Aging Strains Healthcare System, Alzheimer's Disease Spurs $70 Billion Market

Overview

This in-depth industry research report by Morgan Stanley explores whether pharmaceutical innovation can mitigate the Alzheimer's Disease (AD) burden caused by population aging. The core conclusion is: While total US population remains largely stagnant, the sharp rise in the elderly population will transform AD from a clinical issue into massive pressure on healthcare spending and retirement systems. The report estimates the total US AD treatment market could reach $70 billion and builds an investment framework covering disease-modifying therapies (including anti-amyloid, anti-tau combined with Brain Shuttle delivery) and symptom control. The report emphasizes that Brain Shuttle (TfR) technology, receiving its first FDA approval in March 2026, represents a paradigm shift in CNS drug delivery, though efficacy ceilings in the AD field remain.

Core views

The report's core judgments span several levels. **Aging is a structural driver of healthcare spending.** The Congressional Budget Office (CBO) predicts that by 2099, the total US population will remain virtually unchanged (from 349 million to 349.1 million), but the child and working-age populations will continue to decline, while the 65+ elderly population will increase from 65.6 million to 106.5 million, rising from 18.8% to 30.5%. Since annual per-capita healthcare spending for the elderly (~$22,400) is 2.4 times that of the working-age population (~$9,150), age structure changes alone will raise healthcare spending as a % of GDP from 11.7% to ~13.1% (by 2050). AD patients incur even higher costs, with annual spending per elderly AD patient being 3.5 times that of non-AD patients ($28,700 vs $8,223). **AD is the main obstacle to extending healthy life expectancy.** Global life expectancy has approached a ceiling of ~80 years, while healthy life expectancy (years without severe disease impairment) remains at ~70 years, with the last decade primarily spent in an impaired state. AD is the largest driver of this "healthy life expectancy gap." Current estimates place US AD patients at ~7.1 million, projected to rise to ~9–12.7 million by 2050. Annual AD-related healthcare spending will increase from the current ~$205 billion to $400–418 billion by 2050, exceeding $1.2 trillion by 2099. **GLP-1 drugs cannot alleviate the AD burden.** Novo Nordisk's oral semaglutide failed to slow early AD progression in the EVOKE/EVOKE+ Phase III trials (n≈3,800): CDR-SB score differences were -0.06 and +0.15, respectively, neither statistically significant. This implies that metabolic weight-loss/diabetes drugs, currently dominating longevity discussions, are unlikely to alleviate end-stage neurodegenerative burdens. **Existing disease-modifying therapies have limited effects.** Approved Leqembi (lecanemab) and Kisunla (donanemab) confirm that clearing β-amyloid can slow cognitive decline (~0.45 CDR-SB points over 18 months, relative improvement of ~27% and ~one-third), but the effect is modest, and amyloid clearance appears to be nearing its limit, suggesting faster or deeper clearance may not yield better clinical outcomes. **Importance of Brain Shuttle technology.** Denali's Avalayah (tividenofusp alfa) received accelerated FDA approval in March 2026 for neurological manifestations of Hunter syndrome (MPS II), marking the first approved Brain Shuttle project. The report views this as effectively transforming brain bioavailability from a "barrier" into an "overcomable engineering problem." However, Brain Shuttles do not make the delivered drug itself more effective, so the debate centers on whether it brings a "paradigm shift or merely a delivery upgrade" in AD treatment. **Investment opportunities fall into two major categories.** Disease-modifying therapies (anti-amyloid/anti-tau, paired with Brain Shuttle delivery) target a ~$50 billion market; symptom control (psychiatric symptoms and agitation management) targets a ~$20 billion market. Specific stock ratings include bullish views on Denali (DNLI, Overweight, TP $35, 79.3% upside), Akeso (9926.HK, Overweight, TP HK$212, 126.5% upside), Novartis (NVS, Overweight, TP $170, 14.0% upside), and Lilly (LLY, Overweight, TP $1,344, 18.8% upside) in the disease-modifying/Brain Shuttle space; in symptom control, MapLight (MPLT, Overweight, TP $34, 21.4% upside) is favored, while Bristol Myers (BMY, Underweight, TP $40, 30.2% downside) is viewed with relative caution. **Intracellular tau protein is the next key target.** The report notes that tau pathology correlates more strongly with neuronal dysfunction, neurodegeneration, and cognitive decline than amyloid. Currently, only Biogen/Ionis' diranersen (ASO) and Arrowhead's ARO-MAPT (siRNA) target intracellular tau. Biogen's Phase II CELIA study missed its primary endpoint, but prespecified analyses showed slowed cognitive decline, prompting advancement to Phase III. Arrowhead's ARO-MAPT uses the TRiM CNS-SC Brain Shuttle platform, achieving ~75% tau knockdown in non-human primates, with healthy volunteer data expected in late Q3/early Q4 2026.

Analysis framework

The report employs a combined bottom-up and top-down analytical framework. **Top-down: Deriving healthcare spending pressure from demographic structures.** The report first uses CBO US population forecast data to analyze trends across age groups, calculating that the elderly growth rate far exceeds other groups. Combining this with CMS (Centers for Medicare & Medicaid Services) per-capita healthcare spending data, it projects that age structure changes alone will systematically raise healthcare spending as a % of GDP. Overlaying AD prevalence data (from the Alzheimer's Association), it estimates direct and indirect AD-related medical costs, thereby demonstrating the huge demand for the AD treatment market. **Bottom-up: Analysis of drug development pipelines.** The report reviews multiple mechanisms of action in AD treatment (amyloid, tau, neuroinflammation, cholinergic/neurotransmitter, metabolic/vascular, etc.), focusing on approved drugs (Leqembi, Kisunla), key investigational drugs (Trontinemab, COBENFY, Auvelity, etc.), and Brain Shuttle delivery platforms (TfR, IGF1R, etc.) regarding clinical data and development progress. Clear ratings, target prices, and risk analyses are provided for each company. **Scenario-based investment framework.** The core conclusion is "scenario-based rather than rating-only," arguing that a durable investment approach involves risk-adjusted allocation to both disease-modifying therapies (long-term upside) and symptom control (near-to-medium term bridge and hedge). This framework considers both the possibility of technological breakthroughs and the risk of clinical failure.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Demographic shifts (aging) drive long-term growth in healthcare services and drug demand.

  The core starting point of the report's analysis is "demand-side driven." Instead of assessing whether drug supply is sufficient, it first analyzes how the number of AD patients will significantly increase due to aging over the coming decades, thereby deriving the huge and continuously growing demand for AD treatments (whether disease-modifying or symptom control). This is a typical application of the supply-demand framework in the pharmaceutical industry.

• Company Fundamentals & Financial FrameworkEarnings Quality Analysis

  Analyzing the economic value and market pricing of drugs, not just sales revenue.

  The report points out that the economic value of AD treatments lies not only in their own sales revenue but also in delaying patients' transition from independent living to institutional care—since 82% of dementia healthcare costs are unpaid family care, with drugs accounting for only 0.3%. Even if a drug delays nursing home admission by only 12–18 months, its value to the healthcare system is multiples of its list price. This is an analytical perspective based on "value-based pricing" rather than "cost-plus."

• Industry/Sector Analysis FrameworkPenetration S-curve

  Diffusion pattern of technology maturity: Early breakthrough → Rapid penetration → Approaching ceiling.

  The report repeatedly mentions the "efficacy ceiling" of anti-amyloid therapies—amyloid clearance is near maximum, and further acceleration or deepening may not yield better clinical outcomes. This reflects S-curve thinking: early amyloid clearance brought significant improvements, but as technology approaches its limit, marginal returns diminish. Similarly, Brain Shuttle technology is considered to be in the early breakthrough (paradigm shift) stage, with future penetration likely to rise rapidly.

• Cycle & Prosperity FrameworkProsperity Inflection Point Analysis

  Judging nodes where industry or company fundamentals undergo major turning points.

  The report views Denali's Avalayah FDA approval in March 2026 as a "paradigm shift" or "prosperity inflection point" in Brain Shuttle technology—prior to this, the biggest bottleneck in CNS drug development was reaching therapeutic concentrations in the brain, and this approval proves the barrier is surmountable. The report thus argues that the risk in overall CNS drug development has shifted from "can the drug enter the brain" to "is the target effective."

• Industry/Sector Analysis FrameworkVolume-price decomposition

  Structured method decomposing market size into Patient Count × Treatment Rate × Price.

  The report's AD market size estimation is completed by building a "funnel": starting with 7.1 million US AD patients, excluding severe cases (20%), identifying mild+moderate patients (80%), filtering out those ineligible due to safety/comorbidities (only 30% eligible), and finally multiplying by average pricing to derive a ~$50 billion market space. This method allows readers to clearly see assumptions and compression factors at each stage.

• Company Fundamentals & Financial Framework

  Investment Multiple Comparison Method (based on implied multiples of unadjusted market space).

  In Exhibit 1, the report calculates the implied multiple (Market Cap / Market Size) for each company under "unadjusted market size (100% success probability and 100% market share)." For example, Denali has the highest multiple (15.15x) because its market cap ($3.3 billion) is small relative to its targeted disease-modifying market ($50 billion), implying high success and share probabilities; whereas Lilly has the lowest multiple (0.05x) due to its massive market cap, with AD success being only a small part of its business. This comparison helps investors understand the "option value" of different companies regarding the AD theme.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Denali Therapeutics (DNLI.O)

  Leader in Brain Shuttle delivery platform, first FDA-approved Brain Shuttle project (Avalayah), possesses a four-cargo platform, with two projects in AD: DNL921 (anti-amyloid) and DNL628 (anti-tau).

  Strengths

  First US Brain Shuttle approval validates technical feasibility; platform compatible with antibodies, enzymes, oligonucleotides, etc.; two projects in AD (amyloid and tau), diversifying risk.

  Weaknesses

  AD projects still in early stages (DNL921 in IND prep, DNL628 just entered Phase 1b); efficacy of Brain Shuttle in AD requires clinical validation.

  Comparison

  Compared to Alector (earlier ABC platform), Denali has first-mover advantage. Compared to Roche's Trontinemab (already in pivotal trials), Denali is slower in AD progress.

  Risks

  Not explicitly listed in the report.

• Roche Holding AG (ROPC.S)

  Key bellwether for AD disease-modifying therapy; Trontinemab is in key Phase III trial (TRONTIER, results readout in 2028).

  Strengths

  Trontinemab early data shows strong amyloid clearance capability and low ARIA-E rate (<5%), proving the advantage of Brain Shuttle delivery.

  Weaknesses

  Report assigns Equal-weight rating, target price below current price (CHF 295 vs CHF 327, 9.8% downside).

  Comparison

  Compared to Akeso's AK152 (China pipeline, recently received NMPA clinical approval).

  Risks

  Not explicitly listed in the report.

• Akeso (9926.HK)

  Important representative of China's AD pipeline; AK152 is a bispecific antibody (anti-amyloid + Brain Shuttle receptor), received NMPA clinical approval.

  Strengths

  Unique bispecific design; market highly attentive to its AD potential (TP HK$212, 126.5% upside).

  Weaknesses

  Receptor design not disclosed; clinical data still early.

  Comparison

  Compared to Roche's Trontinemab and approved Leqembi/Kisunla.

  Risks

  Not explicitly listed in the report.

• Arrowhead Pharmaceuticals (ARWR.O)

  One of the leaders in intracellular tau targeting; ARO-MAPT uses TRiM CNS-SC Brain Shuttle platform (subcutaneous administration), targeting tau mRNA.

  Strengths

  Achieved ~75% tau knockdown in non-human primates; subcutaneous regimen may be superior to intrathecal injection (diranersen); platform has potential to expand to other targets.

  Weaknesses

  ARO-MAPT still in early Phase I/IIa stage; healthy volunteer data not until late Q3/early Q4 2026.

  Comparison

  Compared to Biogen/Ionis' diranersen (ASO, intrathecal, Phase II CELIA data published but missed primary endpoint). Arrowhead's administration route may be more convenient.

  Risks

  Not explicitly listed in the report.

• Axsome Therapeutics (AXSM.O)

  Target in AD symptom control sector; Auvelity (AXS-05) for AD agitation, sNDA submitted, PDUFA date April 30, 2026.

  Strengths

  Novel mechanism non-antipsychotic (NMDA antagonist/sigma-1 receptor agonist, etc.), avoiding antipsychotic black box warning; efficacy validated in 3 positive Phase III trials.

  Weaknesses

  Targets only symptoms (agitation), does not alter disease course.

  Comparison

  Compared to Acadia's ACP-204 (for AD psychiatric symptoms) and MapLight's ML-007 (M1/M4 muscarinic agonist). Auvelity is further ahead in AD agitation, poised to be the first approved non-antipsychotic.

  Risks

  Not explicitly listed in the report.

• Bristol Myers Squibb Co (BMY.N)

  In AD symptom control sector; Cobenfy (KarXT, M1/M4 agonist + peripheral antagonist) conducting Phase III ADEPT trial for AD psychiatric symptoms.

  Strengths

  Already approved for schizophrenia, with mature safety data; unique mechanism may improve cognition.

  Weaknesses

  Report assigns Underweight rating (TP $40, 30.2% downside). ADEPT trial data delayed.

  Comparison

  Compared to MapLight's ML-007 (also based on muscarinic mechanism). Cobenfy as first-mover has more mature data and approved dosage.

  Risks

  Not explicitly listed in the report.

Key data

• US Total Population (2026→2050→2099)349M → 364M → 349.1MNear-zero growth (~0.0004% CAGR); the story is about structure, not scale.
• Elderly Population Share (2026→2099)18.8% → 30.5%The elderly are the only group with absolute numerical growth.
• Per Capita Healthcare Spending: Elderly vs Adults vs Children$22,400 vs $9,150 vs $4,415Elderly spend 2.4x adults, 5x children.
• Individual Healthcare Spending as % of GDP (2026→2050, age structure change only)11.7% → ~13.1%Even before introducing new drugs, age structure changes alone drive up healthcare spending.
• US AD Patient Count (Current→2050)~7.1M → ~9M (MS estimate) / ~12.7M (Alzheimer's Association)The report's baseline forecast is more conservative.
• Total AD-Related Healthcare Spending (2050→2099)$400–418B → >$1.2TLong-term forecast based on same assumptions.
• Dementia Healthcare Cost Composition: Unpaid Family Care / Drugs82% / 0.3%Of the ~$53,500 annual cost per patient in 2019, 82% was unpaid family care, drugs only 0.3%, indicating the burden lies beyond drugs.
• Annual Per Capita Healthcare Spending: AD Patients vs Non-AD Patients (Elderly)$28,700 vs $8,223 (~3.5x)Medicare spending up 175%, Medicaid spending up 2,120%
• GLP-1 EVOKE/EVOKE+ Phase III ResultsCDR-SB Difference: -0.06 (EVOKE) / +0.15 (EVOKE+)Neither statistically significant; terminated in November 2025.
• Leqembi 18-Month Cognitive Decline Slowing~0.45 CDR-SB points (~27% relative slowing)Effect is modest; amyloid clearance is near maximum.
• Trontinemab Early Data: Clearance Rate / ARIA-E~91% below positive threshold / ARIA-E <5%Delivery issues resolved; efficacy is the proof point.
• AD Clinical Trials (2000-2017): Trial Count / Failure Rate / Cumulative R&D Investment>300 / >99% / >$600BExplains why the AD burden remains unsolved and barriers for new entrants are high.
• ARO-MAPT Tau Knockdown in Non-Human Primates~75% peak knockdownSupports potential quarterly subcutaneous dosing regimen.

Impact & implications

The report believes that the intensifying AD burden due to population aging is a structural trend, bringing significant investment opportunities to the entire AD treatment ecosystem. Disease-modifying therapies (especially combined with Brain Shuttle delivery) are expected to achieve greater breakthroughs in the long term, while symptom control serves as a "bridge" to alleviate healthcare system pressure in the short term. For the healthcare system, any treatment delaying AD patients' transition to institutional care holds immense economic value. The report also notes that diagnostics (plasma p-Tau217 and other biomarkers), care provision (home care, memory care), and pension/insurance systems will also benefit from this trend.

Risks

• Efficacy of Brain Shuttle delivery in AD yet to be proven: Although Denali's Avalayah is approved in rare diseases, Brain Shuttles used for anti-amyloid antibodies may face the same biological ceiling as existing therapies.
• Amyloid clearance nearing maximum: Faster or deeper clearance may not translate to better clinical outcomes, limiting the upside for disease-modifying therapies.
• Tau-targeted treatments remain uncertain: Multiple anti-tau antibody projects have failed since 2021 (targeting extracellular tau); currently, only intracellular tau targeting (ASO/siRNA) shows preliminary hope, but efficacy is not yet confirmed in large clinical trials.
• Clinical trial risks: Historical failure rate of AD clinical trials exceeds 99% (2000-2017), presenting extremely high development barriers for new entrants.
• Regulatory and reimbursement risks: Drug reimbursement decisions and CMS coverage policy progress for amyloid PET scans are unpredictable.
• While demographic trends are certain, lower fertility or immigration rates could exacerbate elderly skew and fiscal drag.

What to watch

• 2026 Catalysts: Auvelity (AXSM) post-launch trajectory for AD agitation; Cobenfy (BMY) AD schizophrenia development updates; ACP-204 (ACAD) Phase II progress; ML-007 ZEPHYR (schizophrenia) top-line data (H2 2026).
• 2027 Catalysts: ML-007 VISTA (AD psychosis) top-line data (H2 2027); Denali (DNLI) DNL126 (Sanfilippo A) potential BLA/approval; Plasma p-Tau217 diagnostic adoption; Alector (ALEC) ABC platform clinical progress; Anti-amyloid maintenance dose data.
• 2028 Catalysts: Roche Trontinemab TRONTIER Phase III cognitive/functional results—may position disease modification ahead of symptom control.
• 2028-2029: Broader Brain Shuttle pipeline expansion (beyond amyloid); Oligonucleotide/tau delivery data (including Denali OTV:MAPT); Payer redesign of preventive treatment trials.
• Late Q2/Early Q4 (2026): Arrowhead ARO-MAPT healthy volunteer Phase I/IIa data—providing early evidence of TRiM CNS-SC platform translatability.
• July 12-15 (AAIC): Biogen diranersen Phase II CELIA detailed data—assessing scientific rationale for tau as a therapeutic target.