.svg){kind=small}
Back
.png)
Tema’s 2025 Healthcare outlook: US politics, obesity and more
The healthcare sector is vital for the US economy representing 18% of GDP and benefitting from the structural tailwind of an aging population. As we look out to 2025, policy uncertainty has created a compelling valuation opportunity, while innovation continues unabated within the most important therapeutic areas. This outlook reviews what 2025 has in store.
Key takeaways:
-
The recent policy-led dislocation has created a compelling valuation opportunity for the healthcare sector.
-
Policy outlook is uncertain but there are counterbalancing forces supporting innovation and M&A.
-
2025 has seen the first Phase III data of an oral obesity agent, which has the potential to unlock current supply constraints.
-
Oncology innovation is accelerating from targeted small molecules to new more potent types of chemotherapy.
-
Neuroscience remains the final frontier with 2025 witnessing the roll out of new Alzheimer’s medications and the potential for the first non-opioid pain drug.
Compelling multi-year valuation opportunity in healthcare
As we closed out 2024 the healthcare sector trailed the S&P 500 by 23% for a second year in a row. At 17x P/E it offers one of the deepest (23%) discounts to the market multiple in the past three decades and the sector’s weight in the S&P 500 is at a 24-year low.
Policy outlook is uncertain but there are counterbalancing forces
The most recent weakness in healthcare is due to President elect Donald Trump nominating Robert Kennedy Jr. (RFK) as Secretary of Health and Human Services (HHS). The role of Secretary of HHS oversees vital healthcare agencies such as the Food and Drug Administration (FDA), that controls drug approvals, or Centers for Medicare & Medicaid Services (CMS), that administers these major programs. In total the HHS has a budget of over $1.8 trillion (or nearly 25% of the total federal budget) and employs 80,000 people.
There is considerable uncertainty about what Kennedy’s policy stance will be. The market’s worries are not helped by pre-election statements by Donald Trump that he will let Kennedy:
“go wild on health. I’m going to let him go wild on the food. I am going to let him go wild on the medicines”
Looking at campaign rhetoric, twitter posts, the Make America Healthy Again (MAHA) website, a recent WSJ editorial, and Trump’s own pronouncements we can piece together the following key healthcare policies: 
There are counterbalancing forces. Although shortlived, the appointment of Vivek Ramaswamy as part of the newly created Department of Government Efficiency shows a desire to support the industry. Ramaswamy made his fortune in biotech and has already tweeted twice, right after Kennedy's nomination, in support of biotech innovation (here and here). Equally, the nomination of Martin Makary, a surgeon from John Hopkins, to FDA commissioner could mean stability at this crucial agency.
Obesity and Cardiometabolic
Developments in obesity, or the GLP-1 mechanism, represent another major focus for 2025. Will market leaders Novo Nordisk and Eli Lilly keep up with demand, and meet investors’ exacting expectations? Manufacturing capacity remains a big issue for these companies. 
Data on follow-on obesity agents, in development by the incumbents and their would-be rivals, are some of 2025’s most important clinical readouts. In particular, the potential of oral obesity drugs will start to emerge, with the first phase 3 data due from the leading project, Lilly’s orforglipron. News on earlier-stage oral projects are also anticipated, as the push for an obesity pill advances. Why do pills matter? Read our previous blog for the answer.
Important readouts in multiple adjacent metabolic conditions are also pending in 2025, for the GLP-1 or incretin class. Tema predicts that the market for these agents could ultimately be worth $500bn, meaning there is much to play for. Expect strategic moves this year – obesity is a space in which big pharma cannot afford to miss out.
The cardiometabolic field is much more than obesity and GLP-1 science, of course. Tema’s actively managed ETF, HRTS, allows investors to gain exposure to other growth areas in this complex field of medicine. TTR cardiomyopathy, for example, an uncommon form of heart failure which has seen much innovation in recent years and in which three companies are now competing: Pfizer, Alnylam and BridgeBio. Is there space for multiple players in this market? That question will start to be answered in 2025.
Oncology
Oncology remains a huge area of innovation and investment for the biopharmaceutical and diagnostic sectors. It is also an area of much dealmaking, particularly in fields where novel approaches hold the potential to dramatically improving patients’ prognoses. Tema’s actively managed oncology ETF (CANC) invests behind the prevention and cure of cancer, identifying companies that deliver these breakthroughs.
This expansive field of medicine requires deep and comprehensive research to successful identify these investment opportunities. We will watching numerous therapeutic themes play out this year, including the highlights here.
The targeting of potent chemotherapies or even the body’s own immune system is now established as an important treatment approach. Antibody-drug conjugates, T cell engagers, bispecifics and radiopharmaceuticals are four modalities attracting much attention – and will continue to be a major focus in 2025, for deals and data.
Precision oncology also encompasses the world of small molecules – oral drugs that can disrupt cancer causing genes or biological pathways. This year promises updates on agents that work along a pathway called RAS-MAPK, where developers like Revolution Medicines are developing novel agents designed to more potently suppress tumor growth.
But what about the detection of cancer? Treatment is nothing without diagnosis. With cancer rates rising in the young, as our recent blog describes, companies developing more convenient liquid biopsies will play a crucial role in the oncology landscape of the future. Could the incoming Trump administration, with its focus on Making America Healthy Again, spur interest in screening programmes to help early diagnosis?
Neuroscience and mental health
Psychiatric disorders and neurodegenerative diseases represent some of the toughest targets in drug development. Many setbacks have occurred despite decades of research, and novel technologies are finally ushering in breakthroughs in diseases previously considered intractable. These technologies frequently represent science’s cutting edge. RNA-based therapies, for example, which are based multiple Nobel Prize-winning discoveries, that researchers have used to push forward our understanding of genetics.
What this means for drug development requires careful interpretation. Tema’s actively managed neuroscience and mental health ETF allows investors to access the breakthroughs that are driving significant advances in treating central nervous system diseases. These represent a huge unmet need, suffered by over 1 billion people worldwide.
In 2025, we will be monitoring the ongoing roll out of the first drugs for Alzheimer’s disease; Lilly’s Kisunla joined Eisai and Biogen’s Leqembi on the market in mid-2024. While not perfect, these monoclonal antibodies promise to slow degeneration in early-stage patients. The first look at prospectively generated, late-stage data on GLP-1 use in Alzheimer’s, due towards the end of 2025, is a potentially pivotal moment for this field.
Elsewhere, the start of the year could see the first novel, non-opioid pain mechanism approved in decades. Vertex’s suzetrigine is being developed in acute and chronic neuropathic pain settings.
Important updates should also emerge in 2025 on potentially transformative RNA delivery mechanisms, designed to shuttle genetic medicines into the CNS. Alnylam and Regeneron, for example, have early-stage projects in conditions like cerebral amyloid angiopathy or amyotropic lateral sclerosis.
Bottom line
For investors looking to diversify without sacrificing growth, healthcare, specifically the therapeutic areas of oncology, cardiometabolic and neuroscience offer underappreciated innovation driven growth. Today policy uncertainty is creating one of the most compelling valuation opportunities for the sector in its history.
