Exposure to the healthcare sector and to our next generation medicine theme has been core to our investment ethos for a number of years for two key reasons – demographics and innovation.
With over 8 billion people on the planet today, there are estimates that the global population aged over 60 will double from c.1 billion today to 2 billion in 2050. At this point, one in six people will be over the age of 65. With elderly cohorts spending three times the amount on healthcare and four times the amount on medicines versus younger cohorts, this provides structural growth in demand as the global population ages.
Ageing populations present complex healthcare challenges and healthcare systems need to adapt and evolve to enable people to live longer and healthier lives, particularly when over 50% of deaths come from either cardiovascular disease or cancer. This requires an evolution of healthcare systems being built around treating acute conditions and being reactive to a model focused on preventative care and early diagnosis. We need to move from a model where care or drugs are issued once a condition has been identified to one where people remain healthy for as long as possible. Keeping the workforce healthier for longer should also support a more productive and efficient global economy.
“We are also seeing breakthroughs in disease categories such as Alzheimer’s and are early in the opportunity in medicines to address obesity, which is linked to numerous other comorbidities such as diabetes and hypertension.”
Thankfully, we believe we are in the early stages of an innovation gold rush in the healthcare space which should support the transition away from reactive to more-targeted healthcare systems. We are seeing significant advances in the way that large and complex disease categories such as cancer are treated through things such as targeted chemotherapy, MRNA and cell and gene therapy. We are also seeing breakthroughs in disease categories such as Alzheimer’s and are early in the opportunity in medicines to address obesity, which is linked to numerous other comorbidities such as diabetes and hypertension.
It is also likely that advancements in Artificial Intelligence (AI) will transform numerous aspects of the healthcare space. We are early in seeing AI used in diagnostics, already seeing it help improve the accuracy and speed of diagnosis when used in radiology and imaging applications and adopted in robotic surgery to speed up procedure times and lower costs. Healthcare systems are also some of the most complex organisations from a data and IT perspective, often filled with huge amounts of unstructured data and legacy systems. AI can be used to drive workflow efficiencies and savings.
Perhaps the biggest opportunity for AI in healthcare, however, is in drug discovery. Today it typically takes 8-10 years to develop a drug and even after that only 10% make it to market. Advancements in AI have the potential to improve development timelines and reduce costs.
Despite the opportunities for investing in healthcare and next generation medicine, it can be a challenging sector to invest in. It is at the intersection of the public and private sector and healthcare systems are often some of the most complex and inefficient systems you will find anywhere. Many companies in the sector also face patent expiry challenges and uncertain pricing and reimbursement environments.
In our view, it is a sector which favours active management and a bottom-up stock picking approach. We focus on identifying competitively advantaged companies, with proven innovation track records and which are part of the solution in driving efficiencies and helping people live longer and healthier. Examples of companies we like include AstraZeneca, a global leader in oncology, Novo Nordisk, a global leader in diabetes and obesity medicine and Thermo Fisher, a life science tools and services provider.
This is a financial promotion and is not investment advice. Past performance is not a guide to future performance. The value of investments and any income from them may go down as well as up and is not guaranteed. Investors may not get back the amount invested. Portfolio characteristics and holdings are subject to change without notice. The views expressed are those of the author at the date of publication unless otherwise indicated, which are subject to change, and is not investment advice.