he Health departments are the big stars of the pandemic era. However, like all megatrends, booms are followed by busts. Does this mean there are no more opportunities in this area? Instead, the foundations for the future appear to be intact, according to data and opinions from some experts.
Although the index MSCI World Index fell 18.1% in 2022Healthcare Industry Values Down only 5.4%. But health care’s reputation as a defensive haven understates the appeal of an industry with other big draws.
group pharmacist,manufacturer medical equipment and suppliers health care Benefit from megatrends that help improve investors’ long-term returns as they decipher the complex forces shaping the industry.
The current reality is that three forces are spurring change in healthcare today: Innovation, pricing structures and politics. However, these dynamics often conflict with each other and complicate the investment prospects of a product or company.
Will people pay more for a revolutionary treatment if the health system doesn’t cover it?yes Might governments provide substantial subsidies for new diagnostic technologies? Such issues vary from country to country, depending on government policies, national economies and cultural or spending preferences.
“Despite these challenges, We believe there are ways to make informed judgments across the industry. This can lead investors to reliable sources of profit and return on investment,” he said. Vinay Thaparasset management company analyst Bernstein. The first step seems to be to avoid common fallacies that drug trials can predict.
During the epidemic, many companies tried to develop vaccines against COVID-19, but only a few succeeded. Even the best scientists in the world can’t reliably predict the results of drug trials, so the question is why investors should bet. “instead, You need a clear understanding of what the innovation, pricing and political dynamics are It may impact the profitability and growth rate of the company,” Thapar added.
Innovation and price disruption
Scientific and technological innovation support Health has progressed over the decades.However, in many ways, the technological revolution In healthcare, it’s still in its infancy. Investors must look beyond cutting-edge equipment or biotech research to understand how innovation will reshape the industry.
For example, although The use of big data and artificial intelligence is still relatively limited In drug development, over time they may become an indispensable tool in improving the effectiveness of drug trials.
this New developments will have implications in many areas. Robotics are already changing surgery. Treatments for Alzheimer’s disease and cardiovascular disease will help address the physical and economic costs of demographic change.he Developing solutions to age-old problems from the common cold to cancer, it’s just a matter of time. However, powerful innovation does not always make economic sense. Understanding how the price of a new product or service is determined is critical to measuring a company’s profit potential.
In many cases, investors must ask themselves whether the price is realistic.For example, he Mylan EpiPen It is a popular product that can prevent death in cases of severe allergic reactions. Since Mylan acquired Merck & Co.’s generics unit, which includes EpiPen, in May 2007, its prices have increased more than sixfold.
Is this sustainable?For Thapar, while high-priced products can help the company boost profits and margins, they may If market dynamics are a weakness Or political decisions force prices down.
“You shouldn’t believe Companies that pursue profit growth at the expense of profitability…Companies that make large acquisitions must also be scrutinized, especially if they are heavily indebted or focus their sales on a small set of products. We believe companies that rely on the success of a single drug trial to drive future growth should be extremely cautious,” the expert commented.
intuitive surgery This is an example of a company that meets the investment criteria of Corporate America.The company is a leader in Medical robots, mature technology In an industry with high barriers to entry for competitors.
Global adoption Robotic surgery is on the rise, more than 1.5 million surgeries were performed in 2021, a 50% increase from 2018. Intuitive Surgical’s ROIC provides the financial means to self-fund its expansion, as well as new opportunities in areas such as natural orifice surgery, which reduces the risk of surgery and leaves no scarring.
“On the contrary, we believe Specialty pharmaceutical companies and hospitals are often questionable investments. For many specialty pharmaceutical companies, the pricing model is unsustainable as companies significantly increase prices while spending little on R&D,” Thapar analyzed.
Instead, capital is allocated to acquisitions, whichThey typically drive adjusted earnings growth at the expense of ROIC (return on equity).. Hospitals also face profitability pressures as insurers focus on creating a low-cost, high-quality healthcare ecosystem, driven in part by advances in new technologies that eliminate the need for patients to travel to hospitals for many types of care. .
Effectively investing in health care securities requires a unique set of skills. This has nothing to do with scientific insights. “Adopt a rigorous investment process The expert concluded that the combination of factors affecting healthcare companies provides investors with a strong source of profit potential to strengthen their long-term stock portfolios.