Transformational Technology - The “Age” Age

By: John_Mauldin

As I mentioned in last week’s letter, I traveled to San Francisco last Monday with my friend Patrick Cox, who writes our Transformational Technology Alert newsletter. We had dinner with Dr. Mike West of Biotime and then spent the next morning at the Buck Institute for Research on Aging. Pat and I decided we would jointly report on what we learned. He has already written his part, which was published last week. I am going to reproduce portions of that letter, which highlight the conversation with Brian Kennedy and his team at the Buck Institute, and then add my own thoughts about our conversation with Mike West the previous night.

(Note that I am excerpting Patrick’s paid letter, which includes comments on companies in his portfolio, rather than his free weekly Transformational Technologies Tech Digest service. We agreed that it was important to do so in this one case, given the huge significance of the research involved and the Buck Institute’s relationship to it.)

Essentially, we looked at two aspects of aging. The Buck Institute is focused on how to slow down the aging process and reduce the symptoms (such as chronic diseases) that come with aging. Dr. Mike West and his colleagues, as well as a few other firms and researchers, are focused on using our own pluripotent stem cells in ways that would allow us to repair organs in our bodies, thus giving us the opportunity to “grow younger” again. (It’s not quite that simple, as I’ll try to explain later.)

The very good news is that progress is being made. The bad news is that the regulatory environment is impeding progress, as the regulators don’t quite know what to do about the advances that are coming; but even there things may be changing. I recognize this letter will be a little far afield from my usual scribblings on economics and finance, but aging and health are things that concern us all. And if there are a few things you can do to increase your healthspan (not just your lifespan), then the attention you pay to optimizing your health will make all the work you do on your investments even more important and useful. So let’s turn to Pat’s letter, and because I can’t resist, I will insert personal comments in brackets until we get to the end of his letter.

Transformational Technology and Aging

John Mauldin and I were invited to spend the day at “the Buck,” as they say. There, we spoke at length with one of the most important scientists working in biotechnology today: Brian K. Kennedy, PhD, the president and CEO of the Buck Institute for Research on Aging. We were also given the tour of the facility by Mary McEachron, the chief administrative officer and general counsel of the institute.

McEachron, in fact, is largely responsible for the successful founding in 1999 of the world’s first major scientific research institution dedicated to solving the problems of aging. Her role is fitting because she was the attorney most responsible for defending the will of Beryl Hamilton Buck, who wanted to fund an anti-aging institute to be established in Marin County, California. The San Francisco Foundation sued to break the Buck trust, arguing that the money should be spent elsewhere (in San Francisco, apparently) because the county of Marin is one of the wealthier counties in the world.

In a court battle that spanned years, McEachron successfully argued that the scientific mission of the Buck Institute – to solve the problems of aging – would benefit not only San Francisco but the rest of the world as well. I find it somewhat remarkable that anyone could even argue with that premise, but this is the world we live in.

As a TransTech reader, you know that the single greatest predictable problem facing us in the 21^st century is aging. Though each one of us faces the problem individually, our society and nation are existentially threatened by the impacts of a population that is increasingly afflicted by age-related diseases.

The United States government is borrowing 30 cents of every dollar it spends already, which happens to be almost the exact percentage of the budget that flows to the aged in the form of Social Security, Medicare, and other transfer payments. The trends that have created this problem, however, are accelerating as the population of transfer-payment recipients grows older and bigger due to increases in lifespans. Simultaneously, of course, the population of younger payers into the system is shrinking along with birth rates.

Part of the reason that I enjoyed visiting Brian Kennedy and the Buck so much was that I was surrounded by very smart people who not only understand how grave this threat is to our system but who also understand that it is solvable. The institute, designed by the renowned architect I.M. Pei, employs about 140 PhDs as well as more than 100 technicians and support staff in 22 labs dedicated to different challenges.

[Not surprisingly, the Institute itself is a marvel of architectural beauty. Pei supposedly came out of retirement to do the design. It is an ongoing project, as he designed several other significant buildings to fit in with the current ones. More on that later.]

Kennedy spends a considerable part of his time explaining the economics of aging. In the last four or five years, he told us, the community of scientists who research aging has become convinced that we can significantly increase healthspans. The consensus among top scientists is that we have the ability to delay the processes that culminate in the diseases of aging. Meanwhile, progress educating the public is slower, but it is happening.

For obvious humanitarian reasons, I want the public to understand right now that our most serious problems are solvable. As a financial analyst, however, I realize that this disconnect between reality and public perception is the basis for the biggest financial opportunities of our era. Just as energy can be generated from two systems with different thermal or charge states, transformational investors can profit from the investment community’s failure to grasp these enormous but unrecognized forces in the biotech arena.

Kennedy agrees that society will eventually recognize the necessity of anti-aging therapeutics because the problems of aging will worsen until they force us to solve them. Right now, however, our institutions are decades behind the science.

Kennedy pointed out, for example, that NIH funding for scientific research has flatlined. Ironically, this dearth of funding is due largely to budgetary pressures created by societal aging. Lest you decide that increasing the NIH budget is the solution, Kennedy cites calculations that less than one percent of NIH grants support research into the aging pathways. I love pure science as much as anybody, but we might do better prioritizing research funding for the problems that threaten our health, the economy, and our children’s future.

[Longtime readers know that I am a deficit hawk on the budget. We need to move to a balanced budget as quickly as possible. That said, there are some agencies that have far greater impacts on our lives than others. The NIH and DARPA come to mind. Using a small percentage of our national budget to fund ideas and research that are at the edge of human knowledge seems quite reasonable to me. I would like to see the administrators whose funded projects have successful outcomes be given more responsibility and access to further monies. Let’s reward competence and tackle problems that profoundly impact the future.]

Another enormous problem is that the FDA utilizes approval methodologies created before the biotech revolution gave us ever-increasing insight into the molecular pathways and mechanisms targeted by drug candidates. As a result, the approval processes – designed when the drug development model resembled a guessing game more than modern science – is unnecessarily expensive and slow.

This regulatory bottleneck is a tragedy because, as Kennedy points out, it will be easier to target aging than to reverse the pathologies – the diseases – that are caused by aging. Targeting aging is also much, much cheaper. The benefits of anti-aging biotechnologies are twofold. Not only are anti-aging therapies far less expensive than disease treatments, they keep people healthier longer so they are able to move out of the recipient column into the contributor column. So the balance sheet is improved from both sides.

[In the next section Pat assumes that you have been a regular reader. Since a part of his service is free, maybe you should consider adding yourself to that list. More information on that later.]

A primary focus of the Buck Institute, as you know, has been rapamycin research, which led to the creation of a company that was a recent addition to our portfolio, Mount Tam Biotechnologies (MNTM). You are aware that the company’s first compound is TAM-01, an analog of rapamycin intended to treat systemic lupus erythematosus (SLE). TAM-01 improves the side-effect profile associated with rapamycin and could, if human trials replicate the results found in animals, provide the first real therapy for lupus. This achievement in turn would further all of Buck’s research.

Because Mount Tam has licensed all of Buck’s IP on the use of rapamycin analogs for autoimmune disorders, the roadmap ahead is immense and multifaceted. TAM-01probably isn’t the analog of rapamycin that will be used for life extension purposes, but its financial potential is huge: the direct cost of treating lupus is $100 billion a year… greater even than for cancer. Here is a pdf file containing that estimate.

We also spoke with Mount Tam’s CEO, Timothy S. Powers, PhD, while we were at Buck and gained real insight into the potential of possible analogs of rapamycin, called rapalogs. By coincidence, the process of finalizing Brian Kennedy’s new role as chairman of the Mount Tam board was just being completed. The announcement was made this week. I think this appointment is a major win for Mount Tam, because it puts Kennedy’s expertise and credibility inside the company. It’s unlikely that anybody knows more about rapamycin and rapalogs than he does.

Kennedy pointed out that the ability of rapamycin to impart life-extending benefits even late in life has come as something of a surprise to the research community. There is, after all, a natural tendency to assume that aging irreversibly damages cells and cellular processes. If this were the case, however, then interventions late in life would provide little benefit to animals, including humans.

In fact, this isn’t the case. Diseases do not seem to be caused by physical damage to the body caused by aging, as was previously believed. Rather, the systems of the body are thrown out of whack as we age, causing the impaired functionality that leads to disease. Therefore, a compound that restores biological systems to a healthier state will have a major impact on healthspans for older as well as younger people.

In rodent studies, animals that were the equivalent of 65 years old were given rapamycin, yielding major improvements in health as well as a 15% improvement in lifespans. Somewhat greater benefits accrued if therapy began earlier, but the majority of the benefits from anti-aging therapies can be delivered rather late in life. If this model holds for people (and I think it has to), it means 65-year-olds could experience big improvements in apparent age and have their average life expectancies increase from 80 to perhaps 92 via some form of rapamycin. Even if there were only a 10-year increase in health- and lifespans, most of us would be willing to pay a great deal for that benefit – especially because rapamycin treatment would cost much less than treating the diseases it acts to prevent.

Though biogerontologists now understand these potentials, it’s clear to me that most people do not. When I speak to people about the anti-aging strategies that are being slowed by regulatory burdens, the attitude I see in many older people is that it’s already too late for them to benefit from these discoveries. This perception is entirely wrong.

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