Thomas Globe
Premier Miton Global Sustainable Growth Fund co-manager
For information purposes only. The views and opinions expressed here are those of the author at the time of writing and can change; they may not represent the views of Premier Miton and should not be taken as statements of fact, nor should they be relied upon for making investment decisions.
Taking the pulse on the healthcare sector
Healthcare is a very broad industry area – it covers key areas such as: Pharmaceuticals, Biotechnology, Healthcare Providers and Services, as well as Medical Devices and Supplies each of which can be broken down into increasingly niche areas.
Each of these areas has varying degrees of direct impact on the end patient. For example, biotechnology focuses on developing products to treat a wide range of health issues from rare diseases to oncology. Healthcare providers and services includes health insurance providers, hospitals and facilities, as well as telemedicine companies. Medical devices and supplies are an area of significant innovation covering areas such as non-invasive surgery techniques and robotic assisted surgeries.
Positive effects of Covid
While Covid-19 undoubtedly put a significant strain across the healthcare sector, necessity became the mother of invention. The Covid pandemic was a catalyst for the acceleration of innovation across healthcare sectors, creating opportunities for investors today in 2023.
Healthcare providers and facilities had to make a multitude of changes to their processes and spaces to adjust to high covid demand but also the restrictions on movement and the result that had on access to care. Often these changes have meant going digital and adopting decentralised care methods to ensure patients get the appropriate treatment.
This was a bold yet necessary move, considering the medical field has been historically late to the game when it comes to digitization. This has resulted in a blurring of lines between ‘old model’ healthcare where there were clear degrees of separation within the service being provided to a new model with much stronger interlinking from prevention, access to advice, diagnosis, treatment and aftercare.
But these shifts are about more than having a zoom call with your GP rather than sitting in an overcrowded waiting room. Healthcare as an investable megatrend is framed by some incredibly compelling long terms fundamentals, but within that we see some strong innovation at work right now. Meaning the pace of change, adoption of technology and rate of progress are compelling.
Healthcare fundamentals – demographics and lifestyle
It is well documented that demographics and healthcare are inextricably linked. Aging populations and the prevalence of obesity globally are key long term fundamentals underpinning healthcare. While the good news is we are living longer on average and can make the most of our life for longer than earlier generations, the bad news is the growing population on our planet doesn’t always treat health as if it were a priority. The data makes stark reading.
According to ourworldindata.org, worldwide obesity has nearly tripled since 1975 with the highest prevalence in developed countries; in 2016 over two-thirds of the US was considered to be obese. Obesity is linked to more deaths worldwide than being underweight and globally there are more people who are obese than underweight. Looking at World Health Organisation (WHO) research, in 2019 an estimated 39 million children under the age of 5 years were overweight or obese. Once considered a high-income country problem, being overweight and obesity are now on the rise in low- and middle-income countries, particularly in urban settings.
An emerging spread
In the last twenty years, emerging economies have been boosted by globalisation and manufacturing shifting to Asia. The emergence of a sizeable, aspirational middle class has brought with it changes in lifestyle and an adoption of western consumption habits. People’s workdays are increasingly sedentary, entertainment has seen the same shift as an array of screens takes up hours of attention and easily accessible processed food can be provided on demand. All of which contribute to the rising prevalence of lifestyle diseases such as diabetes and high cholesterol which in turn cause an abundance of linked health issues.
Again, referencing World Health Organisation research, in Africa, the number of overweight children under 5 has increased by nearly 24% percent since 2000. Almost half of the children under 5 who were overweight or obese in 2019 lived in Asia. The trends seen in China and India, whilst behind the US and Europe, are following the same pattern. On top of this ageing populations in both developed and emerging markets, as well as increasing wealth and a rising middle class, translates into growing demand for healthcare particularly when considering that most of the lifetime healthcare spend occurs in the final years.
The market for longevity and wellness innovation is bringing more capital into the industry and speeding innovations. Meanwhile, the market for more efficient treatments is likely to receive serious focus as demand on health systems increases, budgets tighten and cost of care rises.
The change agents – what is driving innovation in healthcare?
At the most basic level unmet needs drives healthcare innovation whether that is through a better way to check blood glucose levels or improving patient outcomes following a knee replacement. For example, Dexcom makes continuous glucose monitors that offer real time checking of blood glucose, avoiding potentially inaccurate skin prick tests, allow remote monitoring and at some stage may be linked to insulin pumps. On the surgical side current holding Stryker has been one of the leading innovators in robotic assisted surgery, currently working on building out its Mako platform from use in knee and hip surgery to upper extremity and spinal. Greater degrees of accuracy during surgical procedures ultimately lead to better patient outcomes.
The wave of innovation coming through the sector is broad and deep, we see companies like current holding Daiichi Sankyo, whose drug Enhertu is supplying breakthroughs in the treatment of breast cancer and Certara whose bio-simulation software can help to accelerate drug approval, further blurring the lines between healthcare and technology. There are also companies such as Teledoc who garnered significant attention through the pandemic as they provide easy remote access to healthcare services.
The application of this med-tech is potentially global and realistically intergenerational. The World Health Organization notes that healthcare innovation raises healthcare’s productivity, efficiency, reliability, sustainability, and security. By investing in healthcare models that are non-traditional, the aim is to decrease operational costs for providers, making healthcare more affordable for patients – all over the world.
Improving healthcare availability and effectiveness
According to the WHO and World Bank at least half of the world’s population cannot obtain essential health services. Increasing affordability, effectiveness and availability of services therefore needs to be a priority for this sector.
Companies like Qiagen support the decentralisation of healthcare, which have the potential to support health provision in remote areas through their development of in situ medical testing for multiple pathogens, removing the need to test and send samples off to a lab and wait for results to return. Traditionally this may take days to return results, the sub 1 hour turnaround offered by current holding Qiagen has obvious benefits to patient survival.
There has also been a shift, accelerated by the pandemic, to out of hospital care. Whether that is remote access to a physician, surgeries taking place in ambulatory surgical centres rather than hospitals or treatment being done within a patient’s home, as is the case with Outset Medical where they offer in-home dialysis machines.
In terms of increasing effectiveness, the rise of data driven decisions should help improve patient outcomes. Adoption of technology in the industry can allow vast amounts of data to be collected, analysed, and then used to make better informed future decisions about patient care.
The future of healthcare
What is undeniable when looking at healthcare is the role that technology is having in the development and ongoing integration of the different areas of this key sector. Looking to the future we believe this innovation can and will build momentum.
What is exciting is that while the healthcare sector is still in the relatively early stages of accelerating technological integration, healthcare innovation means that the possibilities for ground-breaking improvements in the near future are staggering.
