We recently had the opportunity to talk to Brad Loncar, CEO of Loncar Investments. He is a top biotech investor and just launched a new ETF; the Loncar Cancer Immunotherapy ETF (CNCR ) tracks the performance of biotech equities. The primary business of the equities in this ETF is finding treatments for cancer through immunotherapy.
ETF Database (ETFdb): What inspired you to create a unique ETF that invests in pharmaceutical and growth-oriented biotechnology firms focused on improving cancer treatments?
Brad Loncar (BL): In my opinion as a biotech investor, immunotherapy has the potential to fundamentally change how many, if not most, cancers are treated in the future. This is going to have a big impact on society over time, and so I thought it was worthwhile to create an index that specifically focuses on it. We tend to think of biotechnology as one thing, but there are areas of biotech that are more disruptive than others. Cancer immunotherapy is at the forefront of biotech innovation and I wanted to highlight that.
ETFdb: The index was constructed by you, a top biotech investor. What is the methodology by which the securities in the index were selected?
BL: I’m not a biologist, but I have been a professional biotech investor and voice in the industry for nearly ten years. I have also put together a committee of advisors who oversee the index and have expertise in biotechnology. The index was designed to capture contributions from companies both large and small that are leading in this effort. First, seven top large pharmaceutical companies who are working on immunotherapy are chosen. They are selected both for their strategic focus on immunotherapy and their leadership role in a specific type of immunotherapy. Many of these companies, like Bristol-Myers Squibb and Merck, are already bringing immunotherapy drugs to market now. Next, the top 23 growth biotechnology companies in immunotherapy by market capitalization are added. These smaller companies are the ones working on exciting second and third generation technologies that will begin showing up on the market in a couple of years.
ETFdb: The FAQ section on loncarindex.com, other health care journals, and you yourself have stated that immunotherapy is expected to become the foundational treatment for cancer disease over the next ten years. Why is this your view?
BL: Already a handful of immunotherapy drugs have been approved by FDA for types of prostate cancer, leukemia, melanoma, and lung cancer. What is really interesting though is the wave of clinical trial results that is coming soon. The government keeps a registry of clinical trials on a website called clinicaltrials.gov, and currently one-half of new cancer trials have at least some sort of immunotherapy component to them. That is significant, and what it tells you is that these immunotherapy drugs will be used in combination with almost everything. They will be the foundation of care going forward.
ETFdb: So it seems that immunotherapy is a game-changer in cancer research. Do you believe it’s picking up momentum and interest in the scientific community?
BL: The journal Science named cancer immunotherapy as its “Breakthrough of the Year” in 2013 and the field has been off to the races ever since. You get a good sense of that by talking with researchers at medical and scientific meetings like the American Society of Clinical Oncology annual meeting (the largest cancer meeting in the world, which is held at the end of May in Chicago). Immunotherapy has been a focus of those types of things for the past few years. In fact, there are now multiple meetings throughout the year devoted entirely to immunotherapy, which tells you how far the field has come and what a focus it now is for the research community.
ETFdb: Cancer is an extremely complex disease. Do you believe biologists are getting closer to cures for certain kinds of cancers? And do you believe we’ll ever see the day when all cancers are treatable and/or curable?
BL: Often cancer is talked about as if it is one disease, but the reality is that there are more than 200 different types of cancers. Some are more treatable than others, so sadly it is not realistic to say that all cancers will be treatable and curable in the future. However, great strides have been made. The five-year survival rate across all types of cancer is up 39% since 2000. Immunotherapy is playing a large role. For example, it has revolutionized the treatment of late-stage melanoma, which previously was one of the most difficult types of cancers to treat. I expect it to do the same with others over the coming years. A cure might not be a realistic goal for some types of cancers, but turning them into more of a chronic disease sure is.
ETFdb: What type of investor should invest in the Cancer Immunotherapy ETF, especially since immunotherapy is expected to be applicable over the next ten years vs. surgery, chemotherapy, and radiation as the most common types of cancer treatment?
BL: I can’t give specific investment advice, because everyone’s individual circumstance is different. However, what I can say in my own experience as a biotech investor is that you need to be diversified if you are going to invest in this sector. The way to do well in biotech is to spot a big trend and place enough bets to make sure you have exposure to the winners. That is exactly the opportunity that cancer immunotherapy presents. If cancer immunotherapy does in fact become the foundation of care over the next ten years, that means it will deliver a lot of value to patients and the system and therefore could be a promising area to invest. I am trying to help people think about investing in the theme itself and not individual stocks.
ETFdb: Do you think there’s an advantage from an investment standpoint to invest in an immunotherapy ETF vs. other more broad biotech ETFs?
BL: The broad biotech ETFs, in my opinion, are kind of a letdown because they expose you to many different business models within biotech that are vastly different. Some of these are high-growth areas while others are low growth, and some represent a high degree of R&D innovation while others do not. The Cancer Immunotherapy Index was created to track what I think is the area of biotechnology with the most interesting science right now, and the highest growth potential.