1. Newsroom
  2. Innovation creates opportunities in healthcare
Menu
UBP in the press 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

Expertise

Impact investing - Contributing to a more sustainable future

What are the key features of impact investing?

Read more

Le news più lette

UBP in the press 18.12.2020

The drift towards thematic investing

Rankia Pro (12.2020) - Interview with Didier Chan-Voc-Chun, UBP’s Head of Multi-Management & Fund Research

UBP in the press 04.01.2021

The rise of UBP’s impact strategy

Funds Society (14.12.2020) - The first strategy in UBP's impact investing platform, Positive Impact Equity, has been going from strength to strength since its inception. Impact investing specialist Yvan Delaplace details the strategy’s investment process and broader sustainability trends in the sector.

UBP in the press 29.01.2021

Fixed income outlook: Positive environment for credit

Institutional Money (27.01.2021) - Despite an accelerating Covid-19 spread into year-end, risk markets concluded 2020 on a strong note as investors took confidence from the commencement of the vaccine rollout in the US and UK. 


Altro da leggere

UBP in the press 17.06.2021

Asset TV Fund Selector: Environmental Impact

Environmental impact investing in equities has moved from a niche strategy to the mainstream in recent years. But what exactly are environmental equities, their current valuations and the opportunities available in this sector?

UBP in the press 14.06.2021

Europe to lead the next leg of the global growth recovery

Institutional Money (04.06.2021) - Having trailed other regions in the recovery post-Covid, we now expect Europe to outperform as a number of key factors pivot in the continent’s favour. This bodes well for European credit and in particular higher-income segments, such as high yield and AT1s.

UBP in the press 19.05.2021

What lies ahead for bonds after this volatile start to the year?

Asset TV Masterclass (12.05.2021) - Mohammed Kazmi, Portfolio Manager & Macro-Strategist Global and Absolute Return Fixed Income at UBP, recently took part in an Asset TV broadcast, explaining why he maintains a constructive view on the fixed-income segment and outlining where he sees opportunities in the asset class.