe the delta to further show the progress China has made in transforming its economy. In the early 1980s the Pearl River Delta was primarily an agricultural area and Shenzhen was an unassuming town of about 30,000 (now 13m). The delta witnessed the most rapid urban expansion in human history to become the world’s largest urban area in both size and population by 2015, with more inhabitants than Argentina, Australia or Canada. Today the Pearl River Delta has a population of 120m and a GDP of US$1.5trn - growing at 12% per year - which is greater than that of Indonesia and equal to 9.1% of China’s output.
 
Land, sea and air infrastructure serving the delta is state of the art. For example, the delta has six airports; three of which are international air hubs. In 2016, the passenger traffic of Baiyun Airport in Guangzhou (population 15m) surpassed 60m and the volume of freight it handled was over 2m tonnes. In the same year passenger traffic at Shenzhen (population 13m) airport was in excess of 42m and the volume of freight it handled was over 1m tonnes.  This compares favourably with JFK and Newark Liberty airports. In 2017 both airports set records with more than 59m and 43m passengers respectively.

Part of the delta’s infrastructure is the new Hong Kong-Zhuhai-Macau Bridge, which spans 34 miles (55klm), crosses the waters of the Pearl River and connects Hong Kong with Macao. It is the longest sea-crossing bridge ever built and has a section that runs for seven kilometres in a submarine tunnel that passes four artificial islands. Its construction cost US$16bn, which is part of a US$30bn plan announced in 2009 to develop an infrastructure network to connect the nine cities in the delta so that collectively they would become the largest contiguous urban region in the world, which was achieved in 2015.  One of the infrastructure goals is to reduce travel time between the nine cities and Hong Kong and Macao to one hour from any which way.
 
The Pearl River Delta is the most southern of three major Chinese coastal growth areas. In the middle is the Yangtze River Delta region, which includes Shanghai with a population of 130m and a GDP of US$2trn. To the north is the Beijing-Tianjin-Bohai corridor, covering 10 cities and has a population of 100m and a GDP of US$1.3trn. These three urban clusters account for 21% of China’s population and about 40% of its GDP.


Part 3

 China’s Belt and Road initiative

 
It is not only important to understand the changes in China within the context of its recent history, MIC25 and Beijing’s restructuring of its healthcare sector, but also against the backdrop of China’s ambitious “Belt and Road” (B&R) initiative. Unveiled by President Xi Jinping in September 2013, it has become the centre of Beijing’s ambitions for a new world order predicated upon a modern-day Silk Road connecting China by land and sea to Southeast Asia, Central Asia, the Middle East, Europe and Africa. It is a bold model of economic development, which Xi has called, “the project of the century”. The initiative is supported by the new Asian Infrastructure Investment Bank (AIIB) and the Silk Road Fund. Some estimates suggest that Beijing has already invested US$900bn in the project. Overall, it is expected to cost US$8trn and take three decades to complete. At its core are 6 economic corridors, which connect 65 countries, about 65% of the world’s population, involve some 40% of global trade and 33% of global GDP.
 
Belt and Road’s 6 economic corridors
  1. The Eurasia-Land-Bridge economic corridor is developing rail transportation between China and Europe through Kazakhstan, Russia and Belarus
  2. The China-Mongolia-Russia economic corridor aims to develop trade between China and Mongolia by modernizing transport, telecommunication and energy networks to make Mongolia a hub between China and Russia
  3. The China-Central Asia-West Asia economic corridor connects the Chinese province of Xinjiang to the Mediterranean Sea, through Kazakhstan, Kyrgyzstan, Tajikistan, Uzbekistan, Turkmenistan, Iran and Turkey 
  4. The China-Indochina-Peninsula economic corridor aims to strengthen cooperation among states of the Greater Mekong sub-region and support trade between China and the 10 nations of the Association of Southeast Asian Nations (ASEAN) that are already bound by a free trade agreement since 2010 to facilitate economic growth
  5. The China-Pakistan economic corridor connects Kashgar in the Chinese province of Xinjiang to the port of Gwadar in Pakistan and includes the construction of railways, highways, optical fibre networks, and the creation of an international airport in Gwadar as well as the establishment of special economic zones
  6. The Bangladesh-China-India-Myanmar economic corridor links Kunming to Kolkata (Calcutta) via Mandalay and Dhaka to strengthen connections between China and various economic centres of the Gulf of Bengal in order to increase interregional trade by reducing non-tariff barriers.
China’s neo-colonial strategy
 
China’s B&R initiative is based upon an interpretation of colonialism, which is significantly different to Western  interpretations. While Western nations struggle with a sense of guilt associated with their past colonial rule and feel responsible for the abject economic failure, widespread poverty and erosion of governance in post-colonial independent states, Beijing believes that there are lessons to be learned from colonialism, which are relevant today and necessary prerequisites to stimulate trade, economic growth and domestic employment. Beijing’s B&R initiative is best understood as a neo colonial strategy to strengthen China’s slowing economy, enhance its industrial capabilities and improve its geopolitical standing by driving economic growth in some of the least developed regions of the world, which are neglected by the West.
 
The lessons of Singapore
 
China’s neo-colonialist policies are influenced by Singapore, an island city-state located in Southeast Asia off southern Malaysia. The country gained independence from Malaysia in 1965 and has become a global financial centre with a multicultural population and a multi-party parliamentary representative democracy with a President as head of state and a Prime Minister as the head of government. Although China is 14,000-times bigger than Singapore, has 1bn more citizens and its GDP is US$14trn compared to Singapore’s US$300bn; China views Singapore as an object lesson of political stability and prosperity predicated upon aspects of its colonial legacy, which Beijing believes can be replicated in under-developed regions of the world. These include basic infrastructure, improved administration, widened employment opportunities, female rights, expanded education, improved public healthcare, taxation, access to capital, independent judiciary, and national identity. Such factors China views as benefits of colonialism and necessary prerequisites for trade, economic growth and prosperity. Singapore has a colonial history, but today is a rich country with a GDP per capita of US$55,235, (higher than that of the US: US$53,128) and where Asian culture is intact and Western knowhow is harnessed for economic growth and prosperity for its citizens and is where China would like to be in the future.
 
The AIIB comparable to other development banks
 
In 2013, when Xi Jinping first proposed creating the Asian Infrastructure Investment Bank (AIIB), Washington was against it and campaigned rigorously to persuade potential donor countries not to participate. The US expressed concerns that the AIIB would undermine the World Bank, and the Asian Development Bank (ADB), which operate in Asia and lend to China. Washington also believed that the AIIB would unfairly benefit Chinese companies and argued that China would not adhere to international banking standards of transparency and accountability. Today, the AIIB is up and running as a medium-sized regional development bank with capital of US$100bn and lending at around US$4bn. It is broadly comparable with other development banks and Washington’s concerns appear unfounded.
 
Systematically migrating low-tech manufacturing to low-cost locations
 
An important role of the AIIB is to assist the B&R initiative to open up and create new markets for Chinese goods and services, to stimulate exports and to provide low-wage locations, to which China can migrate its light manufacturing industries. Beijing no longer sees its country’s economy as competitive on the basis of low wages. China’s labour costs are rising faster than gains in productivity and cost estimates of outsourcing production to China will soon be equal to the cost of manufacturing in the US and Western Europe. China is adjusting to rising real wages in its domestic markets by systematically migrating its low-tech industries to less-common low-wage production operations in new locations in Africa such as Ethiopia.

A rationale for this strategy is provided in a 2017 paper from the Center for Global Development, which suggests that “Ethiopia could become the new China” as, “the cost of Ethiopian industrial labour is about 25% that of China today”. This suggests that migrating Chinese low-tech manufacturers might leap-frog middle and lower-middle income developing countries in favour of the poorest countries such as Ethiopia, which is included in China’s B&R initiative. African countries view B&R as a platform to promote global cooperation based on win-win strategies. Speaking at a conference in June 2018 in Addis Ababa, Tan Jian, the Chinese ambassador to Ethiopia said, "We are working closely with Ethiopia in advancing the Belt and Road Initiative. Ethiopia is a very important partner in this regard. We have been doing a lot of projects here in Ethiopia: infrastructure, policy dialogue, trade, financing and people-to-people exchanges.” At the same conference Afework Kassu, Ethiopia's Minister of Foreign Affairs, said, “the Belt and Road initiative is an advantage for African countries for infrastructure development and for economic growth”.
 
Concerns about China’s neo colonialism and debt management
 
Despite these good words, China's B&R initiative is not free of criticism mostly from Western nations and international institutions, which suggest Beijing’s motivation is a retrograde strategy that employs globalization to service its domestic economy, and many of the concerns are about China’s potential economic predominance.
 
A March 2018 Center for Global Development (CGD) paper suggests that because China’s record of international debt financing is not good, and the B&R initiative follows China’s past practices for infrastructure financing, which entail lending to sovereign borrowers, then the initiative runs the risk of creating debt distress in some borrower nations. The paper identifies 8 of the 68 B&R borrower countries as “particularly at risk of debt distress”. Pakistan is the largest country at high risk with the development of its Gwadar deep-sea port, which is part of the B&R China-Pakistan Economic Corridor. China is financing about 80% of this endeavour, which is estimated to cost US$62bn.  Other countries mentioned in the CGD paper to be at high-risk of debt distress from the R&D initiative include Djibouti, the Maldives, Laos, Mongolia, Montenegro, Tajikistan and Kyrgyzstan. The concern is that these at-risk nations could be left with significant debt ‘overhangs’, which could impede their ability to make essential future public investments and thereby challenge their economic growth more generally. Recently, public concerns from within China have been raised over the costs of the initiative. There is also concern that debt problems will create “an unfavourable degree of dependency” on China as a creditor. Several US Senators have expressed similar concerns and suggest that potential defaults could have a deleterious economic impact more generally. In addition to B&R loans, which have been questioned, it has been rumoured that Beijing has lent Venezuela US$60bn and also extended significant credit to Argentina. Venezuela is in economic meltdown and Argentina has applied to the IMF for a bailout. 
 
China’s mounting debt
 
China’s increasing exposure as a significant creditor to economically weak developing nations is compounded by its mounting debt and triggers concerns about China’s future stability. A popular Washington view, endorsed by President Trump’s chief economic adviser Larry Kudlow, is that China’s mounting debt and slowing growth mean that its “economy is going south”, and the recent imposition of tariffs on Chinese exports to the US will accelerate the nation’s demise. However, there is a view that Washington’s imposition of punitive tariffs is an over-reaction because the Chinese economy is nowhere as strong as that of the US economy. Notwithstanding, China is an important trading partner for the US and American companies should find a way to engage with China.
 
Since the 2008 financial crisis, China’s debt has been a concern in Beijing because it was a driver of the country’s economic growth. In 2016, Vice-Premier Liu He, President Xi’s top economic adviser, conscious of the potential national security risks of China’s mounting debt, took steps to de-risk the country’s financial sector. More recently, Liu has accelerated infrastructure investment and taken steps to avoid a banking crisis by ensuring that the renminbi does not fall too rapidly against the US dollar. Over the past 5 months the renminbi has weakened about 10% against the US$ and could weaken further if the currency becomes politicized. Despite Liu’s efforts to reign-in and control China’s debt, which some estimates put at about  260% of GDP, it is not altogether clear how successful these efforts will be especially if China’s debt challenges are considered in conjunction with its loose credit conditions.
 
Changing world economic order

Putting aside these concerns, it is instructive to note that a 2017 study by Price Waterhouse Coopers (PwC), suggests, ceteris paribus, that within the next decade China’s economy will be bigger than America’s and within the next three decades India’s economy will overtake that of the US. The study argues that the US will rank 3rd in the world and in 4th place could be Indonesia. The study suggests that China will have an economy of US$59trn, while India’s will be around US$44trn and America’s will total $34trn. Significantly, Japan (US$6.7trn), Germany (US$6.1trn), the UK ($5.3trn) and France (US$4.7trn), key markets for Western MedTech companies, are expected to fall respectively to 8th, 9th, 10th and 12th in the list. They are expected to be replaced by Indonesia (US$10.5trn), Brazil (US$7.5trn), Russia (US$7.1trn), and Mexico (US$6.8trn), which climb to 4th, 5th 6th and 7th positions respectively. This signals some significant economic shifts likely to take place over the next two to three decades and underlines the importance of emerging economies in the medium-term strategic plans of Western companies.
 
Takeaways
 
The world is on the cusp of some significant  economic changes and the two nations most likely to affect those changes are the US and China. Beijing’s policies and global aspirations are helping China to step into a leadership void created by Washington’s current rejection of multilateralism. However, it is still not altogether clear whether China will be able to sustain this new position, and the uncertainty this causes presents a significant strategic dilemma for Western companies seeking growth outside their current markets in the developed world. China is too big to be ignored by Western companies, but China’s conditions for engagement are onerous and its long-term stability remains in doubt.
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China’s rising MedTech industry and the dilemma facing Western companies

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  • China is seen as a significant growth frontier for MedTech
  • Over the past 2 decades Western companies have derived billions from China
  • But today companies seeking or extending their franchises in China will encounter significant barriers
  • China is successfully decreasing its dependence on Western medical devices and other high-tech products and replacing them with domestic offerings
  • The choice facing Western companies expecting to derive revenues from China is: either localize your value chain and help China achieve its goals to dominate key industries globally or be progressively squeezed out of markets
  • Some Western companies have localized and manufacture their offerings in China
  • Some MedTech companies concerned about China’s weak intellectual property (IP) protection and buoyed by 2 decades of growth and the current performance of the US stock market are turning away from China
  • Could adherence to history dent their futures?
  
China’s rising MedTech industry and the dilemma facing Western companies

 
This is the first of two Commentaries on China.
 
Increased cost pressures, maturing home markets, resource constraints, growing regulatory pressures and rapidly changing healthcare ecosystems are driving Western MedTech companies to seek or expand their franchises in large fast-growing emerging economies. For many, the country of choice is China. AdvaMed, the American MedTech trade association says, “China presents the most significant growth market for the medical device industry today and for the foreseeable future.”

Despite only accounting for 3% of the global MedTech market share, China’s attraction is a US$14trn economy growing at some 7% per annum, a population of 1.42bn with a large, ageing middleclass with disposable incomes, rising healthcare consumption and Beijing’s commitment to increase healthcare expenditure to provide care for all its citizens from “cradle-to-grave”. All these factors drive China’s MedTech market and the certainty of its increasing demand.

Despite this positive scenario, there are an increasing number of non-tariff barriers facing Western MedTech companies in China. This is because Beijing has launched extensive and aggressive initiatives to decrease China's dependence on Western medical devices and replace them with domestic offerings. Opportunities in China for Western players are shrinking and becoming tougher as Beijing’s new healthcare reforms kick-in and Chinese MedTech companies strengthen, increase their capacity, move up the value chain and take a bigger share of the domestic markets. To compete effectively in China, Western companies need to enhance their understanding of Beijing’s extensive healthcare reforms, increase their understanding of the complexities of China’s new procurement processes and be prepared to localize their value chains.
 
In this Commentary

This Commentary is divided it into 2 parts.
  • Part 1: China an ‘el Dorado’ for Western MedTech companies describes the significant commercial benefits derived by some Western companies who, for the past two decades, have supplied high-end medical devices to the Chinese market and benefitted from: (i) Beijing’s commitment to extend healthcare to all citizens, (ii) the country’s vast, rapidly growing and underserved middleclass and (iii) China’s large and aging population with escalating chronic lifetime diseases. These market drivers have profited Western companies because domestic Chinese MedTech enterprises had neither the capacity nor the knowhow to produce high-end medical devices. This gave rise to a bifurcated MedTech market with domestic Chinese companies producing low-end offerings and Western companies supplying high-end products.
  • Part 2: China the end of the ‘el Dorado’ for Western MedTech Companies suggests that commercial opportunities in China for Western MedTech companies have shrunk significantly and become much tougher as domestic manufacturers, incentivized by Beijing, move up the value chain and capture a bigger share of the domestic market. We describe Made in China 2025 (MIC2025), which is a well-resourced government initiative aimed at decreasing China’s dependence on Western MedTech suppliers by enhancing the capacity and scale of Chinese companies. This, together with China’s current 5-year economic plan aimed at a “healthier China” and its 2009 healthcare reforms are already significantly effecting some segments of MedTech markets previously dominated by Western companies.

PART 1
 
 China an el Dorado for Western MedTech companies
 
China’s healthcare market and the MedTech sector
The attraction of China’s healthcare market to Western investors over the past decade is easy to comprehend. In 2013 China surpassed Japan to become the world’s second-largest healthcare market outside the US and the fastest growing of all large emerging markets. Healthcare spending is projected to grow from US$854bn in 2016 to US$1trn in 2020. In 2016, China’s healthcare expenditure as a proportion of its GDP was 6.32%, up from 4.4% in 2006, and this is expected to rise to between 6.5 and 7% by 2020. Although this is a lower percentage than that of the US with 17%, Germany with 11%, Canada, Japan and the UK with about 10%; it suggests that China’s healthcare market has a substantial upside potential; especially as the country’s middleclass grows and becomes economically stronger and Beijing’s healthcare reforms kick-in.
 
The attraction of China’s MedTech market to Western investors also is easy to understand. It is one of the fastest growing market sectors, which has maintained double-digit growth for over a decade. In 2016 China’s MedTech market was valued at US$54bn, an increase of 20% compared to 2015; 72% of which was fuelled by hospital procurements. In 2017 China imported more than US$20bn worth of high-end medical devices the overwhelming majority of which was supplied by Western companies.
 
Drivers of China’s MedTech markets
 
Three China market variables making for highly valued Western MedTech businesses include: (i) the country’s vast, rapidly growing and underserved middleclass, (ii) China’s large and aging population with escalating chronic lifetime diseases and (iii) Beijing’s commitment to extend healthcare to all of its citizens.
 
  1. Rapidly growing and underserved middleclass
China’s past rapid economic growth lifted hundreds of millions of its citizens out of poverty and into the middleclass. As China’s middleclass has grown, its healthcare market has expanded and the opportunities for Western MedTech companies have increased. This partly offsets slower demand experienced by Western MedTech companies after 2009 when middleclass consumers in developed countries were challenged by the shocks to their living standards caused by the 2008 recession and subsequent lower global economic growth.
 
Since 2015, Chinese middleclass consumers have become a significant driver of the country’s economic activity and are projected to remain so through at least 2025. Since 2000, annual real GDP growth per capita has averaged 8.9% while real personal disposable income on average has risen 9.2%. According to Credit Suisse’s Global Wealth Report, in 2015 China overtook the US as the country with the biggest middleclass, which is comprised of some 109m adults compared with 92m in the US. Today, the Chinese middleclass is facing more lifestyle related diseases, whilst expecting more and better healthcare. By 2025, China’s middleclass is projected to reach 600m and have an annual disposable income between US$10,000 and US$35,000. Further, compared to the US and the UK, China’s middleclass has a low level of household debt. China’s household debt-to-GDP ratio is 40% compared with 87% for that of the US and UK. This suggests that consumer led growth in China still has a significant upside. However, there are cultural obstacles to Chinese citizens assuming more personal debt.
 
  1. Large aging population with escalating chronic lifetime diseases
China has a population of 1.42bn and each year Chinese citizens give birth to some 20m. In January 2016 China lifted its 40-year-old one-child policy, which is expected to increase the country’s birth rate and increase the demand for in-vitro fertilization among older parents. Notwithstanding, partly because of the country’s falling fertility rates and partly the increasing life expectancy of the elderly share of the country’s population (In 2017 total life expectancy was 76.5), the number of elderly Chinese citizens has been increasing. According to China’s Office of the National Working Commission on Aging, in 2017 the number of its citizens aged 60 or above had reached 241m, accounting for some 17% of the total population and this is expected to peak at 487m, or 35%, around 2050, when it is projected that China will have 100m citizens over 80.

This is significant because elderly people have a higher incidence of disease, demand more frequent, longer and more complicated treatment regimens and use medical services more often than their younger counterparts. For example, China’s ageing population is fuelling the rise in demand for orthopaedic devices. Projections suggest that over the next decade China could become the world’s largest orthopaedic device market. As the Chinese population continues to age, demand for healthcare services and medical devices are expected to increase substantially. Notwithstanding, a ‘dependent’ large growing and aging population has a significant economic downside.
 
Further, the 600m Chinese citizens of prime earning age tend to live in large urban centres. China has some 662 cities; 6 of which are mega cities with populations of about 10m. 160 Chinese cities have populations in excess of 1m. Increased urbanization, changing diets and lifestyles and increased air pollution and other environmental hazards are causing a substantial rise in the prevalence of chronic lifetime diseases. It is estimated that 330m Chinese citizens currently have chronic diseases. According to a 2018 study almost 100m adults (8.6%) have chronic obstructive pulmonary disease (COPD), about 110m have diabetes and more than 80m Chinese citizens are handicapped. Altogether this creates a vast and growing demand for various high-end medical devices.
 
  1. Beijing’s commitment to extend healthcare to all citizens
A 3rd driver of China’s expanding healthcare sector is Beijing’s healthcare reforms launched in 2009 and its current 5-year economic plan, which prioritizes a "Healthy China". According to a 2016 World Bank report, ”Since the launch of the 2009 health reforms, China has substantially increased investment to expand health infrastructure; strengthened the primary-care system; achieved near-universal health insurance coverage in a relatively short period; reduced the share of out-of-pocket expenses - a major cause of disease-induced poverty - in total health spending; continued to promote equal access to basic public health services; deepened public hospital reform; and improved the availability, equity and affordability of health services. It has also greatly reduced child and maternal mortality and rates of infectious diseases and improved the health and life expectancy of the Chinese people.”
 
The share of healthcare expenses covered by the government is expected to increase from 30% in 2010 to 40% in 2020, but current regional differences in access to and quality of healthcare are expected to remain in the near term. China’s current economic plan, which was approved in 2015 and adopted in 2016 is responsible for a number of well-funded and aggressive healthcare reform programs, and increased investment in healthcare infrastructure. The plan also encourages private capital investment to improve service quality and meet the public’s diverse, complex and escalating healthcare needs.
 
Bifurcated MedTech market

These three healthcare drivers have significantly benefitted Western MedTech companies who leveraged their pre-existing products and business models and served China’s fast growing and underserved high-end MedTech markets with sophisticated medical devices. Chinese domestic MedTech companies, which today are comprised of about 16,000 small-to-medium sized light manufacturing enterprises on China’s east coast, participated in the low end of the global value chain and mostly produced Class I and II cheap disposable medical devices, which required simple forms of manufacturing or assembly, but created large numbers of jobs and made a significant contribution to poverty reduction. This mutual dependence gave rise to a bifurcated market and reflected the type of foreign direct investment that China attracted at the time and the relative lack of capacity of the domestic labour force.
 
The foreign sourced market segment has been served historically by large, well-resourced Western MedTech companies such as Medtronic, General Electric (GE), Philips, Siemens, Zimmer Biomet  and DePuy Synthes. Before 2009, such companies enjoyed a near monopoly supplying their pre-existing high-end medical devices to large Chinese hospitals (see below). US MedTech companies were the #1 foreign supplier of such offerings, followed by Germany and Japan. These 3 countries represented the overwhelming majority share of China’s imports of medical devices.

PART 2

China the end of the el Dorado for Western MedTech companies
 
Between 2003 and 2009 foreign direct investment in China’s MedTech sector was concentrated in low-value-added activities. This pattern reversed during 2010-2018 and enabled Chinese MedTech companies to move up the value chain and develop more sophisticated manufacturing processes, increase their R&D capacity, enhance their post-market services and begin to penetrate more segments of the higher-value-added Class lll MedTech markets. As this happened so the predominance of Western MedTech companies providing high-end product offerings was reduced. This shift suggests that late entrants to the China market may struggle.
 
A 2017 survey conducted by China’s New Center for Structural Economics, covering 640 Chinese export-oriented labour-intensive companies across four sectors between 2005 and 2015 suggests that upgrading low-tech industries is pervasive throughout China. “’Technology upgrading’ was the firms’ most common response to their challenges: 31% of firms ranking it top and 54% in their top three responses. Tighter cost control over inputs and in production was next (top for 27% of firms) and changing product lines or expanding markets was third most common (24%)”, says the report.
 
Taking share from Western companies

To-date domestic Chinese MedTech companies have captured about 10% of the technologically intensive segments of endoscopy and minimally invasive surgery as measured by value, and 50% of the market in patient monitoring devices and orthopaedic implants. Only 5 years ago Western companies such as Zimmer Biomet  and DePuy Synthes controlled 80% of the Chinese high-end orthopaedic market segments. Further, about 80% of China’s market of drug-eluting stents, (medical devices placed into narrowed, diseased peripheral or coronary arteries, which slowly release a drug to block cell proliferation), which is another relatively high-end therapeutic device segment, is controlled by Biosensors International, Lepu Medical, and MicroPort. These three Chinese companies market drug-eluting stents, on average, for about 40% less than their Western counterparts. Just over a decade ago 90% of this market was controlled by Western MedTech companies. Similarly, Chinese companies have increased their domestic market share of digital X-ray technologies to 50%. In 2004 they had zero share of this market.
 
Made in China 2025
 
In May 2015, Beijing launched “Made in China 2025” (MIC2025), which is a national strategy to enhance China’s competitive advantage in manufacturing. Increasing competition from developing nations with similarly competitive costs, coupled with technology-driven efficiency gains in developed countries, means that China’s abundance of cheap labour and the competitive advantage of its infrastructure will soon be insufficient to drive sustainable economic growth. MIC25 is expected to redress this by comprehensively upgrading, consolidating and rebalancing China’s manufacturing industry, and turning China into a global manufacturing power able to influence global standards, supply chains and drive global innovation.
 
The strategy names 10 sectors, including medical devices, which qualify for special attention to help boost the country’s goal of accelerating innovation and improving the quality of products and services. The initiative incentivizes domestic Chinese companies, including SMEs, to increase their usage of artificial intelligence and digital technologies to move up the value chain and capture a greater market share from their Western counterparts. MIC2025 is explicit about China reducing its reliance on Western imports and includes subsidies, loans and bonds to support and encourage domestic companies to: (i) continue increasing their capacity, (ii) devise lean business models that emphasize “affordability”, (iii) increase their R&D, (iv) expand their franchises overseas, and (v) acquire foreign enterprises with cutting-edge technologies. The initiative  also addresses issues of quality, consistency of output, safety and environmental protection, which are all considered strategic challenges to China’s development.
 
Beijing expects MIC2025 to increase the market share of Chinese-produced medical devices in the country’s hospitals to 50% by 2020 and 70% by 2025, enable Chinese companies to compete with Western MedTech giants by 2035 and make China a world MedTech leader by “New China’s” 100th birthday in 2049. The initiative is expected to quickly spread beyond China’s borders as its leading manufacturers seek to develop global supply chains and to access new markets. MIC25 is important for the next stage of China’s emergence as an economic superpower and its ambition to design and make the products of the future required not only by the Chinese consumer, but consumers around the world.
 
US attempts to halt MIC25

While many Western countries are debating how to respond to MIC25 Washington sees the initiative as a well-defined, well-orchestrated strategy, which is “unfair and coercive” because it includes government subsidies and the “forced transfer” of technology and IP to enable the Chinese to “catch-up and surpass” American technological leadership in advanced industries.  An August 2018 US Council for Foreign Relations response says, “MIC25 relies on discriminatory treatment of foreign investment, forced technology transfers, intellectual property theft, and cyber espionage”. In June 2018 Washington sought to halt the policy by levying punitive tariffs on Chinese imports into the US and blocking Chinese-backed acquisitions of American technology companies.
 
The commercial effects of increased tariffs are unclear

It is not altogether clear how successful Washington’s punitive tariffs will be because they could unsettle the US medical supply industry given that a growing number of product offerings marketed in the US are made in China. MRIs, pacemakers, sonograms and other medical devices manufactured in China and imported into the US are all included in the list of items subject to the increased US tariffs. Some estimates suggest that the tariffs will cost the American medical device industry more than US$138m in 2018, and about US$1.5bn every year there after. According to AdvaMed, the US enjoys a trade surplus with China for medical products and rather than grow US productivity, the tariffs could result in less trade and a smaller surplus in medical devices. Whilst protectionist, the MIC25 initiative is permitted under World Trade Organization rules as China is not a signatory to the Agreement on Government Procurement, which covers state run hospitals. Further, historically healthcare products have been excluded from tariffs on humanitarian grounds and because they are seen as an asset to public health.
 
Western companies ‘encouraged’ to localize their value chains
 
Although Beijing is seeking to reduce its dependence on imported medical devices, it has not shut-out Western companies who are expected to continue to be significant high-tech market players in the short to medium term. This is because such international trade is crucial to facilitate China’s access to global knowhow and technology. But Beijing has amended its procurement and reimbursement policies to incentivise hospitals to purchase domestically manufactured medical devices and introduced tough conditions on companies seeking to do business in China. To qualify for inclusion in China’s new hospital procurement arrangements Western companies are obliged to localize their value chains and partner with domestic enterprises. Some companies have done so, while others have been reluctant to localize their value chains because of China’s weak record of IP protection. Beijing is aware of this and is streamlining and strengthening its IP prosecution system (see below).
 
Western importers seriously handicapped
 
Importers who choose not to localize their value chains face a number of significant non-tariff barriers. Unlike other Asian countries such as Japan, China has no national standard for tendering and bidding and there are significant differences between its 34 provincial administrations and 5 automatous regions. Further, China has a dearth of large ‘general’ distributors. Western MedTech companies importing product offerings into China are obliged to engage small-scale distributors dedicated to one sector, one imported brand and one type of product. Such distributors are ill-equipped to effectively navigate China’s vast hospital sector (see below) and its complex, rapidly changing and disaggregated procurement and reimbursement processes. A clash of sales cultures is a further disadvantage for Western MedTech companies’ whose marketing mindset is product-centric territory driven, while winning sales strategies in China and in other emerging markets are customer-centric key-account driven.
 
China’s vast hospital sector
 
One dimension of the challenges faced by Western MedTech companies who are obliged to engage small-scale distributors is the enormity of China’s hospital sector. China has about 30,000 hospitals, which have increased from about 18,700 in 2005, serving a population four and a half times that of the US across a similar land mass. By comparison, the US has some 15,500 hospitals and England 168 NHS hospitals. About 26,000 hospitals in China are public and some 4,000 are private. Although public hospitals in China provide the overwhelming majority of healthcare services, this is changing.  Recently, Beijing has loosened its regulations and private sector healthcare has witnessed an influx of private capital. Over the next decade, China’s private healthcare sector is expected to see new hospital chains, expansion of existing hospitals and improvements in a range of private healthcare services. Currently, Western participation in the Chinese private healthcare market is nascent but expected to grow over the next decade.
 
China’s hospitals provide about 5.3m beds, compared with about 890,000 in the US and 142,000 NHS beds in the UK. Chinese public hospitals, which are the biggest consumers of Western medical devices, are categorized into 3 tiers according to their size and capabilities. The largest are tier-3 hospitals of which there are about 7,000. These are 500-bed-plus national, provincial or big city hospitals, which provide comprehensive healthcare services for multiple regions as well as being centres of excellence for medical education and research. There are about 1,500 tier-2 hospitals, which are medium size city, county or district hospitals. Together teir-2 and 3 hospitals represent about 3.5m acute beds. Tier-1 hospitals are township-based and do not provide acute services. There is a range of specialist hospitals, which are also significant users of imported high-end medical devices. Further, Beijing is beginning to develop primary care facilities, which are normal in North America and Europe, but underdeveloped in China.
 
Mega private hospitals
 
Healthcare in China has traditionally been the monopoly of the central government. However, Beijing’s recent relaxation of the rules on private investment referred to above has triggered an explosion in the number of private healthcare facilities and the development of mega hospitals on a scale not seen elsewhere in the world. For example, Zhengzhou Hospital, which is nearly 700km south of Beijing and can be reached by bullet train in under 3 hours at a cost of about US$45, was officially opened in 2016 and was dubbed the “largest hospital in the universe”. Zhengzhou is a mega-city with a population of 10m and is the capital of east-central China's Henan province. The hospital has some 10,000 beds, facilities are spread across several buildings and over 28 floors and it has its own fire department and police station. In 2015, the hospital admitted some 350,000 inpatients and treated 4.8m people. In one day in February 2015 the hospital received 20,000 out-patients. 
Centralizing procurement
 
Most noticeable among the changes taking place in China’s procurement processes for domestically produced medical devices is the development of centralized e-commerce facilities, which are expected to increase efficiency and reduce spiralling hospital costs. The initiative is a partnership, announced in 2018, between IDS Medical Systems and Tencent’s digital healthcare subsidiary WeDoctor, to establish China’s first smart medical supply chain solutions and procurement company, which in the near term, is expected to dominate the Chinese market by becoming the “Amazon of healthcare”. Tencent is the world’s 6th largest social media and investment company and IDS Medical Systems is a Hong Kong based medical supply company with an extensive Asia-Pacific distribution network, which represents over 200 global medical brands in medical devices and consumables. 
 
WeDoctor, was founded in 2010 to provide online physician appointment bookings, which is an issue in China and patients often stand in-line for hours from 2 and 3 in the morning outside hospitals to get brief appointments with physicians. From this modest beginning WeDoctor has rapidly evolved into a US$5.5bn company, which employs big data, artificial intelligence and other digital tools to deliver cutting-edge healthcare solutions and support services to over 2,700 Chinese hospitals, 240,000 doctors, 15,000 pharmacies and 160m platform users; and these numbers are expected to increase significantly in the next few years.
 
Underpinning WeDoctor’s business model and differentiating it from Western endeavours such as Google’s DeepMind, is the freedom in China to collect and use patient data on a scale unparalleled in the West. WeDoctor is designed to leverage Tencent’s significant complementary strengths, innovative resources and networks in order to centralize device procurement by connecting domestic MedTech companies with China’s vast hospital network. WeDoctor’s ability to manage petabytes of patient data, its knowledge of and favoured position in China’s hospital procurement processes, its rapid and sophisticated distribution capacity and central government support, positions WeDoctor to have a significant impact on the procurement of medical devices in China and beyond in the next five years, and this is expected to provide domestic companies with a further competitive edge.
 
Localizing the value chain in China

Manufacturing in China has been an option only for larger Western MedTech companies with the necessary management knowhow, business networks and finance to bear the costs. Companies which have localized their value chains and support the MIC25 initiative include Medtronic and GE Healthcare.
 
Medtronic
Medtronic, the world’s largest MedTech company, has had a presence in China for the past 2 decades and has established local R&D facilities to design products specifically for the needs of the Chinese market and crafted partnerships with provincial governments to help educate patients about under-served therapeutic areas. In 2012 Medtronic acquired Kanghui Medical, for US$816m. In December 2017 the Chinese government approved sales of a new pacemaker, which is the product of a strategic partnership between Medtronic and Lifetech Scientific Corporation. In January 2012 Medtronic paid US$46.6m for a 19% stake in Lifetech and a further US$19.6m for a convertible loan note. The agreement called for LifeTech to develop a line of pacemakers and leads using its manufacturing plant in Shenzhen, (population 13m). Medtronic supplied “technology, training and support” and LifeTech provided local market expertise, brand recognition and growth potential within China. The alliance has made Lifetech the first Chinese domestic manufacturer with an implantable cardiac pacing system with world-class technology and features. In 2015 Medtronic entered into a partnership with the Chengdu’s (population 14.4m) municipal government in the south west of China to enable people with diabetes in Chengdu and the broader Sichuan province (population 87m) to access a new, locally produced next generation sensor augmented pump system with Medtronic’s SmartGuard technology and software displayed in the Chinese language. Medtronic’s 2017 revenues from its China operations amounted to US$1.6bn, 5% of total revenues, and US$3.4bn from other Asia-Pacific countries, 12% of total revenues.
 
GE Healthcare
GE Healthcare is the largest medical device manufacturer in China and China is a key manufacturing base for GE. GE started conducting business in China in 1906 and today has over 20,000 employees across 40 cities in the country. One third of GE's ultrasound probes, half of its MRIs and two thirds of its CT scanners, which are marketed globally are manufactured in the Chinese cities of Wuxi, Tianjin and Beijing respectively. These devices and others are now subject to a punitive US tariff levied in June 2018. “We remain concerned that these tariffs could make it harder for US manufacturers to compete in the global economy, and will shrink rather than expand US exports,” says Kelly Sousa, a GE Healthcare spokesperson.
 
Rachel Duan, president and CEO of GE China explains that, “GE China has been investing in people, processes and technologies throughout the value chain so that it can design, manufacture and service products closer to customers. This goes beyond market and sales localization, to product R&D, manufacturing and product services." GE has pinpointed localization, partnership, and digitization as the three key initiatives to drive its future development in China. In May 2017 GE opened an Advanced Manufacturing Technology Center in Tianjin, its first outside the US, and has partnered with over 30 Chinese engineering, procurement and construction (EPC) companies. "With a global footprint and depth of localized capabilities in China, we are partnering with customers and helping them win both in China and worldwide by connecting machines, software, and data analytics to unlock industrial productivity," says Duan. 
 
Changing IP environment
 
Medtronic and GE Healthcare provide object lessons of how best Western MedTech companies might leverage commercial opportunities in China. But many remain reluctant to manufacture in China because historically the country’s legal system has been weak in prosecuting IP infringements and more recently they have been further handicapped by Washington’s response to MIC25. For many years, when dealing with China, Western companies have faced a combination of IP challenges, which included litigation with low level damages, an inability to effectively enforce judgments, an inability to patent certain subject matter and a lack of transparency on legal issues. This amounts to substantial disincentives for Western companies to localize their value chain in China. However, the country’s IP environment is changing. In 2017 Beijing spent some US$29bn for the rights to use foreign technology, with the amount paid to US companies increased by 14% year-on-year. China’s IP legal system is maturing and has improved in the scope of allowable patent subject matter to enhancements of litigation options. However, Western reluctance to localize production in China is not only influenced by the country’s weak IP protection and recent trade tensions with the US, but also by ethical concerns and the perceived need for more predictable rules and institutions about environmental and regulatory issues.
 
All this, together with two decades of growth in developed nations and the continued performance of the US stock market might be enough for some MedTech companies to turn-away from China, but could such a reaction dent their futures?
 
Takeaways

This Commentary describes some of the near-term challenges facing Western MedTech companies looking to offset increasing challenges in their home markets by extending their franchises in China. We have suggested why operationalizing this strategy in the short term will be tougher than 5 years ago, especially if Western MedTech companies are reluctant to innovate and transform their strategies and business models. China presents a challenging dilemma for Western companies: either they manufacture in China and support that nation’s endeavours to become a world class manufacturing platform or they progressively get squeezed out of markets. Whatever Western companies decide, we can be sure that their near to medium term futures will be shaped by maturing developed world markets, encumbered by short termism and aging infrastructures and a rising Chinese economic power with state-of-the-art infrastructures and significantly enhanced capacities and capabilities. But how long can China sustain its rise?
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3 months, 4 weeks ago

Who should lead MedTech?

HealthPad
Directory:
Medical Technology
Tags:
4th Industrial Revolution
commentary
digital healthcare
medical device
medical technology
Medtech
  • The MedTech industry is undergoing an era of unprecedented change
  • Pressure on revenues and margins have forced leaders to cling tightly to business as usual
  • In the next decade business as usual will come with significant commercial risks
  • For commercial success future MedTech leaders will need to be different to past leaders
 
Who should lead MedTech?
 
Questions about who should lead medical device (MedTech) companies in the future and what strategies and business models they should pursue are critical. Over the next decade MedTech faces an era of unprecedented change, when it will be necessary to develop new strategies, new business models, new markets, new capabilities and new technologies, while keeping the legacy business running. Future MedTech leaders will be tasked with bridging the gap between traditional manufacturing and sophisticated, digitally driven services while managing unprecedented change and significant competition. For the past 20 years MedTech leaders have been drawn from a relatively narrow set of people with a relatively narrow set of skills. Although this has served the industry well, it might not be the most appropriate policy to ensure commercial success over the next decade.
 
In this Commentary

In this Commentary we: (i) describe the traditional MedTech market, indicate the structure parameters of the industry and note that there is a rapidly evolving parallel digital healthcare technology market: one that is growing more than twice as fast and soon will be comparable in size to the traditional manufacturing-based market, (ii) suggest that MedTech leaders tend to be men in their 50s with limited understanding of this parallel digital healthcare universe, which is positioned to play a significant role in  shaping MedTech companies of the future, (iii) suggest that because MedTech leaders have performed relatively well over the past two decades, they have tended to become prisoners of their own traditions and felt little or no need to evolve their strategies and business models, (iv) contend that MedTech leaders’ principal response to market changes to-date has been increased M&A activity, which has made companies bigger but not better, (v) suggest that the industry is undergoing a significant market shift from manufacturing to solutions and services driven by the 4th industrial revolution, which is characterized by a fusion of technologies, and (vi) conclude that future MedTech leaders will require a deep knowledge and understanding of the 4th industrial revolution if they are to successfully transform traditional strategies and business models in order to deliver superior healthcare solutions at lower prices.
 
MedTech market and the structure of the industry

MedTech is a conservative manufacturing industry, which produces and markets a diverse group of product offerings predominantly in a few developed wealthy markets. Over the next decade the MedTech market is expected to change significantly. For the past two decades the industry has fallen into three broad segments: (i) diagnostic products, which include imaging devices, with a global market of some US$100bn, (ii) medical aids including consumer durables, such as hearing aids and bandages with a worldwide market of about US$150bn, and (iii) surgical products that include equipment and instruments used in the operating room, which has a global market of some US$140bn.
 
A 2017 EvaluateMedTech report suggests the global MedTech market is projected to eclipse US$500bn in sales by 2021, over 33% of which is expected to be derived from the US. The worldwide market is projected to continue growing at a compound annual growth rate (CAGR) of 5%. Ranked by 2017 revenues, seven of the world’s largest MedTech companies are American and a significant proportion of the world’s MedTech companies trade on Nasdaq. This includes 13 large companies with a market cap in excess of US$10bn, some of which are divisions of even larger corporations such as Johnson & Johnson Medical Devices and Diagnostics, with estimated global sales of US$38bn for 2018; this equates to approximately 7.6% of the worldwide MedTech market. Medtronic, which is the world's largest stand-alone MedTech company, has a market cap of US$117bn and in 2017 recorded revenues of US$29.7bn; 26% of which was generated in the US. Nasdaq has about 24 mid-cap MedTech companies ranging in value from US$2bn to US$10bn. The majority of these are American and tend to be regionally based with relatively small markets outside the US, Europe and Japan. There are some 27 small-cap companies with market caps between US$300m and US$2bn, 46 micro-cap companies ranging from US$50m to US$300m and finally some 28 nano-cap MedTech companies with market caps less than US$50m.
 
In recent years, a digital healthcare technology industry, where medical devices meet innovative software, has grown substantially, but mostly in parallel to the traditional manufacturing-based MedTech industry. According to Transparency Market Research, in 2016 this industry, which is based on healthcare information systems and wearable devices, had annual sales of US$180bn, and is projected to grow at a CAGR of 13.4% between 2017 and 2025, reaching US$537bn in annual sales by the end of 2025.
 
MedTech executive leadership
 
There is a relative dearth of data specifically on MedTech leaders and the demographics of MedTech C-suites (senior executives which tend to start with the letter C). Notwithstanding, there are data on Fortune 500 and S&P 500 company leaders from regular surveys undertaken by executive search firms Korn Ferry, and Spencer Stuart. Some of the larger MedTech companies, such as Abbot Laboratories, Baxter International, Stryker and Boston Scientific, are listed in the Fortune 500 and S&P 500. If we assume a significant similarity between the demographics of Fortune 500, S&P 500 and MedTech company executives, then MedTech leaders will tend to be white males in their 50s, predominantly drawn from similar sector company C-suites and will have an average tenure of about eight years.
  
Middle-aged men
 
Over the past 20 years MedTech leaders have benefitted from the industry’s commercial success, albeit in recent years at a slower pace than before 2007. Most leaders are constrained by quarterly earnings targets, shareholder expectations, regulations and the high risk and cost associated with changing manufacturing systems. MedTech CEOs received their formative education before the widescale uptake of the Internet and email. Many had just started their careers in large corporations when giant technology companies such as Amazon (launched 1994) and Google (1998) in the US and their Chinese equivalents - Alibaba (1999) and Baidu (2000) - were start-ups, and the Chinese and Indian economies were still somewhat underdeveloped and inchoate. Consequently, most MedTech leaders were entering middle-age when US social media giants such as Facebook (2004), YouTube (2005), WhatsApp (2009) and Instagram (2010) and their Chinese counterparts such as WeChat (2011), RenRen (2005), Weibo (2009) and Youku (2005), were just taking off.
 
This might partly explain why some MedTech leaders appear to be challenged by the rapidly evolving new digital technologies and the industry’s shift from manufacturing to solutions and services. Such is the pace of change, it will require a shift of mindset among incumbent MedTech leaders if they are to fully grasp this new and significant opportunity set.
 
Similarly, with emerging markets. Most CEOs have knowledge of the wealthy MedTech markets, in particular the US and Europe. Few, however, have in-depth knowledge or first-hand experience of the large and fast-growing emerging economies such as Brazil, Russia, India and China (BRIC). The BRIC countries are at a similar stage of their economic development, and have a combined population of more than 3bn, which equates to about 40% of the global population. BRIC countries are differentiated from other promising emerging markets by their demographic and economic potential to rank among the world’s largest and most influential economies in the 21st century, and by having a reasonable chance of realizing this potential.
 
A future HealthPad Commentary will examine the opportunities for Western MedTech companies seeking or expanding their franchise in China and will suggest that they might not find it as easy as it would have been 5 years ago. Opportunities in China for global MedTech players are becoming tougher as the Chinese economy slows and restructures; Beijing’s healthcare reforms kick-in and local MedTech producers, buoyed by legislation, revenue growth and increased capacity, become commercially stronger, more technically sophisticated and take a bigger share of both the Chinese domestic and international emerging MedTech markets.
 
Underrepresentation of women
 
Not a single woman serves as CEO of a large MedTech company. Only 22% of their board members are women, which is about the same proportion as the Fortune 500 overall (20%), and about 22% of MedTech C-suites are women. In 2017, nearly 50% of the US labour force were women and 40% of these worked in management, professional and related occupations.  Although women are underrepresented in MedTech leadership positions they are key stakeholders in healthcare. About 35% of active US physicians are women. According to the Association of American Medical Colleges, (AAMC), 46% of all physicians in training and almost 50% of all medical students in the US are women.  60% of pharmacists in America are women.

It should not be forgotten that women have played significant roles in medicine and healthcare. For example, Marie Curie, the only person to win a Nobel Prize in two different sciences, pioneered research on radioactivity. Curie made a significant contribution to the fight against cancer and is credited with having created mobile radiography units to provide X-ray services to field-hospitals during World War I. Sussman Yalow, was awarded the Nobel prize in Physiology or Medicine in 1977 for the development of the radioimmunoassay technique, and Gertrude Elion won a Nobel Prize in Physiology or Medicine in 1988 for her work in helping to develop drugs to treat leukaemia and AIDS. More recently, Jennifer Doudna, and Emmanuelle Charpentier, were credited with the discovery of the ground-breaking CRISPR-Cas9 gene-editing technology, which effectively changes genes within organisms and is positioned to radically change healthcare and MedTech in the 21st century.

In addition to under-representation, which suggests that the pipeline of women candidates for top jobs in MedTech is weak, there is some evidence to suggest that the MedTech industry does not have a positive attitude towards women. Findings of a 2015 survey conducted by AvaMed, the industry’s principal trade association, suggest that women in the industry feel discriminated against. Some 42% of women respondents of the survey said they, “felt held back from senior leadership positions” and 37% felt “overtly discriminated against”. "The world cannot afford the loss of the talents of half its people if we are to solve the many problems which beset us,” said Yalow in her 1977 Nobel Prize acceptance speech.
 
MedTech’s business model
 
Over the past two decades MedTech leaders have drawn comfort from the fact that the global MedTech market is highly centralized. The US, Western Europe and Japan, which represent only about 13% of the world’s population, account for more than 86% of the global MedTech market share (US: 42%, Europe: 33%, Japan: 11%). Conversely, the BRIC countries, which represent about 40% of the world’s population, currently only account for about 5% of the global MedTech market. This has enabled MedTech leaders to market their product offerings to healthcare providers principally in a few wealthy developed regions of the world via well-compensated sales representatives with deep product knowledge and expertise. The industry’s predominant business model has been to raise prices on existing products and market new offerings at higher prices than the products they are meant to replace. This worked very well before 2007 during a period of sustained global economic growth, predominantly fees-for-service healthcare systems and relatively benign reimbursement policies; all of which contributed to high margins and significant sales growth.
 
Market changes not perceived as acute enough to trigger transformation
 
Since the 2008 recession the MedTech market has changed. The global economy has weakened, debt (sovereign, corporate and personal) has escalated, populations have continued to grow, and the prevalence of chronic lifetime diseases and multi-morbidities have increased. Over that period, healthcare systems have become fiscally squeezed, costs have become pivotal and impacted all stakeholders. This has led to: (i) a shift in healthcare systems from fees-for-service to fees-for-value (ii) increased consolidation, convergence, and connectivity of stakeholders and a consequent change in purchasing decisions from individual (fragmented) hospitals and clinicians to centralized procurement bodies, which can leverage economies of scale and negotiate for larger purchases at volume discounts, (iii) the decline of MedTech R&D productivity, and (iv) increased competition from new market entrants, often from different industries. MedTech’s gross margins have been squeezed and annual growth rates have slowed to a CAGR of between 4 and 5%. Notwithstanding, MedTech leaders, buoyed by continued but slower revenue growth, and doubtless comforted by a prolonged surge in US equity markets, have not perceived these market changes as being with sufficient acuity to transform their strategies or business models.  Their principal response has been to increase M&A. 
 
M&A main strategic response to market changes
 
Over the past decade M&A has provided MedTech leaders with a means to: (i) increase scale and leverage, (ii) drive stronger financial performance, (iii) obtain a broader portfolio of product offerings, (iv) enhance therapeutic solutions and (v) increase international expansion; without changing their companies’ fundamental manufacturing structures and strategies. According to a January 2018 McKinsey report, between 2011 and 2016, 60% of the growth of the 30 largest MedTech companies was due to M&A. The report also suggests that between 2006 and 2016, only 20% of 54 pure-play publicly traded MedTech companies, “mostly relied on organic growth”.  M&A activity has resulted in bigger MedTech companies but not necessarily better ones. This is because M&A and collaborative relationships have not encouraged healthcare providers to change their strategies and business models and develop powerful data-sharing networks, which help drive integration across the continuum of healthcare.
 
Need for portfolio transformation
 
Encouragingly, the 2018 McKinsey report also suggests that some MedTech companies are beginning to use M&A to acquire “non-traditional” assets, such as software and service companies, to assist them in transforming their portfolios. Notwithstanding, portfolio change in a rapidly evolving and increasingly competitive healthcare ecosystem requires a sound strategic understanding of the potential role that the 4th industrial revolution can provide for MedTech. Given our discussion so far, it seems reasonable to assume that many current MedTech leaders and C-suite executives might not have fully grasped the commercial implications of this revolution for their industry. Portfolio change in the MedTech industry is arguably more likely to be led by executives from, or with an intimate knowledge of, adjacent, service-based companies; those who have successfully employed sophisticated digital technologies and big data strategies to transform their business models and who are now looking to do something similar in MedTech and healthcare markets.
 
The relative slowness of the MedTech industry to transform its strategies and business models is perceived as an opportunity by giant technology corporations. They sense the disruptive potential, just as they do in financial markets due to Wall Street’s inertia to digital change.  For example, in early 2018, Amazon, Apple, Google, and Uber announced their intentions to enter and disrupt the healthcare market by leveraging digital technologies to provide quality healthcare solutions and services at lower costs.
 
Rather than marketing products, MedTech companies are now increasingly being tasked with marketing solutions that can deliver better care at lower prices. The 4th Industrial Revolution is a primary enabler for achieving this. However, given the demographics and the conservatism of the MedTech industry, it seems reasonable to suggest that companies in the sector, which do not adapt, run the risk of becoming simple commodity producers stuck in the middle of a new and rapidly evolving value chain.
 
The 4th Industrial Revolution

The 1st industrial revolution used water and steam to mechanize production, the 2nd used electric energy to create mass production, the 3rd used electronics and information technology to automate production. The 4th industrial revolution, also known as ‘industry 4.0’, is characterized by a fusion of technologies, which is blurring the boundaries between medical devices, drugs, software and patient data and redefining relationships between the physical, biological and digital worlds. These exogenous shifts are likely to demand different strategies, different business models and different leaders for the MedTech industry.
 
Industry 4.0 provides MedTech with an opportunity for portfolio transformation by developing sophisticated data and digitization strategies to enhance company operational and financial performance. Industry 4.0 is driven by greater connectivity via the Internet and computing devices embedded in physical objects and advanced digital technologies, which enable them to send and receive data to help integrate producers, suppliers, business partners and customers; at the same time providing opportunities for MedTech companies to become smarter, more efficient and fully-networked organizations.
 
Key for superior shareholder returns
 
To date, MedTech leaders have been relatively slow to integrate new and evolving digital technologies into their core business operations, although there are encouraging signs that some companies are beginning to do so. Findings of a 2017 report by the Boston Consulting Group, (BCG) suggest MedTech companies are, “masking unsustainably high costs and underdeveloped commercial skills” and relying, “on an outdated commercial model”.  The BCG findings are based on a survey of some 6,000 MedTech employees in commercial functions, more than 100 interviews with MedTech leaders and benchmarking financial and organizational data across 100 MedTech businesses (including nine of the 10 largest companies) worldwide. According to BCG, although the industry overall has made little progress to change its business model and upgrade its skill levels, the companies, which have done so, are winning in the market and generating superior shareholder returns.

MedTech leaders should not mistakenly think that because their companies hold plenty of enterprise data they are implementing industry 4.0 strategies. Often, enterprise data do not provide any competitive advantage whatsoever but are simply a legacy cost of doing business. New sources of data, and the ability to use data’s power, are essential to enhance a company’s competitive advantage. A next-generation enterprise resource planning (ERP) platform, launched by SAP in 2017, is already being used by service companies to provide them with a digital core, which helps to create real-time matrixed data produced by social media, third party information, genetics, the Internet of Things, points of sale, etc.
 
Shift from selling products to selling solutions

To remain competitive in the next decade MedTech leaders will need to employ artificial intelligence (Al), augmented reality, robotics, advanced sensors, the Internet of Things (IoT), blockchain, nanotechnology, 3D printing, petabytes of data, enhanced processing power and storage capacity to help them transform their strategies and business models and enable their companies to evolve from being product-centric to customer-centric, with an emphasis on digitization and the capture and communication of data. Industry 4.0 and the convergence of the physical, biological and digital worlds will fundamentally change MedTech strategies and business models, as decision-making powers continue to shift from manufacturers to other healthcare stakeholders. Critical to this transformation will be those MedTech leaders who are well positioned to ensure that companies remain competitive in their core markets while establishing new markets underpinned by 4.0 technologies.
 
"Out-of-touch leaders" the main cause of company failure

A book published in 2016 entitled Lead and Disrupt suggests that company transformations fail because of out-of-touch leaders rather than competition. According to Michael Tushman, co-author of Lead and Disrupt, “The things that help organizations execute their current strategy - the cultures they build, the structures they forge, the processes that work so well to get today’s strategy executed - actually collude to hold the organization hostage to that soon-to-be-obsolete strategy. The more firms engage in getting today’s work done, it actually reduces the probability of making shifts in innovation and strategy. That is what is so strikingly paradoxical to leaders: The very recipes that work so well for today often get in the way of the future. It’s a challenge to incrementally improve what you’re doing as you’re trying to complement it with something different. The dual strategies are inconsistent.”
 
Takeaways

Over the past two decades MedTech companies have helped to shape healthcare systems in wealthy advanced industrial societies and have been rewarded with commercial success. But just as the fund investment axiom tells us, past performance is no guarantee of future success.

Crucial to the future success of MedTech companies will be their leaders. We have suggested that employing recruiting criteria, which have worked in the past might not guarantee future success. The next 10 years will be an era of unprecedented technological change for MedTech companies when the boundaries between medical devices, drugs, software and patient data become blurred.

Business as usual, which has served the industry well in the past, is unlikely to bring continued commercial success in this new healthcare ecosystem. In recent years, investment in digital healthcare has soared and the momentum towards a digital future has gathered pace. Future successful MedTech leaders will be those who combine a deep understanding of the 4th industrial revolution to leverage sophisticated digital technologies and data to assist them in creating and delivering enhanced healthcare solutions at lower costs, with an ability to keep the legacy manufacturing business running.  

MedTech companies face a stark choice: either appoint leaders similar to those of the past and become challenged or appoint leaders able to integrate new and evolving technologies into the core of the business to create and market cost effective quality healthcare solutions and remain profitable. MedTech leaders might consider adopting the motto: tempora mutantur et nos mutamur in illis.
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9 months, 1 week ago

CRISPR positioned to eliminate human papilloma viruses that cause cervical cancer

HealthPad
Directory:
Medical Technology
Tags:
Cervarix
cervical cancer
commentary
CRISPR
Gardasil
gene editing
gynaecological cancers
HPV
HPV vaccination
Human Papilloma Virus
  • A 2018 clinical study in China is the first to use CRISPR to edit cells inside the human body in an attempt to eliminate the human papilloma virus (HPV) and is hugely significant for millions of women
  • Nearly all sexually active people get an HPV virus at some point in their lives and persistent high-risk HPV infections are the main cause of cervical cancer
  • Respectively 34,800 and 256,000 women in the UK and US live with cervical cancer and each year about 3,200 and 12,200 new cases of cervical cancer are diagnosed in the UK and US respectively nearly all related to HPV
  • Cervical cancer is increasing in older women not eligible for the HPV vaccine and not availing themselves of Pap test screening programs
  • A new study suggests that cervical cancer mortality among older women could increase by 150% in the next 20 years

CRISPR positioned to eliminate human papilloma viruses that cause cervical cancer

January 2018 marked the beginning of the first CRISPR clinical study to attempt to edit cells while they are in the body of women in the hope to eliminate the human papilloma virus (HPV), which is the main cause of cervical cancer. The study, led by Zheng Hu of the First Affiliated Hospital, Sun Yat-Sen University, Guangzhou, Guangdong, China, is the first to edit human cells while inside the body. Zheng Hu will apply a gel that carries the necessary DNA coding for the CRISPR machinery to the cervixes of 60 women between the ages of 18 and 50. The study’s aim is to prevent cervical cancers by targeting and destroying the HPV genes that cause tumor growth while leaving the DNA of normal cells untouched. Current estimates suggest that every year 527,624 women are diagnosed with cervical cancer and 265,672 die from the disease. Zheng Hu’s study is expected to be completed by November 2018 and findings reported in January 2019.
 
In this Commentary

This Commentary describes the Chinese CRISPR study and the etiology and epidemiology of cervical cancer. It also describes the current cervical cancer vaccination possibilities and the challenges they face. Further, the significance of the Chinese study is demonstrated by an English study, published in December 2017 in the Lancet Public Health, which warns that although HPV vaccination programs have significantly reduced the incidence of cervical cancer among young women, the incidence of the disease is increasing significantly among older women who do not qualify for the cervical cancer vaccine, and fail to avail themselves of regular Pap tests (A Pap test is a simple, quick and essentially painless screening procedure for cancer or precancer of the uterine cervix). The latter part of the Commentary describes advances that CRISPR technology has made over the past decade as well as describing its main ethical and technical challenges.
 
Human papilloma virus (HPV)

There are over 200 different types of HPV related viruses. Viruses are the etiological agents of approximately 15% of human cancers worldwide, and high-risk HPVs are responsible for nearly 5% of cancers worldwide. It is estimated that about 75% of the reproductive-age population has been infected with 1 or 2 types of genital HPV. About 79m Americans are currently infected with HPV, and about 14m people become newly infected each year. The American Centers for Disease Control and Prevention estimates that more than 90 and 80% of sexually active American men and women respectively will be infected with at least one type of HPV at some point in their lives. Most HPV infections are harmless, they last no more than 1 to 2 years, and usually the body clears the infections on its own. More than 40 HPV types can be easily spread by anal, oral and vaginal sex. About 12 HPV types are high risk, and it is estimated these persist in only about 1% of women. However, a central component of the association between HPV and cervical carcinogenesis is the ability of HPV to persist in the lower genital tract for long periods without being cleared. These persistent high-risk types of HPV can lead to cell changes, which if untreated, may progress to cancer. Other HPV types are responsible for genital warts, which are not sexually transmitted.
 
Etiology of cervical cancer
 
 “The way that the HPV causes cancer informs us about how cancer occurs in other settings. Virus particles insert foreign DNA into a person’s normal cells. This virus then turns off the “off-switch” and allows the oncogenes [Genes that can transform a cell into a tumor cell] to progress unchecked and create an oncogenic virus. So, in this case the 'insult' is known: it’s an HPV virus. However, in many circumstances we’re not sure what that initial switch is that upsets the balance between a tumor suppressor and an oncogene,” says Whitfield Growdon, of the Massachusetts General Hospital and Professor of Obstetrics, Gynecology and Reproductive Biology at the Harvard University Medical School: see video below:
 
 
HPV and cervical cancer

The association of risk with sexual behavior has been suggested since the mid-19th century, but the central causal role of HPV infection was identified just 40 years ago. HPV infection is the main etiologic agent of cervical cancer. 99% of cervical cancer cases are linked to genital infection with HPV and it is the most common viral infection of the reproductive tract. HPV types 16 and 18 are responsible for about 70% of all cervical cancer cases worldwide. Further, there is growing evidence to suggest that HPV also is a relevant factor in other anogenital cancers (anus, penis, vagina and vulva) as well as head and neck cancers. The importance of prevention and cervical cytological screening was established in the second half of the 20th century, which preceded and even advanced etiologic understanding.
 
Epidemiology of cervical cancer
 
Cervical cancer is one of the most common types of gynecological malignancies worldwide. It ranks as the 4th most frequent cancer among women in the World, and the 2nd most common female cancer in women between 15 and 44. According to the World Health Organization there were some 630m cases of HPV infections in 2012, and 190m of these led to over 0.5m new diagnoses of cervical cancer. The World has a population of some 2,784m women aged 15 and older who are at risk of developing cervical cancer. Each year about 3,200 and 12,200 new cases of cervical cancer are diagnosed in the UK and US respectively; nearly all related to HPV. There is estimated to be 34,800 and 256,000 women in the UK and US respectively living with cervical cancer. Each year some 890 and 4,200 women die from cervical in the UK and US respectively.
 
HPV vaccines
 
HPV vaccines, which prevent certain types of HPV infections, are now available to females up to the age of 26, and have the potential to reduce the incidence of cervical and other anogenital cancers. “Vaccinations work by using your own immune system against foreign pathogens such as viruses and bacteria. Vaccination against some high risk sub-types of cancer-causing HPV viruses is one of the most meaningful interventions we’ve had since the development of the Pap test,” says Growdon: see video below.
 
 
Gardasil and Cervarix

Gardasil, an HPV vaccine developed by Merck & Co., and licenced by the US Food and Drug Administration (FDA) in 2006, was the first HPV vaccine recommended for girls before their 15th birthday, and can also be used for boys. In 2008 Cervarix, an HPV vaccine manufactured by GlaxoSmithKline,  was introduced into the UK’s national immunization program for girls between 12 and 13. Both vaccines have very high efficacy and are equally effective to immunise against HPV types 16 and 18, which are estimated to cause 70% of cervical cancer cases. Both vaccines significantly improve the outlook for cervical cancer among women living in countries where it is routinely administered to girls before they become sexually active. “Both Gardasil and Cervarix vaccines have been shown to be incredibly effective at preventing the development of high-grade dysplasia, which we know, if left unchecked, would turn into cervical cancer,” says Growdon: see video above.

Gardasil also protects against HPV types 6 and 11, which can cause genital warts in both men and women. Second-generation vaccines are under development to broaden protection against HPV. In 2014 the FDA approved Gardasil 9, an enhanced vaccine, which adds protection against an additional 5 HPV types that cause approximately 20% of cervical cancers.
Global challenge

Despite the availability of prophylactic vaccines, HPVs remain a major global health challenge due to inadequate vaccine availability and vaccination coverage. Despite the promise, vaccine uptake has been variable in developed nations, and limited in developing nations, which are most in need. The available vaccines are expensive, require a cold chain to protect their quality, and are administered in 2 to 3 doses spanning several months. Thus, for a variety of practical and societal reasons (e.g., opposition to vaccination of young girls against a sexually transmitted agent, fear of vaccination), coverage, particularly in the US has been lower than would be optimal from a public health perspective.
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Gene editing battles
Success among young women

Notwithstanding, a study referred to above and published in the Lancet Public Health suggests cervical cancer cases are expected to fall by 75% among young women for whom vaccination is now the norm. Death from cervical cancer among the generation who were 17 or younger in 2008 when the UK vaccination program was introduced is expected to virtually disappear.
 
Challenges for older women

Notwithstanding the success of HPV vaccines for young women, there are continuing challenges for older women who, because of their age, do not qualify for HPV vaccines, and do not attend their Pap screening test when invited. “Pap tests involve scraping the cervix on the outside for cells, which then udergo microscopic examination. Today this is carried out by a computer. Further examination is carried out by a cytopathologist who determines status . . . . . . . . . . Pap tests do not diagnose cancer, but tell you whether you are at high risk of either having pre-cancerous or cancerous cells. Actual diagnosis of cervical cancer involves a colposcopy. This is a simple procedure, which uses a specific type of microscope called a colposcope to look directly into the cervix, magnify its appearance, and helps to take biopsies of abnormal areas,” says Growdon: see videos below.
 

What is a Pap smear test?


Diagnostic tests for cervical cancer
 
Older women and Pap tests

Pap tests, which are offered by NHS England to women between 25 and 64, is the most effective way of preventing cervical cancer; yet data show that in 2016 there was a significant drop in Pap test screening as women’s age increased. If such screening covered 85% of women, it is estimated that it would reduce deaths from cervical cancer by 27% in 5 years, and the diagnosis of new cases of cervical cancer by 14% in 1 year. According to the authors of the 2017 Lancet study, “The risk of acquiring an HPV infection that will progress to cancer has increased in unvaccinated individuals born since 1960, suggesting that current screening coverage is not sufficient to maintain – much less reduce – cervical cancer incidence in the next 20 years.”
 
Cervical cancer projected to increase in older women

Over the next 2 decades, diagnoses of cervical cancer in women between 50 and 64 are projected to increase by 62%, which could increase mortality from the disease by nearly 150%. “The main reason for this is that the population is ageing and women currently 25-40 will not benefit from vaccination – and they are in the age range where the likelihood of getting an HPV infection is quite high,” saidAlejandra Castanon one of the authors of the Lancet study.
 
Chinese study extends CRISPR technology

The Chinese study mentioned above to eliminate the HPV virus employs an innovative extension of CRISPR, which is a ‘game-changing’ technology. Over the past decade CRISPR has become a significant tool for genetic manipulation in biomedical research and biotechnology.  
 
CRISPR and genome editing

CRISPR is a complex system that can recognize and cut DNA sequences in order to provide organisms a strong defence against attacks and make them immune from further assaults. CRISPR has been adapted for both in vitro and in vivo use in eukaryotic cells to perform highly selective gene silencing or editing. Eukaryotic cells are those that contain a nucleus surrounded by a membrane and whose DNA is bound together by proteins into chromosomes.  CRISPRs are specialized stretches of DNA, and "CRISPR-Cas9" provides a powerful tool for precision editing due to its highly efficient targeting of specific DNA sequences in a genome, and has become the standard for genetic editing. Cas9 protein is an enzyme that acts like a pair of molecular scissors capable of cutting strands of DNA. The genomes of organisms encode messages and instructions within their DNA sequences. Genome editing involves changing those sequences, thereby changing the messages. This is achieved by making a break in the DNA, and tricking a cell's natural DNA repair mechanisms to make desired changes; CRISPR-Cas9 provides a means to do this. The technology’s ease of use and low cost have made it popular among the scientific community, and the possibility of its use as a clinical treatment in several genetically derived pathologies has rapidly spread its significance worldwide.
 
Changing ethical concerns

Despite CRISPRS promise there have been significant ethical concerns to genome editing, which center around human germline editing. This is because germline editing entails deliberately changing the genes passed on to children and future generations; in other words, creating genetically modified people. The debate about genome editing is not a new one, but has regained attention following the discovery that CRISPR has the potential to make such editing more accurate and even "easy" in comparison to older technologies. As of 2014, there were about 40 countries that discouraged or banned research on germline editing, including 15 nations in Western Europe. There is also an international effort, launched in December 2015 at the International Summit on Human Gene Editing and led by the US, UK, and China, to harmonize regulation of the application of genome editing technologies. 
 
After initially being opposed to using CRISPR in humans, in June 2016, the US National Institutes of Health advisory panel approved the technology for a study designed to target three types of cancer and funded by the Parker Institute for Cancer Immunotherapy at the University of Pennsylvania. In 2017 the UK approved the use of CRISPR for research in healthy human embryos. 
 
Off-target effects

Soon after scientists reported that CRISPR can edit DNA in 2012, experts raised concerns about “off-target effects,” meaning either CRISPR changes a gene scientist did not want changed or it fails to change a gene that they do. Although CRISPR-Cas9 is known for its precision a study, published in 2017 in the journal Nature Methods, raised concerns that because of the potential for “off-target effects” testing CRISPR in humans may be premature. Non-intended consequenes can happen because one molecule in the CRISPR system acts like a “molecular bloodhound”, searching the genome until it finds a match to its own sequence of  genetic letters; but there are 6bn genetic letters of the human genome, which suggests that there may be more than one match. Scientists anticipate and plan for this by using a computer algorithm to predict where such flaws might occur, then they search those areas to see if such off-target effects did occur. Notwithstanding such procedures and despite CRISPR’s precision, substantial efforts still are required to make the technology a common device safe for human clinical treatments.
 
Advances using CRISPR
 
The first clinical study using CRISPR began in October 2016 at the West China Hospital in Chengdu. Researchers, led by oncologist Lu You from Sichuan University, removed immune cells from the blood of a person with lung cancer, used CRISPR to disable a gene called PD-1, and then returned the cells to the body. This study is part of a much larger CRISPR genome editing revolution. Today, there are about 20 human clinical studies taking place using CRISPR technology most of which are in China. Different studies focus on different cancers including, breast, bladder, oesophageal, kidney, and prostate cancers. Further, a 2017 paper published in the journal Cell describes a number of innovative ways CRISPR being used; including editing cells while inside the body.
 
Takeaways
 
Despite the efficacy of HPV vaccines, immunization against cervical cancer still has significant challenges. Vaccines only target young people before they become sexually active, and are not recommended for slightly older and sexually active women. There is an urgent and growing concern about older women therefore who were not eligible for HPV vaccination, and are not availing themselves of regular Pap tests, and in whom the incidence of cervical cancer is increasing significantly. This makes Zheng Hu’s clinical study extremely important because it holds out the potential to substantially dent this large and rapidly increasing burden of cervical cancer.
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1 year, 7 months ago

Gene editing battles

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  • Competition is intensifying among scientists to develop and use gene editing and immunotherapy to defeat intractable diseases
  • Chinese scientists were the first to inject people with cells modified by the CRISPR–Cas9 gene-editing technique
  • Several studies have extracted a patient’s own immune cells, modified them using gene-editing techniques, and re-infused them into the patient to seek and destroy cancer cells
  • A new prêt à l'emploi gene editing treatment disables the gene that causes donor immune cells to attack their host
  • The technique harvests immune cells from a donor, modifies and multiplies them so that they may be used quickly, easily and cheaply on different patients
  • Commercial, technical, regulatory and ethical barriers to gene editing differ in different geographies 

Gene editing battles

Gene editing and immunotherapy are developing at a pace. They have been innovative and effective in the fight against melanoma, lung cancer, lymphomas and some leukaemias, and promise much more. Somatic gene therapy changes, fixes and replaces genes at the tissue or cellular levels to treat a patient, and the changes are not passed on to the patient’s offspring. Germ line gene therapy inserts genes into reproductive cells and embryos to correct genetic defects that could be passed on to future generations.  Although there are still many unanswered clinical, commercial and ethical questions surrounding gene therapy, its future is assured and will be shaped by unexpected new market entrants and competition between Chinese and Western scientists, which is gaining momentum.
  
14 February 2017

On the 14th February 2017 an influential US science advisory group formed by the National Academy of Sciences and the National Academy of Medicine gave support to the modification of human embryos to prevent “serious diseases and disabilities” in cases where there are no other “reasonable alternatives”. This is one step closer to making the once unthinkable heritable changes in the human genome. The Report, however, insisted that before humanity intervenes in its own evolution, there should be a wide-ranging public debate, since the technology is associated with a number of unresolved ethical challenges. The French oppose gene editing, the Dutch and the Swedes support it, and a recent Nature editorial suggested that the EU is, “habitually paralysed whenever genetic modification is discussed”. In the meantime, clinical studies, which involve gene-editing are advancing at a pace in China, while the rest of the world appears to be embroiled in intellectual property and ethical debates, and playing catch-up.
 
15 February 2017

On the 15th February 2017, after a long, high-profile, heated and costly intellectual property action, judges at the US Patent and Trademark Office ruled in favor of Professor Feng Zhang and the Broad Institute of MIT and Harvard, over patents issued to them associated with the ownership of the gene-editing technology CRISPR-Cas9: a cheap and easy-to-use, all-purpose gene-editing tool, with huge therapeutic and commercial potential.
 
The proceedings were brought by University College Berkeley who claimed that the CRISPR technology had been invented by Professor Jennifer Doudna of the University, and Professor Emmanuelle Charpentier, now at the Max Planck Institute for Infection Biology in Berlin, and described in a paper they published in the journal Science in 2012. Berkeley argued that after the 2012 publication, an “obvious” development of the technology was to edit eukaryotic cells, which Berkeley claimed is all that Zhang did, and therefore his patents are without merit.

The Broad Institute countered, suggesting that Zhang made a significant inventive leap in applying CRISPR knowledge to edit complex organisms such as human cells, that there was no overlap with the University of California’s research outcomes, and that the patents were therefore deserved. The judges agreed, and ruled that the 10 CRISPR-Cas9 patents awarded to Zhang and the Broad Institute are sufficiently different from patents applied for by Berkeley, so that they can stand. 
 
The scientific community

Interestingly, before the 15th February 2017 ruling, the scientific community had appeared to side with Berkeley. In 2015 Doudna, and Charpentier were awarded US$3m and US$0.5m respectively for the prestigious Breakthrough Prize in life sciences and the Gruber Genetics Prize. In 2017 they were awarded the Japan Prize of US$0.45m for, “extending the boundaries of life sciences”. Doudna and Charpentier have each founded companies to commercially exploit their discovery: respectively Intellia Therapeutic, and CRISPR Therapeutics.
 
16 February 2017

A day after the patent ruling, Doudna said: “The Broad Institute is happy that their patent didn’t get thrown out, but we are pleased that our patent based on earlier work can now proceed to be issued”. According to Doudna, her patents are applicable to all cells, whereas Zhang’s patents are much more narrowly indicated. “They (Zhang and the Broad Institute) will have patents on green tennis balls. We will get patents on all tennis balls,” says Doudna.
 
Gene biology

Gene therapy has evolved from the science of genetics, which is an understanding of how heredity works. According to scientists life begins in a cell that is the basic building block of all multicellular organisms, which are made up of trillions of cells, each performing a specific function. Pairs of chromosomes comprising a single molecule of DNA reside in a cell’s nucleus. These contain the blueprint of life: genes, which determine inherited characteristics. Each gene has millions of sequences organised into segments of the chromosome and DNA. These contain hereditary information, which determine an organism’s growth and characteristics, and genes produce proteins that are responsible for most of the body’s chemical functions and biological reactions.

Roger Kornberg, an American structural biologist who won the 2006 Nobel Prize in Chemistry "for his studies of the molecular basis of eukaryotic transcription", describes the Impact of human genome determination on pharmaceuticals:
 
 
China’s first
 
While American scientists were fighting over intellectual property associated with CRISPR-Cas9, and American national scientific and medical academies were making lukewarm pronouncements about gene editing, Chinese scientists  had edited the genomes of human embryos in an attempt to modify the gene responsible for β-thalassemia and HIV, and are planning further clinical studies. In October 2016, Nature reported that a team of scientists, led by oncologist Lu You, at Ghengdu’s Sichuan University in China established a world first by using CRISPR-Cas9 technology to genetically modify a human patient’s immune cells, and re-infused them into the patient with aggressive lung cancer, with the expectation that the edited cells would seek, attack and destroy the cancer. Lu is recruiting more lung cancer patients to treat in this way, and he is planning further clinical studies that use similar ex vivo CRISPR-Cas9 approaches to treat bladder, kidney and prostate cancers
 
The Parker Institute for Cancer Immunotherapy
 
Conscious of the Chinese scientists’ achievements, Carl June, Professor of Pathology and Laboratory Medicine at the University of Pennsylvania and director of the new Parker Institute for Cancer Immunotherapy, believes America has the scientific infrastructure and support to accelerate gene editing and immunotherapies. Gene editing was first used therapeutically in humans at the University of Pennsylvania in 2014, when scientists modified the CCR5 gene (a co-receptor for HIV entry) on T-cells, which were injected in patients with AIDS to tackle HIV replication. Twelve patients with chronic HIV infection received autologous cells carrying a modified CCR5 gene, and HIV DNA levels were decreased in most patients.
 
Medical science and the music industry

The Parker Institute was founded in 2016 with a US$250m donation from Sean Parker, founder of Napster, an online music site, and former chairman of Facebook. This represents the largest single contribution ever made to the field of immunotherapy. The Institute unites 6 American medical schools and cancer centres with the aim of accelerating cures for cancer through immunotherapy approaches. 

Parker, who is 37, believes that medical research could learn from the music industry, which has been transformed by music sharing services such as Spotify. According to Parker, more scientists sharing intellectual property might transform immunotherapy research. He also suggests that T-cells, which have had significant success as a treatment for leukaemia, are similar to computers because they can be re-programed to become more effective at fighting certain cancers. The studies proposed by June and colleagues focus on removing T-cells, from a patient’s blood, modifying them in a laboratory to express chemeric antigen receptors that will attack cancer cells, and then re-infusing them into the patient to destroy cancer. This approach, however, is expensive, and in very young children it is not always possible to extract enough immune cells for the technique to work.
 
Prêt à l'emploi therapy

Waseem Qasim, Professor of Cell & Gene Therapy at University College London and Consultant in Paediatric immunology at Great Ormond Street Hospital, has overcome some of the challenges raised by June and his research. In 2015 Qasim and his team successfully used a prêt à l'emploi gene editing technique on a very young leukaemia patient. The technique, developed by the Paris-based pharmaceutical company Cellectis, disables the gene that causes donor-immune cells to attack their host. This was a world-first to treat leukaemia with genetically engineered immune cells from another person. Today, the young leukaemia patient is in remission. A second child, treated similarly by Qasim in December 2015, also shows no signs of the leukaemia returning. The cases were reported in 2017 in the journal Science Translational Medicine.
 
Universal cells to treat anyone cost effectively

The principal attraction of the prêt à l'emploi gene editing technique is that it can be used to create batches of cells to treat anyone. Blood is collected from a donor, and then turned into “hundreds” of doses that can then be stored frozen. At a later point in time the modified cells can be taken out of storage, and easily re-infused into different patients to become exemplars of a new generation of “living drugs” that seek and destroy specific cancer cells. The cost to manufacture a batch of prêt à l'emploi cells is estimated to be about US$4,000 compared to some US$50,000 using the more conventional method of altering a patient’s cells and returning them to the same patient. Qasim’s clinical successes raise the possibility of relatively cheap cellular therapy using supplies of universal cells that could be dripped into patients' veins on a moment’s notice.
 
Takeaways
 
CRISPR-Cas9 provides a relatively cheap and easy-to-use means to get an all-purpose gene-editing technology into clinics throughout the world. Clinical studies using the technology have shown a lot of promise especially in blood cancers. These studies are accelerating, and prêt à l'emploi gene editing techniques as an immunotherapy suggest a new and efficacious therapeutic pathway. Notwithstanding the clinical successes, there remain significant clinical, commercial and ethical challenges, but expect these to be approached differently in different parts of the world. And expect these differences to impact on the outcome of the scientific race, which is gaining momentum.
 
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1 year, 8 months ago

The convergence of MedTech and pharma and the role of biosensors

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  • The convergence of MedTech and pharma can generate innovative combination devices that promise significant therapeutic and commercial benefits
  • Combination devices such as advanced drug delivery systems offer more precise, predictable and personalized healthcare
  • The global market for advanced drug delivery systems is US$196bn and growing
  • Biosensors play a role in convergence and innovative drug delivery systems
  • Roger Kornberg, Professor of Medicine at Stanford University and 2006 Nobel Prize winner for Chemistry describes the technological advances, which are shaping new medical therapies

    

The convergence of MedTech and pharma and the role of biosensors

MedTech and pharma companies are converging.
What role do biosensors play in such a convergence?
 
Traditionally, MedTech and big pharma have progressed along parallel paths. More recently, however, their paths have begun to converge in an attempt to gain a competitive edge in a radically changing healthcare landscape. Convergence leverages MedTech’s technical expertise and pharma’s medical and biological agents to develop combination devices. These are expected to significantly improve diagnosis, monitoring and treatment of 21st century chronic lifetime diseases, and thereby make a substantial contribution to an evolving healthcare ecosystem that demands enhanced patient outcomes, and effective cost-containment.
 
Conventional diagnostics & drug delivery

Conventional in vitro diagnostics for common diseases are costly, time-consuming, and require centralized laboratories, experienced personnel and bulky equipment. Standard processes include the collection and transportation of biological samples from the point of care to a centralized laboratory for processing by experienced personnel. After the results become available, which usually takes days, the laboratory notifies doctors, who in turn contact patients, and modify their treatments as required. Conventional modes of treatment have mainly consisted of simple, fast-acting pharmaceuticals dispensed orally or as injectables. Such limited means of drug delivery slows the progress of drug development since most drugs are formulated to accommodate the conventional oral or injection delivery routes. Concerns about the quantity and duration of a drug’s presence, and its potential toxic effect on proximal non-diseased tissue drives interest in alternative drug delivery systems and fuels the convergence of MedTech and pharma.


The end of in vitro diagnostics

Roger Kornberg, Professor of Medicine at Stanford University, reflects on the limitations of conventional in vitro diagnostics, and describes how technological advances facilitate rapid point-of-care diagnostics, which are easier and cheaper:

 
 
Converging interest
 
Illustrative of the MedTech-pharma convergence is Verily's (formerly Google Life Sciences) partnership with Novartis to develop smart contact lenses to correct presbyopia, (age-related farsightedness), and for monitoring diabetes by measuring glucose in tears. Otsuka’s, partnership with Proteus Digital Health is another example. This venture expects to develop an ingestible drug adherence device. Proteus already has a FDA-approved sensor, which measures medication adherence. Otsuka is embedding the Proteus’s sensor, which is the size of a sand particle, into its medication for severe mental illnesses in order to enhance drug adherence, which is a serious problem. 50% of prescribed medication in the US is not taken as directed, resulting in unnecessary escalation of conditions and therapies, higher costs to health systems, and a serious challenge for clinical studies.

Drivers of change

The principal drivers of MedTech-pharma convergence include scientific and technological advances, ageing populations, increased chronic lifestyle diseases, emerging-market expansion, and developments in therapies. All have played a role in changing healthcare demands and delivery landscapes. Responding to these changes, both MedTech and pharma have continued to emphasize growth, while attempting to enhance value for payers and patients. This has resulted in cost cutting, and a sharper focus on high-performing therapeutics. It has also fuelled MedTech-pharma convergence and the consequent development of combination devices. According to Deloitte’s 2016 Global Life Science Outlook, combination devices “will likely continue to rapidly increase in number and application”.

MedTech’s changing business model
 
Over the past two decades, MedTech has been challenged by tighter regulatory scrutiny, and continued pressure on healthcare budgets, but advantaged by technological progress, which it has embraced to create new business models. This has been rewarded by positive healthcare investment trends. Over a similar period, pharma has been challenged by the expiry of its patents, advances in molecular science, and changing demographics, but buoyed by increased healthcare spending trends, although the forces that increase health costs are being tempered by a demand for value.

As pharma has been increasingly challenged, so interest has increased in the potential of MedTech to address some of the more pressing healthcare demands in a radically changing healthcare ecosystem. Unlike pharma, MedTech has leveraged social, mobile, and cloud technologies to develop new business models and innovative devices for earlier diagnoses, faster and less invasive interventions, enhanced patient monitoring, and improved management of lifetime chronic conditions.
 
Such innovations are contributing to cheaper, faster, and more efficient patient care, and shifting MedTech’s strategic focus away from curative care, such as joint replacements, to improving the quality of life for patients with chronic long-term conditions. This re-focusing of its strategy has strengthened MedTech commercially, and is rapidly changing the way in which healthcare is delivered, the way health professionals treat patients, and the way patients’ experience healthcare.
 
Josh Shachar, founder of several successful US technology companies and author of a number of patents, describes the new healthcare ecosystem and some of the commercial opportunities it offers, which are predicated on the convergence of MedTech and pharma:
 
 
The decline of big pharma’s traditional business model
 
Pharma’s one-size-fits-all traditional business model, which has fuelled its commercial success over the past century, is based on broad population averages. This now is in decline as patents expire on major drugs, and product pipelines diminish. For example, over the past 30 years the expiry of pharma’s patents cost the industry some US$240bn.

Advances in genetics and molecular biology, which followed the complete sequencing of the human genome in 2003, revolutionized medicine and shifted its focus from inefficient one-size-fits-all drugs to personalized therapies that matched patients to drugs via diagnostic tests and biomarkers in order to improve outcomes, and reduce side effects. Already 40% of drugs in development are personalized medicines, and this is projected to increase to nearly 70% over the next five years.

Today, analysts transform individuals’ DNA information into practical data, which drives drug discovery and diagnostics, and tailors medicines to treat individual diseases. This personalized medicine aims to target the right therapy to the right patient at the right time, in order to improve outcomes and reduce costs, and is transforming how healthcare is delivered and diseases managed. 
 
Personalized medicine

Personalized medicine has significantly dented pharma’s one-size-fits-all strategies. In general, pharma has been slow to respond to external shocks, and slow to renew its internal processes of discovery and development. As a result, the majority of new pharma drugs only offer marginal benefits. Today, pharma finds itself trapped in a downward commercial spiral: its revenues have plummeted, it has shed thousands of jobs, it has a dearth of one-size-fits-all drugs, and its replacement drugs are difficult-to-find, and when they are, they are too expensive.

Illustrative of the advances in molecular science that helped to destroy pharma’s traditional commercial strategy is the work of Kornberg. Here he describes an aspect of his work that is related to how biological information encoded in the genome is accessed to inform the direction of all human activity and the construction of organisms for which Kornberg received the Nobel Prize in Chemistry 2006, and created the foundations of personalized medicine:
 

  
Advanced drug delivery systems
 
Over the past 20 years, as pharma has struggled commercially and MedTech has shifted its business model, drug delivery systems have advanced significantly. Evolving sensor technologies have played a role in facilitating some of these advances, and are positioned to play an increasingly important role in the future of advanced drug delivery. According to BCC Research, the global market for advanced drug delivery systems, which increase bioavailability, reduce side effects, and improve patient compliance, increased from US$134bn in 2008 to some US$196bn in 2014.
 
The growth drivers for innovative drug delivery systems include recent advances of biological drugs such as proteins and nucleic acids, which have broadened the scope of therapeutic targets for a number of diseases. There are however, challenges.
 
Proteins are important structural and functional biomolecules that are a major part of every cell in your body. There are two nucleic acids: DNA and RNA. DNA stores and transfers genetic information, while RNA delivers information from DNA to protein-builders in the cells.

For instance, RNA is inherently unstable, and potentially immunogenic, and therefore requires innovative, targeted delivery systems. Such systems have benefitted significantly from progress in biomedical engineering and sensor technologies, which have enhanced the value of discoveries of bioactive molecules and gene therapies, and contributed to a number of new, advanced and innovative combination drug delivery systems, which promise to be more efficacious than conventional ones. 
 
Biosensors
 
The use of biosensors in drug delivery system is not new. The insulin pump is one example. Introduced in its present form some 30 years ago, the insulin pump is a near-physiologic programmable method of insulin delivery that is flexible and lifestyle-friendly.

Biosensors are analytical tools, which convert biological responses into electrical signals. In healthcare, they provide analyses of chemical or physiological processes and transmit that physiologic data to an observer or to a monitoring device. Historically, data outputs generated from these devices were either analog in nature or aggregated in a fashion that was not conducive to secondary analysis. The latest biosensors are wearable and provide vital sign monitoring of patients, athletes, premature infants, children, psychiatric patients, people who need long-term care, elderly, and people in remote regions. 
 
Increased accuracy and speed
 
The success of biosensors is associated with their ability to achieve very high levels of precision in measuring disease specific biomarkers both in vitro and in vivo environments. They use a biological element, such as enzymes, antibodies, receptors, tissues and microorganisms capable of recognizing or signalling real time biochemical changes in different inflammatory diseases and tumors. A transducer is then used to convert the biochemical signal into a quantifiable signal that can be transmitted, detected and analysed, and thereby has the potential, among other things, for rapid, accurate diagnosis and disease management.
 
Recent technological advances have led to the development of biosensors capable of detecting the target molecule in very low quantities and are considered to have enhanced capacity for increased accuracy and speed of diagnosis, prognosis and disease management. Biosensors are robust, inexpensive, easy to use, and more importantly, they do not require any sample preparation since they are able to detect almost any biomarker  - protein, nucleic acid, small molecule, etc. - within a pool of other bimolecular substances. Recently, researchers have developed various innovative strategies to miniaturize biosensors so that they can be used as an active integral part of tissue engineering systems and implanted in vivo.
 
Market for biosensors
 
Over the past decade, the market in biosensors and bioinformatics has grown; driven by advances in artificial intelligence (AI), increased computer power, enhanced network connectivity, miniaturization, and large data storage capacity.

Today, biosensors represent a rapidly expanding field estimated to be growing at 60% per year, albeit from a low start. In addition to providing a critical analytical component for new drug delivery systems, biosensors are used for environmental and food analysis, and production monitoring. The estimated annual world analytical market is about US$12bn, of which 30% is in healthcare. There is a vast market expansion potential for biosensors because less than 0.1% of the analytical market is currently using them.

A significant impetus of this growth comes from the healthcare industry, where there is increasing demand for inexpensive and reliable sensors across many aspects of both primary and secondary healthcare. It is reasonable to assume that a major biosensor market will be where an immediate assay is required, and in the near-term patients will use biosensors to monitor and manage treatable lifetime conditions, such as diabetes cancer, and heart disease.

The integration of biosensors with drug delivery
 
The integration of biosensors with drug delivery systems supports improved disease management, and better patient compliance since all information in respect to a person’s medical condition may be monitored and maintained continuously. It also increases the potential for implantable pharmacies, which can operate as closed loop systems that facilitate continuous diagnosis, treatment and prognosis without vast data processing and specialist intervention. A number of diseases require continuous monitoring for effective management. For example, frequent measurement of blood flow changes could improve the ability of health care providers to diagnose and treat patients with vascular conditions, such as those associated with diabetes and high blood pressure. Further, physicochemical changes in the body can indicate the progression of a disease before it manifests itself, and early detection of illness and its progression can increase the efficacy of therapeutics.
 
Takeaways

Combination devices, which are triggered by the convergence of MedTech and pharma, offer substantial therapeutic and commercial opportunities. There is significant potential for biosensors in this convergence. The importance of biosensors is associated with their operational simplicity, higher sensitivity, ability to perform multiplex analysis, and capability to be integrated into different functions using the same chip. However, there remain non-trivial challenges to reconcile the demands of performance and yield to simplicity and affordability.
 
 
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1 year, 9 months ago

Gene editing positioned to revolutionise medicine

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  • Chinese scientists lead the world in editing genomes of human embryos in order to develop new therapies for intractable diseases
  • US and UK regulators have given permission to edit the genes of human embryos
  • CRISPR-Cas9 has become the most common gene editing platform, which acts like is a pair of molecular scissors
  • CRISPR technology has the potential to revolutionize medicine, but critics say it could create a two-tiered society with elite citizens, and an underclass and have called for a worldwide moratorium on gene editing
  • Roger Kornberg, professor of medicine at Stanford University and 2006 Nobel Prize winner for Chemistry explains the science, which underpins gene-editing technology
  
Gene editing positioned to revolutionise medicine
 
It is a world first for China.
 
In 2015, a group of Chinese scientists edited the genomes of human embryos in an attempt to modify the gene responsible for β-thalassemia, a potentially fatal blood disorder. Researchers, led by Junjiu Huang from Sun Yat-sen University in Guangzhou, published their findings in the journal Protein & Cell.
 
In April 2016, another team of Chinese scientists reported a second experiment, which used the same gene editing procedure to alter a gene associated with resistance to the HIV virus. The research, led by Yong Fan, from Guangzhou Medical University, was published in the Journal of Assisted Reproduction and Genetics. At least two other groups in China are pursuing gene-editing research in human embryos, and thousands of scientists throughout the world are increasingly using a gene-editing technique called CRISPR-Cas9.
 
 
CRISPR-Cas9

Almost all cells in any living organism contain DNA, a type of molecule, which is passed on from one generation to the next. The genome is the entire sequence of DNA or an organism. Gene editing is the deliberate alteration of a selected DNA sequence in a living cell. CRISPR-Cas9 is a cheap and powerful technology that makes it possible to precisely “cut and paste” DNA, and has become the most common tool to create genetically modified organisms. Using CRISPR-Cas9, scientists can target specific sections of DNA, delete them, and if necessary, insert new genetic sequences. In its most basic form, CRISPR-Cas9 consists of a small piece of RNA, a genetic molecule closely related to DNA, and an enzyme protein called Cas9. The CRISPR component is the programmable molecular machinery that aligns the gene-editing tool at exactly the correct position on the DNA molecule. Then Cas9, a bacterial enzyme, cuts through the strands of DNA like a pair of molecular scissors. Gene editing differs from gene therapy, which is the introduction of normal genes into cells in place of missing or defective ones in order to correct genetic disorders.
 
Ground-breaking discovery 

The ground-breaking discovery of how CRISPR-Cas9 could be used in genome editing was first described by Jennifer Doudna, Professor of Chemistry and Cell Biology at the University of California, Berkeley, and Emmanuelle Charpentier, a geneticist and microbiologist, now at the Max Plank Institute for Infections in Berlin, and published in the journal Science in 2012.

In 2011 Feng Zhang, a bioengineer at the Broad Institute, MIT and Harvard, learned about CRISPR and began to work adapting CRISPR for use in human cells. His findings were published in 2013, and demonstrated how CRISPR-Cas9 can be used to edit the human genome in living cells.  

Subsequently, there has been a battle, which is on-going, between the scientists and their respective institution over the actual discovery of CRISPR’s use in human embryos, and who is entitled to the technology’s patents.
 
Gene editing research gathers pace worldwide: a few western examples

In 2016 a US federal biosafety and ethics panel licensed scientists at the University of Pennsylvania’s new Parker Institute of Cancer Immunotherapy to undertake the first human study to endow T-cells with the ability to attack specific cancers. Patients in the study will become the first people in the world to be treated with T-cells that have been genetically modified.

T-cells are designed to fight disease, but puzzlingly they are almost useless at fighting cancer. Carl June, the Parker Institute’s director and his team of researchers, will alter three genes in the T-cells of 18 cancer patients, essentially transforming the cells into super fighters. The patients will then be re-infused with the cancer-fighting T-cells to see if they will seek and destroy cancerous tumors.

Also in 2016, the UK’s Human Fertilisation and Embryology Authority (HFEA), which regulates fertility clinics and research, granted permission to a team of scientists led by Kathy Niakan at the Francis Crick Institute in London to edit the genes of human IVF embryos in order to investigate the causes of miscarriage. Out of every 100 fertilized eggs, fewer than 50 reach the early blastocyst stage, 25 implant into the womb, and only 13 develop beyond three months.
 
Frederick Lander, a development biologist at the Karolinska Institute Stockholm, is also using gene editing in an endeavour to discover new ways to treat infertility and prevent miscarriages. Lander is the first researcher to modify the DNA of healthy human embryos in order to learn more about how the genes regulate early embryonic development. Lander, like other scientists using gene-editing techniques on human embryos, is meticulous in not allowing them to result in a live birth. Lander only studies the modified embryos for the first seven days of their growth, and he never lets them develop past 14 days. “The potential benefits could be enormous”, he says.
 
Gene editing cures in a single treatment

Doctors at IVF clinics can already test embryos for genetic diseases, and pick the healthiest ones to implant into women. An advantage of gene editing is that potentially it could be used to correct genetic faults in embryos instead of picking those that happen to be healthy. This is why the two Chinese research papers represent a significant turning point. The gene editing technology they used has the potential to revolutionize the whole fight against devastating diseases, and to do many other things besides. The main benefit of gene editing therapy is that it provides potential cures for intractable diseases with a single treatment, rather than multiple treatments with possible side-effects.
 
The promise of gene editing for fatal and debilitating diseases
 
Among other things, gene editing holds out promise for people with fatal or debilitating inherited diseases. There are over 4,000 known inherited single gene conditions, affecting about 1% of births worldwide. These include the following:- cystic fibrosis, which each year affects about 70,000 people worldwide, 30,000 in the US, and about 10,000 in the UK; Tay-Sachs disease, which results in spasticity and death in childhood. The BRCA1 and BRCA2 inherited genes predispose women with a significantly greater chance of developing breast or ovarian cancer. Sickle-cell anaemia, in which inheriting the sickle cell gene from both parents causes the red blood cells to spontaneously “sickle” during a stress crisis; heart disease, of which many types are passed on genetically; haemophilia, a bleeding disorder caused by the absence of genetic clotting agent and. Huntington disease, a genetic condition which slowly kills victims by affecting cognitive functions and neurological status. Further, genomics play a significant role in mortality from chronic conditions such as cancer, diabetes and heart disease.
 
A world first

Huang and his colleagues set out to see if they could replace a gene in a single-cell fertilized human embryo. In principle, all cells produced as the embryo develops would then have the replaced gene. The embryos used by Huang were obtained from fertility clinics, but had an extra set of chromosomes, which prevented them from resulting in a live birth, though they did undergo the first stages of development. The technique used by Huang’s team involved injecting embryos with the enzyme complex CRISPR-Cas9, which, as described above, acts like is a pair of molecular scissors that can be designed to find and remove a specific strand of DNA inside a cell, and then replace it with a new piece of genetic material.
 
The science underpinning gene editing

In the two videos below Roger Kornberg, professor of medicine at Stanford University and 2006 Nobel Prize winner for Chemistry for his work on “transcription”, the process by which DNA is converted into RNA, explains the science, which underpins gene-editing technology:
 
How biological information, encoded in the genome, is accessed for all human activity

 
 
Impact of human genome determination on pharmaceuticals
 
An immature technology
 
Huang’s team injected 86 embryos, and then waited 48 hours; enough time for the CRISPR-Cas9 system, and the molecules that replace the missing DNA to act, and for the embryos to grow to about eight cells each. Of the 71 embryos that survived, 54 were genetically tested. Only 28 were successfully spliced, and only a fraction of those contained the replacement genetic material.
 
Therapy to cure HIV
 
Fan, the Chinese scientist who used CRISPR in an endeavor to discover a therapy for HIV/Aids, collected 213 fertilized human eggs, donated by 87 patients, which like embryos used by Huang, were unsuitable for implantation, as part of in vitro fertility therapy. Fan used CRISPR–Cas9 to introduce into some of the embryos a mutation that cripples an immune-cell gene called CCR5. Some humans who naturally carry this mutation are resistant to HIV, because the mutation alters the CCR5 protein in a way that prevents the virus from entering the T-cells it tries to infect. Fan’s analysis showed that only 4 of the 26 human embryos targeted were successfully modified.
 
Deleting and altering genes not targeted
 
In 2012, soon after scientists reported that CRISPR could edit DNA, experts raised concerns about “off-target effects,” where CRISPR inadvertently deletes or alters genes not targeted by the scientists. This can happen because one molecule in CRISPR acts like a bloodhound, and sniffs around the genome until it finds a match to its own specific sequence. Unfortunately, the human genome has billions of potential matches, which raises the possibility that the procedure might result in more than one match. 
 
Huang is considering ways to decrease the number of “off-target” mutations by tweaking the enzymes to guide them more precisely to a desired spot, introducing the enzymes in a different format in order to try to regulate their lifespans, allowing enzymes to be shut down before mutations accumulate; and varying the concentrations of the introduced enzymes and repair molecules. He is also, considering using other gene-editing techniques, such as LATENT.
 
The slippery slope to eugenics

Despite the potential therapeutic benefits from gene editing, critics suggest that genetic changes to embryos, known as germline modifications, are the start of a “slippery slope” that could eventually lead to the creation of a two-tiered society, with elite citizens, genetically engineered to be smarter, healthier and to live longer, and an underclass of biologically run-of-the-mill humans.
 
Some people believe that the work of Huang, Fan and others crosses a significant ethical line: because germline modifications are heritable, they therefore could have an unpredictable effect on future generations. Few people would argue against using CRISPR to treat terminal cancer patients, but what about treating chronic diseases or disabilities? If cystic fibrosis can be corrected with CRISPR, should obesity, which is associated with many life-threatening conditions? Who decides where the line is drawn?
 
40 countries have banned CRISPR in human embryos. Two prominent journals, Nature and Science, rejected Huang’s 2012 research paper on ethical grounds, and subsequently, Nature published a note calling for a global moratorium on the genetic modification of human embryos, suggesting that there are “grave concerns” about the ethics and safety of the technology.
 
A 2016 report from the Nuffield Council on Bioethics suggests that because of the steep rise in genetic technology, and the general availability of cheap, simple-to-use gene-editing kits, which make it relatively straightforward for enthusiasts outside laboratories to perform experiments, there needs to be internationally agreed ethical codes before the technology develops further.
 
Recently, the novelist Kazuo Ishiguro, among others, joined the debate, arguing that social changes unleashed by gene editing technologies could undermine core human values. “We’re coming close to the point where we can, objectively in some sense, create people who are superior to others,” says Ishiguro.
 
Takeaways

CRISPR has been described as the “Model T of genetics”.  Just as the Model T was the first motor vehicle to be successfully mass-produced, and made driving cheap and accessible to the masses, so CRISPR has made a complex process to alter any piece of DNA in any species easy, cheap and reliable, and accessible to scientists throughout the world. Although CRISPR still faces some technical challenges, and notwithstanding that it has ignited significant protests on ethical grounds, there is now a global race to push the boundaries of its capabilities well beyond its present limits.
 
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1 year, 9 months ago

The critical importance of new rapid influenza diagnostic tests

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  • Influenza, or flu, outbreaks are recurrent and every year pose  a significant risk to global health
  • Influenza affects millions: each year 3m to 5m cases of severe disease and 500,000 deaths
  • Pandemics occur about three times a century
  • The 1918 flu pandemic killed 21m . . . Total deaths in World War I was 17m
  • Effective treatment of patients with respiratory illness depend on accurate and timely diagnosis
  • Early diagnosis of influenza can reduce the inappropriate use of antibiotics and provide the option of using antiviral therapy
  • Rapid Influenza Diagnostic Tests (RIDTs) are useful in determining whether outbreaks of respiratory disease might be due to influenza
  • RIDTs vary in their sensitivity, specificity, complexity, and time to produce results
  • There is a pressing need for faster, cheaper, and easier-to-use flu tests with higher levels of sensitivity and specificity than those currently available
  • The large, fast-growing, global and under-served RIDT market drives a host of initiatives
  • Various development challenges pose significant threats
 
 
The critical importance of new rapid influenza diagnostic tests
 
What challenges face developers of cheap, easy-to-use, rapid and accurate diagnostic tests for influenza, or flu, which improve on tests currently available?
 
Influenza

Influenza is a highly contagious respiratory illness caused by a virus, and occurs in distinct outbreaks of varying extent every year. Its epidemiologic pattern reflects the changing nature of the antigenic properties of influenza viruses. The viruses subsequent spread depends upon multiple factors, including transmissibility and the susceptibility of the population. Influenza A viruses, in particular, have a remarkable ability to undergo periodic changes in the antigenic characteristics of their envelope glycoproteins; the hemagglutinin and the neuraminidase. Anyone can get influenza. It is usually spread by the coughs and sneezes of an infected person. You can also catch flu by touching an infected person (e.g. shaking hands). Adults are contagious one to two days before getting symptoms and up to seven days after becoming ill, which means that you can spread the influenza virus before you even know you are infected. Influenza presents as a sudden onset of high fever, myalgia, headache and severe malaise, cough (usually dry), sore throat, and runny nose. There are several treatment options, which aim to ease symptoms until the infection goes, and aims to prevent complications. Most healthy people recover within one to two weeks without requiring any medical treatment. However, influenza can cause severe illness or death especially in people at high risk such as the very young, the elderly, and people suffering from medical conditions such as lung diseases, diabetes, cancer, kidney or heart problems.
  
Costly killer

Influenza is a cruel, costly killer with a history of pandemics. It causes millions of upper respiratory tract infections every year as it spreads around the world in seasonal epidemics, and poses on-going risks to health. The most vulnerable are the young, the old and those with chronic medical conditions such as heart disease, respiratory problems and diabetes. Each year, on average 5% to 20% of populations in wealthy countries get influenza. In the US it causes more than 200,000 hospitalizations and 36,000 deaths annually, and each year costs the American economy between US$71 to US$167bn.
 
History of pandemics

The 1918-19 “Spanish Flu” pandemic caused 21m deaths, and was one of three 20th century influenza pandemics. At least four pandemics occurred in the 19th century, and the first pandemic of the 21st century was the 2009 “Swine Flu”. Its virulence and global human impact was less deadly than originally feared, but it still resulted in 18,449 laboratory confirmed deaths. If you account for people who died as a result of complications precipitated by the Swine Flu, the actual death toll is significantly higher. Mindful of the potential accelerated spread of a pandemic subtype of the influenza virus, the World Health Organization (WHO), and national governments continuously monitor influenza viruses. Assessment of pathogenicity and virulence is the key to taking appropriate healthcare actions in the event of an outbreak.

However, without widespread access to improved diagnostic tests, each year millions will not receive timely anti-viral medication, tens of thousands of influenza sufferers will develop complications, and thousands will die unnecessarily, as the growing interconnections and complexity of the world present an increasing challenge to influenza prevention and control.
 
The influenza viruses

Influenza is a single-stranded, helically shaped, RNA virus of the orthomyxovirus family. Influenza viruses are divided into two groups: A and B. Influenza A has two subtypes which are important for humans: A(H3N2) and A(H1N1). The former is currently associated with most deaths. Influenza viruses are defined by two different protein components, known as antigens, on the surface of the virus. They are haemagglutinin (H) and neuraminidase (N) components. Influenza viruses circulate in all parts of the world, and mutate at a low level, referred to as "genetic drift", which allows influenza to continuously evolve and escape from the pressures of population immunity. This means that each individual is always susceptible to infections with new strains of the virus. "Genetic shift" occurs when a strain of influenza A virus completely replaces one or more of its gene segments with the homologous segments from another influenza A strain, a process known as reassortment. If the new segments are from an animal influenza virus to which humans have had no exposure and no immunity, pandemics may ensue.
 
Gold standard diagnosis rarely used

The gold standard method for the detection of influenza viruses is rarely performed, as patients with suspected influenza are most likely to be seen by a primary care doctor with limited resources, and the gold standard test requires sophisticated laboratory infrastructure, and takes at least 48 hours. Even the faster Reverse Transcription-Polymerase Chain Reaction (RT-PCR) test, which is a relatively new type of molecular assay that uses isothermal amplification of viral cells, has a turnaround time of four to six hours. It is also expensive, and therefore not commonly used.

The slowness and expense of traditional influenza tests led to the development of an array of commercially available Rapid Influenza Diagnostic Tests (RIDTs), which screen for influenza viruses, and provide results within as little as 15 minutes after sample collection and processing. Such tests are largely immunoassays that can identify the presence of influenza A and B viral nucleoprotein antigens in respiratory specimens and display the results in a qualitative way (positive or negative). About 10 such tests have FDA approval and are available in the US. About 20 have been determined suitable for the European market. All are growing in their usage. However, the RIDTs vary in their sensitivity, specificity, complexity, and in the time needed to produce results.
  
Tests rule in Influenza but do not rule it out
 
According to the Centers for Disease Control and Prevention (CDC) the commercially available RIDTs in America have a sensitivity ranging from 50% to 70%. This means that in up to 50% of influenza cases, test results will still be negative. A study showed that tests for the N1H1 virus, a subtype of influenza A that was the most common cause of the Swine Flu in 2009, and is associated with the 1918 Spanish Flu pandemic, have a sensitivity ranging from 32% to 50% depending on the brand of test. A 2012 meta-analysis of the accuracy of RIDTs reported an average sensitivity for detecting influenza in adults of only 54%. Sensitivity in children is somewhat higher since they tend to shed a greater quantity of virus. Thus some 30% to 50% of flu samples that would register positive by the gold standard viral culture test may give a false negative when using a RIDT, and some may indicate a false positive when a person is not infected with influenza. Thus, RIDTs that are currently available allow Influenza to be ruled in but not ruled out. More sensitive tests are needed.
 
New flu tests

There are a number of innovative nano-scale molecular diagnostic influenza tests in development, which are expected to deliver more accurate validations than existing antigen-based molecular tests. The new tests use a platform, comprised of an extremely thin layer of material, which detects the presence of influenza proteins in saliva or blood. This is attached to an electronic chip, which transforms the platform into a sensor. This is an essential part of the measuring device as it converts the input signal to the quantity suitable for measurement and interpretation. The presence of influenza proteins in saliva or blood triggers an electrical signal in the chip, which is then communicated to a mobile phone.
 
Here Roger Kornberg, Professor of Medicine at Stanford University and 2006 Nobel Laureate for Chemistry describes how advances in molecular science are enabling the replacement of traditional in vitro diagnostics with rapid, virtually instantaneous point-of-care diagnostics without resort to complex processes or elaborate infrastructure.  Antiviral drugs for influenza are available in some countries and may reduce severe complications and deaths. Ideally they need to be administered early (within 48 hours of onset of symptoms) in the disease.  An almost instantaneous point-of-care test will enable better access to appropriate treatment particularly in primary care:
 
 
Challenges

Notwithstanding all the recent scientific advances, new and innovative influenza detection tests will need to overcome significant challenges to outperform current RIDTs. In addition to the usual challenges associated with sensitivity and specificity, new developers have to be aware of recent changes in immunochromatographic antigen detection testing for influenza viruses, and the rapid development of commercially available nucleic acid amplification tests. Also, there are the usual development challenges associated with miniaturization, fabrication, scaling, marketing, and regulation. Effective from 13 February 2017, the FDA reclassified antigen based rapid influenza detection tests from class I into class II devices. Class II devices are higher risk than Class I, and require greater regulatory controls to provide reasonable assurance of the device’s safety and effectiveness. This was provoked by the potential for the devices to fail to detect newer versions of the influenza virus. For instance, a novel variant of influenza A,H7N9, has emerged in Asia, and H5N1 is also re-emergent.
 
Another challenge, especially for start-ups with limited resources, is the fluctuating nature of the influenza virus itself. A bad year for patients, when influenza causes millions of people to become ill, is a good year for manufacturers of RIDTs. Conversely, a good year for patients, when influenza affects a lower percentage of the population, is a bad year for manufacturers who suffer from unsold inventory, and reduced revenues. Thus, the vagaries of the flu virus not only have the potential to kill millions of people, they also pose a significant threat to start-ups dedicated to developing RIDTs.
 
Takeaways

Despite all the challenges, there is a significant commercial opportunity in the current under-served global RIDT market for improved tests. Each year, in the US, more than 1bn people visit primary care doctors, and in the UK, the NHS, deals with over 1m patients every 36 hours. The global in vitro diagnostics market was valued at US$60bn in 2016. Between 2016 and 2021, the market is expected to grow at a CAGR of 5.5% to reach US$79bn by 2021. Over the same period, the global point-of-care diagnostics sub-market is expected to grow at a CAGR of 10% to reach US$37bn by 2021. Large corporates, small start-ups, and university research laboratories have spotted the opportunity, and started developing new and innovative RIDTs. Given that each-year influenza causes widespread morbidity as well as mortality, it should be a matter of priority to support all efforts to develop swift and reliable RIDTs. A significant step forward would be a RIDT with greater sensitivity and usability such that the test could be administered and a result given within a 10-minute primary care consultation.
 
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