1. Newsroom
  2. Innovation creates opportunities in healthcare
Menu
UBP in der Presse 12.12.2018

Innovation creates opportunities in healthcare

Innovation creates opportunities in healthcare

Bilan (13.12.2018) - The secular trends in healthcare – ageing populations, emerging market demand, and expanding basic health insurance – remain well entrenched. However, investors should shift their focus towards differentiated innovators in the healthcare space via mid-sized biotech and medical technology (like Swiss companies Lonza and Galapagos, for example), and healthcare-focused IT companies (such as Teleadoc).


The global healthcare market continues to expand rapidly, driven by ageing populations, emerging market demand and expanding basic health insurance, which will continue to drive demand for best-in-class and highly efficient treatment options: worldwide healthcare spending is projected to increase at an annual rate of 4.1% in 2017–2021, up from just 1.3% in 2012–2016, and combined healthcare spending in the world’s major regions is expected to reach USD 8.7 trillion by 2020, up from USD 7 trillion in 2015.

Industry reports find that, in aggregate, average price increases have contributed to more than 60% of the over 20% growth in US sales of the 45 main pharmaceutical products over the past three years. We expect the benefits of these price rises to continue to wane even as the growth in demand for those products slows further. Partially driving this is a commitment on the part of many pharmaceutical companies not to increase drug prices through 2018 in response to US political pressure.

Without these price increases driving growth, investors need to shift their focus to innovation as their key source of return. In particular, therapeutic and technological innovation, with the potential to disrupt the existing USD 1 trillion annual biopharmaceutical market, is a key opportunity: there has been a notable increase in the number of approvals for new drugs and R&D budgets focused on areas of unmet need are growing. We have identified six growth areas in the current innovation cycle: immuno-oncology, gene-therapy, rare diseases, obesity, neurological diseases, and healthcare IT.

For investors, simply focusing on the world’s largest pharmaceutical companies to participate in these growth trends is no longer a viable strategy. Bernstein Research highlights that almost 50% of blockbuster drugs – those with peak sales exceeding USD 1 billion – now emerge from smaller and mid-sized biotech and medtech companies, which in turn need investors in order to pivot their focus.

Beyond this, in light of the high level of inefficiency in the global healthcare market, we see an opportunity in healthcare IT. Tech consultancy Gartner estimates that healthcare providers in the US will have spent approximately USD 42 billion on IT services in 2017, or just over 1% of domestic US healthcare expenditure. If the average spend on IT services across healthcare companies were to reach 3.3% (comparable to non-healthcare companies in corporate America), healthcare IT providers could see an incremental revenue opportunity of over USD 70 billion.

Though the healthcare sector should retain several of the secular growth drivers seen in previous decades, a shift in focus from safe, dividend-paying names to the interplay of multiple, fast-changing factors is needed to continue to participate in ongoing innovation and efficiency in the provision of healthcare.

Investment expertise

Boldt-Robin_150x150.jpg

Robin Boldt
Global Healthcare Equity Analyst

Convertible Bonds

Convertible bonds add convexity to your portfolio

Find out why convexity works in the short-to-long term

Watch the video

Meistgelesene News

UBP in der Presse 17.04.2020

Smug Money podcast: Is impact investing the answer?

Good With Money (25.03.2020) – Our Co-Manager of the Positive Impact Equity strategy Rupert Welchman discusses the importance of impact investing in the current environment.

UBP in der Presse 23.01.2020

UBP, die remontada

Sphere (01.2020) - 2018 erreichte die Union Bancaire Privée praktisch wieder das 2007 verzeichnete Kundenvermöge, das aufgrund der Krise auf 65 Milliarden Ende 2010 gesunken war. Seither ist es der Bank gelungen, ihre Grösse zu verdoppeln und sich neu aufzustellen, um auf Wachstumskurs zu bleiben.

UBP in der Presse 03.03.2020

Diskretionäres Portfolio-management kombiniert Know-how und Flexibilität

Le Temps (02.03.2020) - Es ist mittlerweile eine Selbstverständlichkeit, dass sich die institutionelle Verwaltung und das diskretionäre Portfoliomanagement gemeinsamer Entscheidungshilfen und Verwaltungsmethoden bedienen.

Auch lesenswert

UBP in der Presse 28.05.2020

Covid-19 crisis: CDS indices have passed their crash test

Handelszeitung (15.05.2020) - The Covid-19 crisis has caused major upheaval for equity and bond positions within portfolios.

UBP in der Presse 27.05.2020

COVID-19 and Sustainable Investing

The Good Investment Review (04.2020) - Common allies or Incompatible bed fellows

UBP in der Presse 26.05.2020

Asset TV: Cautious optimism in fixed income

Mohammed Kazmi, Portfolio Manager & Macro-Strategist Global and Absolute Return Fixed Income at UBP, recently participated in an Asset TV Masterclass discussing which areas of the bond market offer opportunities to investors.