Your Quarterly E-Zine
Edition 11 • December 2019

This website contains the latest edition of Forsyth Barr Focus, a quarterly on-line magazine written by senior members of Forsyth Barr's investment team.

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A SONG OF PEPPERMINT …

An 1866 edition of the Evening Post newspaper carried an advertisement for Taylor's Hygenic Balm And Botanic Water “the only restorative for producing the growth of the hair, the same as used by Her Majesty the Queen of England.” In Victorian times, arsenic based shampoos were said to reverse baldness; the Queen after which the era was named, was rumoured to have been deeply worried by her thinning tresses.

However in the nineteenth century, prescribed medicines or cures might just as easily have maimed rather than cured patients, with many medicinal compounds, (perhaps even Taylors Hygenic Balm), more often than not comprising poisons such as arsenic and strychnine. The general theory was that their rather violent chemical properties could shock the body back into balance, when it was out of kilter due to illness.

Fortunately, early last century, the discovery of penicillin and the creation of sulphonamides (anti-bacterial compounds) marked the first major advances in genuine healthcare. The general improvement in the health of people over the course of the 20th century saw average global life expectancy more than double; in the past 60 years, the average life expectancy of a New Zealander has increased by 10 years, to 81. In part, these dramatic improvements have been due to the continued advances in the development of new medicines.

Today, the global pharmaceuticals market is estimated to be worth US$900 billion a year and is forecast to reach US$1,200 billion by 2016 . Typically it takes 10 to 15 years to develop a new medicine or vaccine, with over US$135 billion spent on research and development annually. On average, it’s estimated to cost over US$1 billion to develop a single drug and bring it to market.

The primary focus of this extraordinary expenditure globally is on finding a cure for cancer, which represents nearly half of all drugs currently under development. Heart disease, diabetes and HIV/AIDS are the other major areas of global investment, with more recently the world’s attention being diverted to developing a vaccine for the latest threat to global health, Ebola. However despite the considerable resources invested in the sector, each year only around 1% of the thousands of the new compounds under development actually find their way to consumers. Yet today more than ever, the need for pharmacological innovation is urgent. For example, while antibiotics revolutionised medicine one hundred years ago and have saved millions of lives since, increasing bacterial resistance and falling antibiotic production has reduced their effectiveness.

As a result of all of these factors, investment in all sectors of the global healthcare market continues to grow apace. From an investor’s point of view, there are many aspects to the pharmaceutical industry to consider; from research and development to manufacturing and distribution. Investors looking to participate in this burgeoning market can evaluate local firms such as EBOS, Fisher & Paykel Healthcare or Pacific Edge, as well as global conglomerates such as Gilead Sciences, Novartis or Roche. Listed investment companies specialising in the pharmaceutical sector such as Worldwide Healthcare Trust PLC and The Biotech Growth Trust PLC are other alternatives worth appraising.

In the nineteenth century, reference to royalty seemed a sure way to secure commercial success, with Woods’ Peppermint Cure, based on Guaiphenesin (Guaiacum resin) and peppermint leaf, a popular medicine marketed by rhyme.

“Sing a song of Peppermint. The cure that's made by Woods, For one and sixpence worth of cost; A sovereign's worth of good. When the bottle's opened, ‘Tis praise all people sing; ‘Tis certain such a sovereign Cure Would set up any King.”

In the 21st century, traditional medicines made with natural compounds continue to have their place in meeting the needs of consumers, with Woods’ Peppermint Cure still being sold in some parts of the world today. However, technology has spurred development in medicinal areas which were unknown a century earlier; this is where investment capital can be deployed to create much more than a sovereign’s worth of good, for the benefit of King, Queen and subject alike.

By Gordon Noble-Campbell
Director, Private Client Services

This article was first published in September 2014