The Health Sciences Revolution

Just as the Industrial Revolution was the driving force for the economic and social developments that shaped the 20th century, the Health Sciences Revolution, in our view, will define the 21st century. Fueling this revolution is the combined momentum of aging populations and scientific innovation, which have led to a "coming of age" for the biotechnology sector.

Aging Populations and Rising Expenditures

Demographic trends are at work that will likely push health care demand steadily upward. In 1996, the oldest of the "baby boomers" turned 50. As this generation ages, its demand for health care and, correspondingly, health care expenditures, may escalate dramatically. Between the years 2000 and 2025 the percentage of the U.S. population over 65 is projected to increase by 50%. As a result of these demographic trends, the demand for healthcare goods and services is escalating. Health care now accounts for over 15% of the U.S. Gross Domestic Product, up from under 6% in 1965.

Accelerating Rate of Medical Breakthroughs

The discovery of the structure of DNA and the cracking of the genetic code are perhaps the most notable recent breakthroughs. Not only have they produced exciting new therapies that underpin the current revolution in molecular medicine, they have opened new research frontiers that continue to transform the health sciences. We believe that new "blockbuster" drugs are in development all over the world. Within the next decade, the health sciences industry is likely to make important progress in treating diseases such as cancer, Alzheimer's and diabetes. The companies engaged in the pursuit of tomorrow's innovations, and those who invest in them, have the potential to profit handsomely.

The combination of demographics-driven demand for better healthcare and innovation-driven supply of new therapeutics has led to a "coming of age" of the health sciences industry, as demonstrated by the increasing number of profitable biotechnology companies. In 1986, Genentech was the only biotechnology company which had achieved sustained profitability. As of today, over 65 biotechnology companies (including those acquired by other firms) have achieved profitability. OrbiMed estimates the number could grow to over 100 by 2009.

The Health Sciences Universe

The health sciences universe includes companies principally engaged in the development, production, or distribution of products and services related to health care.

Biotechnology

Traditionally, biotechnology companies were those producing therapeutic drugs using recombinant and molecular biology and rational drug design platforms. More generally, the term has been applied to small companies engaged in drug discovery using any methods, including standard chemistry.

Pharmaceuticals

Companies involved in large-scale, global discovery and development of innovative prescription drugs and diagnostics, over-the-counter products, delivery systems, nutrition, animal health and sometimes chemical and agricultural products.

Diagnostics

Companies that develop or maintain sophisticated diagnostic equipment such as CAT scanners and MRI, as well as urological and serological assays.

Medical Devices

Companies engaged in the manufacture of inpatient and outpatient medical, dental and surgical devices, ranging from kidney dialysis equipment to cardiovascular stents and orthopedics.