Covid-19 aside, the main drivers of healthcare remain unchanged: there is accelerating demand for healthcare services as people are increasingly living longer. Governments around the world face budget pressures with the ever-growing demand for health services, this makes the need for more efficient health services a necessity and not an option.
Technology – the new insights in the biology of diseases and new treatment modalities - is also driving a tremendous wave of new medicines that offer a step change in patient outcomes. Just as exciting is the use of information age technology to make healthcare provision more efficient and improve quality.
What impact is technology having on the healthcare sector?
We are at the start of a transformational shift in knowledge and technology. The advancement of medical science in recent years has led to many new insights into disease biology which has driven a steady increase in innovative new medicines and associated diagnostics.
Medical technologies are contributing to novel therapeutic devices that are impacting a number of complex diseases, such has reducing the devastating impact of strokes. Digital health is already making healthcare provision more efficient and helping to drive better patient outcomes. It will serve to democratise the management of healthcare and well-being, providing individuals with the tools and data to take greater responsibility for their own personal health.
While these changes have been some time in the making, we are now at a positive inflection point where we will start to see genuine innovation and advancement across the sector. This will drive the returns of those companies at the forefront of innovation. This can be seen by a number of new, innovative drugs in areas such as oncology and gene therapy that are at the point of commercialisation. Meanwhile, the Covid-19 pandemic has accelerated the adoption of telehealth and digital services.
What are currently the most interesting sub-sectors in healthcare?
Sub-sectors most impacted by Covid-19 – hospitals, care providers and consumer healthcare (for example, hearing aids) are seeing a recovery in procedure/patient volume that is helping drive performance and we expect this will continue into next year. The rapid scale-up in Covid-19 vaccine production and the growing realisation that vaccinations will persist means there is still the potential for growth for companies involved in the production supply chain.
While sub-sectors such as biotech and healthcare technology have done well, there remain opportunities in the mid-term. There is a steady stream of exciting new biotech companies emerging from several geographies – these should benefit from either hitting key clinical trial milestones or as targets from acquisitive larger companies that need new products.
The lockdown period did shine a light on the value of telehealth and digital health services. This is being developed further into new tools to better manage chronic diseases such as diabetes using remote monitoring and artificial intelligence-enabled behavioural health products to improve outcomes. This trend is still relatively early in its adoption and therefore remains a source of mid- to long-term growth.
What about sustainability?
There are three forces that we believe have the potential to make healthcare a sustainable growth area for many years to come. The first factor is demographics. Increasing numbers of older people around the world is driving an accelerating demand for healthcare services.
The second factor is efficiency. The financial burden to national budgets and employer-sponsored health insurance is creating the necessary force for change.
The final critical factor is technology. There is a steady stream of novel and disruptive technologies in both medicines and technology/data that are providing new approaches to managing diseases. These are providing better patient outcomes in a more cost-effective manner.
The current Covid-19 crisis has just shone a large spotlight on the importance of these technologies. However, it’s the pace of rapid change across the sector that is now the most compelling reason for investors to consider the sector.
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