Spotlight on: Healthcare
This month our spotlight focuses on healthcare, where we have been long-term investors. Changing global demographics put upward pressures on demand as people are living longer and emerging markets develop. This growing demand creates opportunities for healthcare companies for their products, particularly those that can offer governments efficiencies and cost savings, as healthcare spending continues to grow as a proportion of government spending.
It is not all about drugs and medicines, so while pharmaceuticals are a large part of the healthcare opportunity set, other areas such as medical devices and healthcare services are important. Medical devices can help improve treatment effectiveness or be used as a more efficient solution for some issues.
Healthcare services include areas such as distribution, facilities (including the provision of hospitals and doctors’ surgeries) and managed care (including care homes for elderly or vulnerable patients).
Technology is increasingly influencing the winners and losers within the sector. This does not just include advances in medicines, such as the speed of the various vaccination programmes, but also the increased role of analytics and big data. This can help demonstrate the effectiveness of treatments, enabling a cost/benefit analysis of products and providing greater insight into what provides the best outcomes. Technology is increasingly being used for procurement by governments or the large healthcare providers in the US.
Finally, a few companies have become a lot higher profile following Covid-19 vaccine development. While this is a product that is currently in huge demand, vaccine makers may not make much profit from this area. Both the Oxford/AstraZeneca and Johnson & Johnson have committed to a not-for-profit approach for the duration of the pandemic. Others, such as Moderna and the BioNTech/Pfizer, have a for-profit model and while these will be among their best-selling products this year, they are still a small part of these global businesses.
We have been positive on healthcare for a long time and continue to see great potential from this theme. This is not just from drugs, but from medical devices and increasing focus on providing more effective care. We are not trying to buy vaccine producers, which we do not see as hugely profitable, preferring to focus on the long-term demographic drivers of the asset class.
