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The Business of the Microbiome

Past performance does not predict future returns. You may get back less than you originally invested. Reference to specific securities is not intended as a recommendation to purchase or sell any investment.

In this episode of Global Infusions, Tom and Tom explore the business of the microbiome. They discuss the increasing evidence that the trillions of bacteria that live in us can influence our appetites, cancer, and even how we think. They also chat about dynamic beer pricing, succession in the Murdoch empire and how Kindle is dealing with a splurge of new works written by AI.

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TR: Hello, I’m Tom Record and I’m here with Tom Hosking. Welcome to Global Infusions, an investment podcast from the Liontrust Global Fundamental team that takes a long-term view of today's stories.


Last episode we chatted about the business of books from thieving scribes in ancient Egypt to mulched books paving roads and the diminishing choice of potential publishers. This episode we’re looking at the microbiome – the community of microorganisms that make a home on your skin, in your gut and generally help your health. If your taste buds are tickled or you have any questions for our next episode, please do send them in via your client contact or through the contact us link on the Liontrust website.


So sit back, grab a cup of tea, and remember that when we talk about individual companies we are not making a recommendation to buy or sell shares and that some of these companies may not be held across Liontrust’s global fund range.

TH: Tom, I know you’ve been interested in the microbiome for years, why don’t you kick off by explaining what it is?

TR: Well technically the microbiome is the genes of all the organisms that live inside us, and the microbiota are the bugs themselves. But microbiome has come to mean both of these…

TH: And we're talking about a lot of bugs aren't we?

TR: Yes, well, as you know each of us is made of cells – about 30 trillion or so. But this only tells part of the story. We each have about 38 trillion bacteria cells as well as fungi and viruses that live within and on us.

TH: So that’s more bacterial cells than human – about 1/3 more in fact.

TR: Exactly, and if you exclude your red blood cells whizzing around your veins, you have more than 6 times as many bacteria living on you as you do human cells making you up.

TH: Wow. So given there are so many of these bacteria, they must be an integral part of each of us?

TR: Yes, and the thing is that humans have evolved with bacteria living alongside us and we function better with them around. We’re not meant to live in a sterile environment… we just haven’t evolved that way.

TH: I suppose this opens up the question of whether the bacteria are part of what makes us? I.e. We’re not really human but some sort of symbiotic ecosystem?

TR: It’s a really good question, as there’s evidence that your microbiome can change your health and even how you think.  So it’s widely accepted that the microbiome can protect against disease.  There are studies that show it’s good for your immune system, your heart, weight, and there’s even evidence that it can protect against some kinds of cancer and neuro problems like anxiety and depression.

TH: So you mentioned they live within us, I assume this is mostly within our gut?

TR: Yes, the vast majority are in the 5m of gut that each of us has but the microbiome also lives on places like our skin. It’s with us from a very early age. In fact some experts point out that before birth, the mother’s microbiome changes so that children can pick it up.

TH: So this is why children who are born by caesarean section tend to have a higher incidence of asthma and type 1 diabetes. And this is increasingly important as global caesarean section rates have increased from 7% in 1990 to 21% today.

TR: True… and the interaction between breastmilk and your microbiome is fascinating as well.

TH: Go on…

TR: Some of the complex carbohydrates in breastmilk can’t actually be broken down by the baby, but instead the microbiome break it down into simpler food for the baby. And this probably encourages those good bacteria to grow as well and colonise the gut.

TH: So breastfeeding isn’t just about feeding the baby but also feeding the bacteria inside the baby.

TR: Yes exactly.

TH: So I’ve done some reading on this and one interesting species of bacteria that came up was called, wait while I glance down at my notes, bifidobacterium longum infantis

TR: A bit of a mouthful

TH: Yes, and that bacteria is now rare in the developed world but still very common in the developing world. And because children without it can’t digest the complex carbs in breast milk properly, they tend to have runny excrement, unlike in developing countries, where it’s firmer.

TR: So there are population as well as individual scale changes underway here?

TH: Yes, so in developing countries those good bacteria grow and colonise the gut and effectively crowd out any bad, or pathogenic, bacteria which can’t get a foothold.

TR: so your gut wraps itself in a protective film of good bacteria?

TH: More or less, yes!

TR: And these gut bacteria make all sorts of things, but among them are short chain fatty acids.

TH: OK, and what do these short chain fatty acids do?

TR: well I was reading in a British Medical Journal article that there’s evidence that these fatty acids can push cancer cells to kill themselves, can help regulate your glucose levels, and can help maintain the right oxygen level in your gut so that it works properly.

TH: That’s quite a list

TR: Yes! And there are more things from sorting out your cholesterol to appetite regulation, so they really are helpful to look after!

TH: Yes, sounds very important.

TR: And if you want to cultivate these good bacteria in your gut, one way to do this is to eat plenty of fibre or prebiotics. The suggestion is about 30g of fibre a day from a really varied range of vegetables.

TH: Now, Tom, you mentioned prebiotics.  They’re very different to probiotics…

TR: Yes – prebiotics are food for your microbiome to grow on – so things like fibre and inulin.

TH: Inulin?

TR: Yes – you find inulin in things like Chicory root and Jerusalem artichokes.  Now inulin is something you don’t digest yourself.  So it passes through to the bacteria in your gut which can digest it and thrive.

TH: So those are prebiotics, and probiotics are inoculations of bacteria that you can eat. From Actimel, to unpasteurised cheeses, and fermented foods like kefir, kimchee and my favourite, sauerkraut.

TR: Fermentation, in this context, is preparing food, or effectively cooking it with microbes. And this gives the body access to nutrients that otherwise wouldn’t be accessible to us. And traditionally it helped our ancestors preserve food.

TH: Fermented foods are very on trend at the moment aren’t they.

TR: They are and quite rightly so because actively eating bacteria can restore or reset your gut. So for example if you’re coming off a long course of antibiotics and need to restock your intestines with healthy bacteria.

TH: Speaking of resetting your gut, this seems like a good time to talk about FMT – we can’t talk about the microbiome without mentioning it.

TR: Do we really have to?

TH: Yes, I’m afraid so. Hopefully the listeners are following protocol by drinking a cup of tea rather than eating their breakfast at this very moment! FMT stands for Faecal Microbiota Transplant.

TR: So transporting gut bacteria from a healthy person to a sick person?

TH: Exactly. And the recent interest in the microbiome largely comes from the growing awareness of the health benefits of FMT. For example, it is currently mainly used to deal with infections of a bug called Clostridium difficile, or C. diff for short, where it is very effective.

TR: I heard about this – didn’t they have to stop the trials early because FMT was so effective?

TH: Yes, the patient group that were given antibiotics ONLY were doing so much worse that they decided it would have been unethical not to give everyone FMT immediately.

TR: Cool.  And now trials are underway testing FMT for a huge range of things from inflammatory bowel disease, liver disease and depression to name just a few.

TH: Yes, the therapy could become quite common in the future.

TR: So, dare I ask, how exactly do they transplant the bacteria?

TH: Well, there are three methods, broadly speaking. The first is via a long tube inserted into the nose of the patient that extends down into the gut.

TR: That doesn’t sound very comfortable.

TH: The second method is with a special version of a colonoscopy where the doctor is not just examining the intestine but depositing microbial samples. And the third is encapsulated versions of FMT but where the capsule has to be robust enough to get to the gut rather than be dissolved by stomach acid before it gets there.

TR: I understand that the last one is known colloquially as ‘crapsules’.

TH: Haha yes – there is a joint venture between the Swiss company Lonza and the Danish company Christian Hansen that is making them. And all these methods are certainly preferable to historic practices.

TR: Historic, so this isn’t a completely new idea then?

TH: No, not entirely. There is evidence that as early as the 4th century AD Chinese doctors started prescribing ‘yellow soup’ to treat patients with severe diarrhoea.

TR: Gosh what a euphemism! So the Chinese discovered it first, as with a lot of things!

TH: So it’s not just about having enough bacteria or the right bacteria, but also about having a diverse range of bacteria.

TR: Yes, there’s a correlation between the diversity of the bacteria in your gut and incidence of a huge range of diseases from arthritis, to eczema, diabetes and artery stiffness.

TH: So a diverse microbiome is good. And that leads us onto artificial sweeteners and emulsifiers.

TR: The sort of things that you find in processed foods…

TH: Yes, and although high intensity sweeteners are “generally recognised as safe” by regulators, there’s plenty of evidence that things like sucralose, saccharine and aspartame have a bad effect on the gut.

TR: So these are experiments on mice and rats.  And I know they’ve done the same with emulsifiers, which are found in almost all processed foods and have the same effect of decreasing gut diversity.

TH: There have been some really interesting research on humans as well. There was a landmark study in 2015 where researchers were trying to understand why colorectal cancer differs so much around the world.

TR: That's one of the most common cancers – the third most prevalent in the world I think.

TH: Yes that's right and the second leading cause of cancer death. One mystery is why incidence of it varies so much depending on where you live. For example, in rural Africa, there are less than 5 cases per 100k per year. Compare that to African Americans, who remember will have very similar genetics, the rate is 65 per 100k.

TR: Could this be just differences in detection?

TH: That's what I thought at first too but it turns out no, that doesn't justify the difference. The researchers investigated the effect of diet on 20 rural Africans and 20 African Americans. They conducted baseline tests before the experiment, colonoscopies and stool analysis. I won't go into details, but one example of the difference was that 40% of the African Americans had polyps in their intestines which are a known precursor to cancer. The rural Africans had zero.

TR: Interesting. The diets of those two groups must have been quite different- the African American one being more meat-based and with much more processed food.

TH: Indeed. Then they did a two-week diet swap, so African Americans eating loads of vegetables etc.

TR: And the rural Africans were eating burgers and chips?

TH: Yes that's right. Hopefully they didn't get addicted to it. They repeated the tests after just two weeks, and remarkably the rural Africans were already showing high rates of known carcinogens in the gut. And the African Americans’ rates had gone down and instead had higher levels of healthy things like butyrates.

TR: And butyrate is one of those short chain fatty acids that a healthy microbiome makes. It’s quite shocking how much difference a healthy diet makes. In the UK, young people are getting much higher rates of bowel cancer. So if you're a millennial your chance of getting bowel cancer is 4 times that of someone born in the 1960s.

TH: It is a growing problem, but a silver lining of this study is that changes in diet can be quickly reflected in your microbiome.

TR: And this isn’t only relevant to bowel cancers. There is a collection of conditions normally referred to as leaky gut syndrome where an unhealthy gut lining results in bacteria entering the blood stream that shouldn't be there. This can create cancers elsewhere in the body.

TH: Gosh, all the evidence does seem to point to the microbiome being a cornerstone of preventative medicine. It’s better and cheaper not to get ill in the first place, especially since drugs have such varied results on different people.

TR: That's the whole rationale behind the structural trend to personalised medicine. Through genomic analysis of you and your microbiome, you will be able to identify individual variations in biology and give that person the appropriate therapy, tailored to them.

TH: Yes we spend a lot of time discussing which companies will benefit from that trend. But it’s very rare to see enough thought about the microbiome being a source of that individual variation. For example, there was a very interesting study last year involving Keytruda, Merck's blockbuster drug.

TR: Blockbuster is truly apt in this context- It's the second biggest drug in the world by sales. It's the leading drug in a class of cancer treatments called, PDL1 checkpoint inhibitors. They use the patient's own immune system to fight cancer very effectively.

TH: That's the one. In this study the researchers acquired mice from two different laboratories to test the drug's effect on Melanoma. Despite the mice being genetically the same, tumours grew much more aggressively in mice from one particular lab. But, when the faeces from the other the second group were transplanted into the first group, the results were reversed.

TR: So the bacteria in the gut of one group of mice influenced how effective the drug was.

TH: Yes and the effect was surprisingly large.  The scientists managed to identify a specific bacteria that when transplanted into their gut, improved tumour control to the same degree as Keytruda, the wonder drug. I repeat- to the same degree!

TR: So a single strain of bacteria was as effective as the $20bn a year drug?!

TH: Yes it's astonishing isn't it. It is a mice study so it has to be taken with a pinch of salt but subsequent studies in humans have demonstrated that responders and non-responders to these types of immunotherapies have different microbiomes.

TR: It does make sense. Our view of the immune system is changing from a role of just defence to one that cooperates with the microbiome to shape our immune responses. And since our diet influences our microbiome, that must matter too.

TH: Agreed. It wouldn't be surprising to me if within a decade all major medicines come with a FMT component of some sort.

TR: Considerable effort is going into developing ways to edit the human genome but I wonder if editing the microbial genome, by adding or subtracting particular species, and thus the genes they carry is in principle far easier.

TH: That would make sense.

TR: Now, it’s not just humans that have a microbiome, Tom – I know you’ve done a lot of work on Novozymes, who are one of the champions of microbes.

TH: Yes, their core business is engineering enzymes and getting bacteria to make them, but they also work in a fascinating area coating seeds.

TR: So I assume they are coating seeds with specific bacteria, but what do these bacteria do?

TH: Well soil is full of microbes, you’ll find 50bn or so in a teaspoon of it. And some of these microbes have helpful properties like supporting nutrient uptake, root growth and disease resistance. So if you can find them and produce them at scale, then they have the potential to replace the chemicals that farmers around the world spray on their crops, whether it be fertilisers, pesticides or fungicides.

TR: So this is similar to the rhizobium bacteria that live in root nodules in legumes like peas and fix nitrogen from the air so that the plants can use it.

TH: Yes, it’s a similar idea and really demonstrates how both we and plants have all evolved to succeed in living with bacteria.

TR: On that note, shall we move onto the news. Tom, what have you got for us this week?

TH: The first news item from me is Britain's largest pub company, Stonegate, have introduced dynamic pricing for its drinks.

TR: Ah yes, I remember something similar at University – I think they called it a stock market bar with dynamic prices, when they needed to clear stock at the end of term. But this one got quite a bit of media attention because customers aren't happy about having to pay slightly more for their pint during busy trading times.

TH: Yeah, no one likes paying more do they, BUT people do like off-peak discounts. And it's the same thing in essence, but just a little bit more advanced.

TR: That's true, we are just more used to seeing it in industries like airlines and hotels. I suppose as technology improves, it is going to be cost effective for more and more businesses to implement. What we’ve seen with the travel industry is that’s its more profitable to adjust prices in line with demand.

TH: Agreed. And for consumers, what this means is a transfer of spending power away from those who have inflexible schedules and towards those who can be more flexible with their time.

TR: Ok so when I next want to go to the pub on a Friday evening, which pubs should I be avoiding again?

TH: Slug and Lettuce and Be at One are the best-known chains that Stonegate manage themselves. But most of the estate are tenanted pubs, that they acquired when they bought the old Enterprise Inns business in 2019. So no brand name for those.

TR: Well, I thought I’d start with some mind boggling stats from the Congressional Budget Office in the US about the public debt in the US.

TH: So I know this has been growing and is now some huge number... was it $30tn?

TR: Around that, it’s $33tn… but that’s tough to conceptualise, so what $33trn means is $250k of government debt for each and every household in the US.

TH: Quite substantial!

TR: And the interest bill is over $2bn… per day.  No surprise that the base case is for US debt to increase by $5bn a day over the next decade.

TH: Those are some exceptional and scary numbers!

TR: OK, Tom, where do you want to go next?

TH: Well I thought we should mention the news that Rupert Murdoch has stepped down as Chairman of Fox and News Corp at the grand old age of 92 and named his eldest son, Lachlan, as his successor.

TR: So our Business of Succession episode a couple of months ago was well timed!

TH: Yes exactly! I read that when Murdoch was first asked in 1994 about his succession planning, he said 'I expect to do it about 30 years'. And it turns out he stuck to his word, almost, 29 years later.

TR: That is eerily close. It does feel like the end of an era. And this is the second succession story he has been part of because he himself succeeded his father way back in 1952 when he took over The News, an Adelaide-based tabloid.

TH: Yes and then then he started building an empire, at first by buying UK newspapers. I saw a play about it in the West End several years ago called 'Ink'. It was pretty gripping and told the story of him buying The News of the World and The Sun.

TR: He’s been pretty ruthless. It turned out that those acquisitions were just the start with later purchases of The Times, the New York Post, Wall Street Journal, 20th Century Fox and founding Sky in 1989.

TH: They also own Harper Collins, the book publisher, which I didn't realise!

TR: It is going to be interesting to see how Lachlan manages everything and there is still a question mark over what happens when Rupert Murdoch dies right?

TH: Yes – so when that happens, the four eldest children will again control over the family trust which controls 40% of the voting shares in both Fox and News Corp.

TR: So the other siblings could form alliances and outvote Lachlan.

TH: Yes exactly. It could get very interesting. And it reminds me I really should watch this HBO series that everyone else has seen and says is so good!

TR: Yes me too. Moving on… Have you heard of the Bajau people?

TH: No, I haven’t... Bajau... where could that be?... I’m sorry I have no idea!

TR: Well, this was an article about adaptation and the Bajau live in the Philippines and Indonesia and spend a huge amount of time on and under the sea, fishing. And they are amazing freedivers

TH: Not something I’ve ever been tempted to do. But there are some amazing documentaries on free diving.

TR: I’m not tempted either! Well, the Bajau happily free dive 70m down or more, and many can hold their breath for 10 to 15 minutes. And a paper from the journal Cell, suggests that many of the divers have spleens that are 50% larger than expected and they use these to effectively store oxygen for those dives.

TH: And is there a genetic component to this?

TR: Yes, the scientists identified a variant of a gene called PDE10A that correlates with the bigger spleen.

TH: I think I read something similar a while ago tracing gene mutations that allows the people of Tibet to live more easily in high altitude.

TR: Exactly – another example of the wonderful variety of the human species!

TH: OK, my last story is about something you may have seen in the press recently – the giant hack of MGM, the US casino operator.

TR: Yes, I saw this. They had to stop the slot machines, and thousands of room key cards stopped working. Some sort of ransomware attack I think, but how did they get in?

TH: Well, it looks like a call to the helpdesk by a cyber criminal gang called scattered spider.  They’d worked through social media to build the profile of an employee and then used social engineering to get into one of the systems.

TR: And from there all the systems trusted each other?

TH: Exactly – it’s the opposite of how Fortinet describes the systems that it secures… the zero trust approach expects that they will be hacked at some stage and so makes them more secure and may have limited the impact of this attack.

TR: Interesting… For my final story I’d like to touch on the intersection of AI, publishing and Amazon.

TH: Very topical!

TR: Well, Kindle, which is owned by Amazon has just changed its rules so that when you self publish a book through Kindle Direct Publishing, you now have to tag it as AI or human generated.

TH: Sometimes it’s pretty difficult to tell the difference!

TR: Exactly, and Amazon was having an issue as a wave of new books were coming through and there is still that limbo aspect of whether an AI trained on copyrighted works is inspired by them, r copying them.

TH: So Amazon are toeing a careful line.

TR: Exactly. Thank you for listening to Global Infusions – a podcast that believes that the best discussions are had over tea and cake. We hope you've enjoyed your cuppa and our thoughts on the microbiome. Please do subscribe through Apple or Spotify and with that we wish you goodbye!

TH: Goodbye!

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This should not be construed as advice for investment in any product or security mentioned, an offer to buy or sell units/shares of Funds mentioned, or a solicitation to purchase securities in any company or investment product. Examples of stocks are provided for general information only to demonstrate our investment philosophy. The investment being promoted is for units in a fund, not directly in the underlying assets. It contains information and analysis that is believed to be accurate at the time of publication, but is subject to change without notice. Whilst care has been taken in compiling the content of this document, no representation or warranty, express or implied, is made by Liontrust as to its accuracy or completeness, including for external sources (which may have been used) which have not been verified. It should not be copied, forwarded, reproduced, divulged or otherwise distributed in any form whether by way of fax, email, oral or otherwise, in whole or in part without the express and prior written consent of Liontrust. Always research your own investments and if you are not a professional investor please consult a regulated financial adviser regarding the suitability of such an investment for you and your personal circumstances. 

Tom Hosking
Tom Hosking
Tom Hosking is a Co-Fund Manager of the International Equity, Global Balanced, Global Alpha and Global Smaller Companies funds. Tom joined Liontrust in April 2022 as part of the acquisition of Majedie Asset Management, where he was an Equity Analyst and Co-Fund Manager for eight years and is a member of the Liontrust Global Fundamental team.

Tom holds a Master of Arts degree in Economics from Corpus Christi College, Cambridge and is a CFA Charterholder.

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