Market view and Insights
The healthcare sector is in the midst of fundamental change. What opportunities does this present for investors?
The idea that the "new normal" will kick in after the COVID-19 pandemic has been put forward time and time again. It is an idea that combines both disruption and continuity. In some industries, this may be the case. But in the healthcare sector, there is no continuity to be seen.
Healthcare is undergoing fundamental changes around the world. We have already explored reasons for this, such as global demographic, prosperity and lifestyles trends and their far-reaching consequences. Now let’s take a look at the opportunities this presents for investors.
When it comes to health matters, prevention and detecting diseases early on are better than cures - from both a medical and a financial perspective.
The following are especially good examples of this:
But there’s more: according to the World Health Organization (WHO), healthy eating and physical activity prevent up to 80% of all coronary heart disease, one-third of all incidents of cancer and 90% of all type 2 diabetes. And the pandemic has had a positive effect on this front: a recent survey shows that 65% of respondents in the EU are more likely to pay attention to their health now than before the pandemic.
One beneficiary of this new awareness is the sportswear industry. It is expected to be the fastest growing sector within consumer cyclicals, with other secular trends such as “athleisure” providing additional momentum. By 2025, the sporting goods industry is expected to grow by EUR 100 billion.
Hygiene and personal care awareness have also increased in the wake of the pandemic. In this sector, growth is being driven by the massive need for developing countries to catch up. In two-thirds of these countries, more than 20% of households still do not have flush toilets. Driven by double-digit growth rates in developing and emerging countries, the global personal home care market is expected to grow by almost 5% annually over the next five years.
When it comes to access to medication, the major pharmaceutical companies and insurers have a key role to play. Companies with a strong market position are expected to benefit most from this development, and make an important contribution to better global medical care. For more than 15 years, the Access to Medicine Foundation has been monitoring and analyzing how the pharmaceutical industry provides access to medication. Although substantial progress has been made, there are still too many barriers to accessing healthcare. For the world’s poorest households in particular, medication remains the single largest healthcare-related cost. In many cases, the medication needed is not even available.
For companies, distributing products in low- and middle-income countries is positive not only from a social, but also from a financial perspective. Every two years, the Access to Medicine Index is used to assess how successful the world’s largest pharmaceutical companies are in giving all humans access to their medication. Markets that have been entered can generate further profitable sales opportunities, attract new customers and improve the company’s resilience in different market conditions.
In the more advanced industrialized countries, there appears to still be a lot of catching up to do in the area of mental health. It accounted for only 0.4% of global health spending between 2000 and 2014 – a stark contrast if you consider the fact that between 25–50% of the population experiences mental health problems at least once in their lives.
Technological advances are also impacting our health and will inevitably change all areas of medicine. Three topics in this area are particularly exciting:
Global healthcare will not only become better, but also more accessible as a result of technological progress. The use of microelectronics to treat diseases or to monitor patients remotely are examples of this that help prevent premature deaths. After a slowdown in the wake of the COVID-19 pandemic, the medical device market is expected to recover and grow over 5% annually in the coming years.
Few sectors are better positioned for combining sustainability and returns into one investment than healthcare.