Precision Medicine Is Transforming Health Care. What That Means for Investors.

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Precision medicine, or the application of information technology to biology, could revolutionize health care in coming years as treatments are tailored to individual patients based on their personal biology. The result could be better patient outcomes, lower costs, and improved health equity, or the attainment of maximum health across diverse populations, Dr. Charles Kennedy, CEO and managing partner at Blue Ox Healthcare Partners, a New York-based private-equity firm, explained in a recent Barron’s Live call with readers.

In the edited Q&A below, Kennedy addresses listener questions on health-care innovation, delivery, and investing that he was unable to answer, or answer fully, during the call. You can also listen to a playback of the full Barron’s Live call below or by clicking here.

Barron’s: Which health-care innovations look most promising over the next few years?

Kennedy: Health care in the United States is going through a scientific revolution of unprecedented scope and depth. New Covid vaccines based on never-before-used synthetic messenger RNA technology have reduced the time for effective vaccine development from four to five years to less than one year, with preliminary effectiveness in excess of 95%.

From this new wisdom springs hope for the best of times, and yet, we face a collection of tragedies as bad as any in our history. Covid has killed more than one-quarter-million Americans. Maternal mortality and pre-term birth rates remain stubbornly high. Obesity and chronic diseases such as diabetes and heart disease continue to ravage our population. Access to health care is poor for many American—especially those in rural or inner-city environments—and for those who have access, affordability is approaching a breaking point.

As a result, we believe investment opportunities are broad and varied within health care. At Blue Ox, we are finding it most advantageous to invest in the two most powerful trends in health care—precision medicine and value-based incentives in support of affordability.

Are there any companies working on disease prevention?

Many precision-medicine techniques offer the potential for disease prevention, driving the potential for cost savings and patient-outcome improvements. One example is pre-term birth, which represents more than $32 billion in health-care spending in the U.S.—in part due to its occurrence in one in every 10 pregnancies, and as many as one in every five pregnancies in the African American population. While many interventions are used to reduce the morbidity and mortality of pre-term birth, a fundamental problem that exists is the inability to identify women at risk for a pre-term delivery.

A Blue Ox portfolio company, Sera Prognostics, has taken steps to fix this problem. Sera Prognostics has developed the PreTRM test, which, through a simple blood draw, uses molecular diagnostics to measure certain proteins and form an effective risk measure for each patient’s pre-term birth risk. By using PreTRM on their patients, physicians can detect 80% or more of patients they wouldn’t have known were at risk for pre-term birth, allowing these physicians to intervene in a more timely and aggressive way, and more comprehensively than they otherwise would have.

You spend a lot of time focused on health-care delivery. How is it changing, or likely to change, in coming years?

Everything about health care is changing and will continue to do so. Where you receive your care is evolving based on convenience and integration with daily life. For example, we’ve seen more medical retail locations in shopping environments. Additionally, technology that remotely monitors patients who might otherwise need to be in a care setting is changing. We’ve seen a dramatic increase in the importance and acceptance of telehealth due to Covid. Furthermore, the actual care that you receive is changing due to the science of information technology applied to biology, commonly called precision medicine, which is starting to make patient care better and more tailored to your unique biology. We’ve seen some multi-billion-dollar deals shining a light on the precision-medicine space recently, including

Illumina’s

[ticker: ILMN] acquisition of Grail and

Invitae’s

[NVTA] acquisition of ArcherDx.

Finally, how you pay for health care is changing. With the rise of deductibles increasingly bringing retail dynamics into what has historically been a B2B [business-to-business] industry, there has been robust deal activity, with about $1.5 billion worth of deals in this year’s third quarter for health plans and benefits.

The lack of health-care equity has become all too apparent during the Covid crisis. How can we move toward greater health-care equity, from an industry standpoint and as a society?

Health equity is the attainment of the highest level of health for all people. Achieving health equity requires valuing everyone equally with focused and ongoing societal efforts to address avoidable inequalities, historical and contemporary injustices, and the elimination of health and health-care inequities. It is both a societal issue and a health issue. I am optimistic that we can make improvements in health equity issues if we take conscious control of innovations in precision medicine. Why? Because while precision medicine might have only indirect impacts on issues such as access and costs, it transcends race by digitizing your biology and characterizing what makes you uniquely you.

Simply put, you have the biology to take advantage of a drug or other treatment, or you don’t. As such, more quantitative and discrete measures of disease and intervention opportunities make care more objective, less subjective, and more precisely aligned with the greatest likelihood of the best patient outcome, no matter who you are or where you come from.

Thanks, Dr. Kennedy.

Write to Lauren R. Rublin at [email protected]