Morningstar Advisor - August/September 2010 - 44

Morningstar Conversation

high risk is, in the next five years, are we going to have an Alzheimer’s therapy? That would be explosive.
Acker: I agree with Kris on Human Genome

Five years ago, I don’t think China was among the top 20 global pharmaceutical markets. Today, it’s number five. In five years, it’ll be number two.
Andy Acker

Sciences and Benlysta. It’s a compelling, high unmet medical need. We’re seeing areas in immunology that are getting addressed with new therapies. We’re starting to learn how to harness the immune system to fight cancer. At a conference about three weeks ago, we saw the first immune-based therapy for metastatic melanoma. This was the first trial to show a survival advantage. The drug is called ipilimumab from Bristol-Myers. Another company that just got a drug approved is Dendreon, which has an immunotherapy. This is where you take cells from the body, activate them against the tumor, and then re-inject them back into the body. In the device space, one of the exciting areas is heart pumps. Heart failure affects 5 million people in the United States, and 500,000 people are in class four, the worst part of the disease. There are not enough heart transplants to go around, so hundreds of thousands of people die—with medical therapy you get a two-year survival rate in the 10% range. They started with artificial hearts, but this technology takes a long time to develop. Now, they have artificial heart pumps that they can install inside of a person’s heart. This is a huge growth area. They’re doing about 4,000 implants today. The pumps use a magnetic levitation system, so there’s only one moving part and no friction. Technically, they can last as long as the patient does. With these devices, they’re seeing two-year survival rates expanding to 60% to 70%. There are a couple of companies that dominate this space. We’re invested in one called HeartWare HTWR.

Areas of Innovation
Conover: When you invest in health care, you have to be cognizant of scientific innovations. Where are you seeing true innovation, and which stocks look best positioned to capture that innovation? Jenner: One of this country’s global assets is

That process takes 10 to 15 years. I’d also caution everybody that you have to be selective. In many cases, something positive occurs at a company, but it is offset by a negative, so they counteract one another. As a result, you’ve got a wash in the stock. What we’re looking for is a significant, innovative product that will have the most meaningful effect on the stock price. But to your specific question, I think that the hepatitis C area is one where we’re about to see some real improvement—where the cure rates for a life-threatening illness is going to go from about 50% of individuals to maybe 70% or 80%, and the duration of therapy may get cut in half. Human Genome Sciences HGSI—we’re a top shareholder— is about to bring forward the first new medicine, Benlysta, for lupus in 50 years. A question that holds the most reward but comes at very

our biomedical infrastructure. What I mean by that is our universities, our biotechnology companies, and the pharmaceutical industry— that whole gestalt is something that is trying to take scientific innovation and discovery and turn them into medicines and devices that are both more effective and safer that what we have now. I think you’ll hear from both of us an optimistic assessment, but I would caution everyone that it takes quite some time to play out because what we’re talking about is the natural rhythm of scientific innovation.

Potential of Emerging Markets
Conover: A lot of interest is starting to bubble up over emerging markets. Ten years ago, emerging markets didn’t contribute much

44 Morningstar Advisor August/September 2010



Morningstar Advisor - August/September 2010

Table of Contents for the Digital Edition of Morningstar Advisor - August/September 2010

Morningstar Advisor - August/September 2010
Contents
New on MorningstarAdvisor.com
Contributors
Letter From the Editor
What Aspects of Health-Care Reform Will Most Affect Your Clients?
Bonds, Chicago Style
Investment Briefs
Which Risk Are You Managing?
Eye on the Prize
Advisors Can’t Rely on Fidelity Alone
Health Care Gets Back to Business
An Opportune Time to Bet the Pharm
Reform’s Impact on Other Health-Care Industries
Top Takeover Targets in Biotech
After Reform, Narrow-Moat Firms Have Strong Prospects in Diagnostics
Health-Care Investing Alive and Well
Quest for Knowledge
Four Picks for the Present
How to Make Your Bond Portfolio Inflation-Resistant
Weeding Through the Energy Patch
Uncertainty and Value in Basic Materials
Stock Market Doom-Busters
Hunting Down European Debt-Dodgers
Mutual Fund Analyst Picks
50 Most Popular Equity ETFs
Undervalued Stocks With Wide Moats
VA Sales Slip a Bit in First Quarter
New at Morningstar
Star Wars, the Sequel
Morningstar Advisor - August/September 2010 - Morningstar Advisor - August/September 2010
Morningstar Advisor - August/September 2010 - Cover2
Morningstar Advisor - August/September 2010 - 1
Morningstar Advisor - August/September 2010 - 2
Morningstar Advisor - August/September 2010 - Contents
Morningstar Advisor - August/September 2010 - 4
Morningstar Advisor - August/September 2010 - 5
Morningstar Advisor - August/September 2010 - New on MorningstarAdvisor.com
Morningstar Advisor - August/September 2010 - 7
Morningstar Advisor - August/September 2010 - Contributors
Morningstar Advisor - August/September 2010 - Letter From the Editor
Morningstar Advisor - August/September 2010 - What Aspects of Health-Care Reform Will Most Affect Your Clients?
Morningstar Advisor - August/September 2010 - 11
Morningstar Advisor - August/September 2010 - Bonds, Chicago Style
Morningstar Advisor - August/September 2010 - 13
Morningstar Advisor - August/September 2010 - Investment Briefs
Morningstar Advisor - August/September 2010 - 15
Morningstar Advisor - August/September 2010 - Which Risk Are You Managing?
Morningstar Advisor - August/September 2010 - 17
Morningstar Advisor - August/September 2010 - 18
Morningstar Advisor - August/September 2010 - Eye on the Prize
Morningstar Advisor - August/September 2010 - 20
Morningstar Advisor - August/September 2010 - 21
Morningstar Advisor - August/September 2010 - Advisors Can’t Rely on Fidelity Alone
Morningstar Advisor - August/September 2010 - 23
Morningstar Advisor - August/September 2010 - 24
Morningstar Advisor - August/September 2010 - 25
Morningstar Advisor - August/September 2010 - 26
Morningstar Advisor - August/September 2010 - Health Care Gets Back to Business
Morningstar Advisor - August/September 2010 - An Opportune Time to Bet the Pharm
Morningstar Advisor - August/September 2010 - 29
Morningstar Advisor - August/September 2010 - Reform’s Impact on Other Health-Care Industries
Morningstar Advisor - August/September 2010 - 31
Morningstar Advisor - August/September 2010 - 32
Morningstar Advisor - August/September 2010 - Top Takeover Targets in Biotech
Morningstar Advisor - August/September 2010 - 34
Morningstar Advisor - August/September 2010 - 35
Morningstar Advisor - August/September 2010 - After Reform, Narrow-Moat Firms Have Strong Prospects in Diagnostics
Morningstar Advisor - August/September 2010 - 37
Morningstar Advisor - August/September 2010 - 38
Morningstar Advisor - August/September 2010 - 39
Morningstar Advisor - August/September 2010 - 40
Morningstar Advisor - August/September 2010 - Health-Care Investing Alive and Well
Morningstar Advisor - August/September 2010 - 42
Morningstar Advisor - August/September 2010 - 43
Morningstar Advisor - August/September 2010 - 44
Morningstar Advisor - August/September 2010 - 45
Morningstar Advisor - August/September 2010 - 46
Morningstar Advisor - August/September 2010 - 47
Morningstar Advisor - August/September 2010 - 48
Morningstar Advisor - August/September 2010 - Quest for Knowledge
Morningstar Advisor - August/September 2010 - 50
Morningstar Advisor - August/September 2010 - 51
Morningstar Advisor - August/September 2010 - Four Picks for the Present
Morningstar Advisor - August/September 2010 - 53
Morningstar Advisor - August/September 2010 - How to Make Your Bond Portfolio Inflation-Resistant
Morningstar Advisor - August/September 2010 - 55
Morningstar Advisor - August/September 2010 - 56
Morningstar Advisor - August/September 2010 - 57
Morningstar Advisor - August/September 2010 - Weeding Through the Energy Patch
Morningstar Advisor - August/September 2010 - 59
Morningstar Advisor - August/September 2010 - 60
Morningstar Advisor - August/September 2010 - Uncertainty and Value in Basic Materials
Morningstar Advisor - August/September 2010 - 62
Morningstar Advisor - August/September 2010 - 63
Morningstar Advisor - August/September 2010 - Stock Market Doom-Busters
Morningstar Advisor - August/September 2010 - 65
Morningstar Advisor - August/September 2010 - Hunting Down European Debt-Dodgers
Morningstar Advisor - August/September 2010 - 67
Morningstar Advisor - August/September 2010 - Mutual Fund Analyst Picks
Morningstar Advisor - August/September 2010 - 69
Morningstar Advisor - August/September 2010 - 70
Morningstar Advisor - August/September 2010 - 71
Morningstar Advisor - August/September 2010 - 50 Most Popular Equity ETFs
Morningstar Advisor - August/September 2010 - 73
Morningstar Advisor - August/September 2010 - Undervalued Stocks With Wide Moats
Morningstar Advisor - August/September 2010 - 75
Morningstar Advisor - August/September 2010 - VA Sales Slip a Bit in First Quarter
Morningstar Advisor - August/September 2010 - 77
Morningstar Advisor - August/September 2010 - 78
Morningstar Advisor - August/September 2010 - New at Morningstar
Morningstar Advisor - August/September 2010 - Star Wars, the Sequel
Morningstar Advisor - August/September 2010 - Cover3
Morningstar Advisor - August/September 2010 - Cover4
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