We believe the year ahead is likely to offer some interesting investment opportunities within the health-care sector. We expect ageing populations in developed markets and changing lifestyles in the emerging world, as described by our ‘healthy demand’ theme, to continue to support underlying growth for many companies. In addition, while we see the potential for policy changes from the new US administration to create some near-term uncertainty, we also believe it could benefit selective investment in the sector.
Here are just a few of the key topics we are focusing on in 2017:
President Trump: uncertainty and opportunity
We anticipate that the new US administration will prove to be a net positive for health-care investing, and that it could lead to changes that benefit the sector. In the short term, we accept that investors will worry about disruption to health-care access from the repeal of Obamacare, but in our view it is likely that a replacement will tweak the existing structure, rather than represent a major overhaul of the system.
Cost awareness: still driving change
We see the recent debate around US drug pricing as a further sign of increasing global efforts, already very evident in Europe and Japan, to address the rising cost of meeting health-care demand. Focus on cost is likely to continue in all markets, and we remain excited by companies that recognise cost pressures as drivers of change and opportunity.
These pressures are likely to drive further innovation as companies find ways to meet demand by providing ‘smarter’ rather than just ‘more’ health care. Among interesting trends we think are likely to emerge are better diagnosis, care coordination, and greater focus on standardisation and personalisation.
Consumerisation of health care: it’s all about the patient
A gradual ‘consumerisation’ of health care is underway, and we believe this trend will accelerate as individuals increasingly pay more out of their own pockets for their care. This will not only influence how health-care resources are used, but also improve transparency of both price and quality.
Innovation: still the key to sustainable growth
The progress being made in understanding the mechanisms of disease and in the personalisation of treatments will continue to drive innovation. With the current focus on costs rather than solutions, we believe innovation is currently being undervalued by investors in many segments of health care, but particularly in services. This will offer some attractive investment opportunities in our view.
Over the course of 2017, we’ll be sharing more of our thoughts on these trends.