Baillie Gifford US Growth’s (USA) interim results to 30 November 2020 brought share price and NAV returns of 50.8% and 53.8%. This compares with a total return of 11.1% for the S&P 500 index (in sterling terms).
Some of the highlights from the period include:
- Moderna, held by USA since 2018, is one of the biotechnology companies which has been at the forefront of coronavirus vaccine development.
- In the energy sector, there’s been an acceleration in the shift towards electric vehicles.
- SpaceX, a private company investment, has been innovating at a breath-taking pace.
- Kirsty Gibson will replace Helen Xiong as co-manager alongside Gary Robinson.
‘Moderna held since its IPO in 2018’
“After a long and bleak year, we have entered 2021 with light at the end of the tunnel. Countries around the world are starting to vaccinate their populations. The number of people whose immune systems are primed to fight coronavirus is growing each day. We must not get complacent, and there is still a long road ahead, but there is a chance that we are now at the beginning of the end of the pandemic. We have science to thank for this. Vaccine development has traditionally taken years. There are many infectious diseases where there is still no vaccine available (e.g. HIV). The coronavirus vaccines have been developed in little over a year. Importantly, these vaccines are highly efficacious. It has been a huge effort which has required co-ordination amongst many parties. As well as capital and will, modern science has been an important catalyst for this breakthrough. One of the biotechnology companies which has been at the forefront of this development is Moderna. We have held it in the Trust since its IPO in 2018. The coronavirus vaccine is Moderna’s first commercial product. Its approval has important read-across for Moderna’s drug development platform more broadly
For decades drug discovery has largely been a process of trial and error. Our understanding of disease pathways has been relatively limited. Even in cases where diseases have been well understood we have had few tools with which to intervene. This has led to low success rates. Furthermore, in the traditional drug development model outcomes are independent of one another. Success with one drug tells you nothing about the probability of success with the next. But we may be entering a new era for drug development. One of true platforms, where success begets success. A cohort of biotechnology companies are emerging which are built upon foundational technologies which may be reusable across multiple diseases and disease categories. We think Moderna could be one such company.
Moderna makes drugs based on mRNA. mRNA is the intermediary molecule between our DNA, the blueprint of our body, and proteins, the functional units of our body. DNA makes RNA, and RNA makes protein. mRNA is an exciting drug candidate because, just like our DNA, it is ‘digital’ in nature. It is comprised of just four distinct building blocks, called bases. These bases can be combined in sequence to form long strings of mRNA code. These strings can then be delivered into cells to produce almost any chosen protein, human or non-human – for example, the coronavirus spike protein. In other words, mRNA enables us to programme cells.
Moderna’s success has not come easy. The work on coronavirus this year is the tip of the iceberg. The company has been investing in its mRNA platform for over a decade. It has had to overcome challenges with drug stability, delivery, and expression. However, now that these challenges have been solved in coronavirus, the learnings ought to be transferrable to the next vaccine that Moderna develops. This does not guarantee success by any means, but it makes the chances higher. Once Moderna has a DNA sequence of a protein to work on, it can be up and running with clinical trials in a matter of weeks. We are moving from a world of spaghetti at the wall drug development to something more akin to industrial manufacturing.
These developments would not have been possible without commensurate progress in our understanding of the molecular basis of disease. Techniques like low-cost whole-genome sequencing, which was pioneered by portfolio holding Illumina, have helped build our knowledge of the DNA that serves as the blueprint of life. More recently, Google’s AI division DeepMind achieved a breakthrough in the field of protein folding. By using an AI-powered programme called AlphaFold, DeepMind was able to predict the 3D structure of a protein to a high degree of accuracy by just looking at the protein’s corresponding DNA sequence. This problem has vexed scientists for half a century. Only a tiny fraction of protein structures have been solved. DeepMind achieved what experts thought would take another decade in two years. This breakthrough has the potential to drive a step-change in our understanding of biology.”
‘2020 was the year that America sent astronauts to the space station again’
“Healthcare is not the only sector which has seen major breakthroughs this year. In the energy sector, there has been an acceleration in the shift towards electric vehicles. Alternative energy sources such as solar have continued their march down the cost curve. Increasingly, they are competitive with carbon-based fuels. They are only going to get cheaper from here. And energy storage costs are falling too. At its recent battery day, Tesla mapped out a path to a further halving in battery costs. The way we produce, store, and consume energy is changing rapidly. For the better. The end of carbon is getting closer.
And then there is space. SpaceX has been innovating at a breath-taking pace. 2020 was the year that America sent astronauts to the space station again. SpaceX’s crewed mission was a first for a private company. Starlink, SpaceX’s satellite-based high-speed broadband service is up and running in beta, with over 900 satellites orbiting the earth delivering internet to users. And in Texas, SpaceX has been rapidly developing its Starship rocket, the vehicle it hopes will take people back to the Moon and then on to Mars.”
USA: Moderna a major success story for Baillie Gifford US Growth