He The health sector was a big star during the pandemic. However, like all big trends, the uptrend was followed by a big decline. Does this suggest that there should no longer be opportunities in that area? Rather, in line with the data and opinions of some experts, it seems that the foundation for the future remains intact.
while index MSCI World falls 18.1% in 2022Health care sector values They fell only 5.4%, But healthcare’s reputation as a defensive haven undermines the attractiveness of an area that has other great attractions.
Group pharmacistscreator of medical devices and suppliers Health care Benefitting from larger trends can help drive long-term returns for investors who understand the complex forces shaping the sector.
The current reality is that three forces are driving change in healthcare today: Innovation, pricing structures and politics. However, these dynamics often collide and complicate the prospects for investing in a product or company.
If a revolutionary treatment is not covered by the health system, will people pay more for it? Is What is the likelihood that a government will provide significant subsidies for new diagnostic technology? Such issues vary from country to country depending on government policies, national economy, and cultural or spending preferences.
“Despite these challenges, We believe there are many ways to make informed decisions across the industry. That can lead investors to solid sources of profitability and returns on investment,” he says. Vinay Thaparasset manager analyst alliancebernstein, The first step seems to be to avoid the common misconception that drug tests are predictable.
During the pandemic, many companies tried to develop vaccines against COVID-19, but only a few were successful. Even the world’s best scientists can’t reliably predict the outcomes of drug trials, so the question is why investors should bet. “instead, You need to get a clear idea of innovation, pricing and political dynamics “The profitability and growth rate of a company can be affected,” says Thapar.
Innovation and value disruption
Scientific innovation has supported Progress has been made in health over decades. However, in many ways, the technological revolution It is still in its infancy in healthcare. Investors should look beyond cutting-edge devices or biotech research to understand how innovation will reshape the sector.
For example, although The use of big data and artificial intelligence is still relatively limited In pharmaceutical development, over time they will likely become integral tools for improving the effectiveness of drug trials.
New developments will impact many areas. Robotics is already changing surgical procedures. Treatments for Alzheimer’s disease and cardiovascular disorders will help address the physical and economic costs of demographic change. He Developing solutions to ancient problems, from the common cold to cancer, it’s just a matter of time. However, powerful innovations do not always make economic sense. Assessing a company’s profitability requires understanding how prices for a new product or service are determined.
In many cases, investors must ask themselves whether the prices are realistic. For example, he mylan epipen It is a popular product that can prevent death in cases of extreme allergic reactions. Its price has increased more than sixfold since May 2007, when Mylan bought Merck’s generic drug unit, which included EpiPen.
Is it sustainable? For Thapar, although higher-priced products can help a company’s profits and margins, they can also If market dynamics are a weak point Or political decisions force the price to fall.
“You must disbelieve this Companies that aim for profit growth at the expense of profitability…Companies making large acquisitions should also be closely examined, especially if they are heavily indebted or concentrate their sales on a small group of products. In our opinion, companies that rely on the success of a single drug trial to drive their future growth should be treated with great caution,” the expert comments.
Sahaj Surgical This is an example of a company that meets the investment criteria for a US firm. The company is a leader in Medical Robotics with Proven Technology In an area where there are high barriers to entry for competitors.
global adoption of The trend of robotic surgery is increasingWith over 1.5 million procedures in 2021, a 50% increase from 2018. And Intuitive Surgical’s ROIC provides it with the financial means to self-fund its expansion, as well as provide new opportunities in areas such as natural orifice surgery, which minimizes the risk of procedures and does not create scars.
“Instead, we believe that Specialty pharmaceutical companies and hospitals are often problematic investments, For many specialty pharmaceutical companies, pricing models are unsustainable, as companies raise prices aggressively while spending little on R&D,” Thapar analyses.
Instead, capital is allocated to acquisitions, whichThey typically drive adjusted earnings growth at the expense of ROIC (return on equity)., Hospitals also face pressure on profitability as insurers focus on creating a lower-cost, higher-quality health care ecosystem, partly aided by new technological advances that allow patients to access multiple types of care. Takes away from hospitals.
Investing effectively in health care securities requires a unique set of skills. This is not about scientific insight. ,Implementing a disciplined investment process which integrates the various factors affecting healthcare companies, investors can access sources of strong profitability potential that can strengthen long-term equity portfolios,” the expert concludes.