Innovation & Growth: The Case for Investing in Healthcare Now

We believe healthcare is one of the most compelling investment opportunities in the market today.

• There is a revolution in biology, aided by a confluence of AI, lower costs of human genomic sequencing and multi-omics. This revolution is driving innovation from new drug modalities like anti-body drug conjugates to new protein targets. AI should also accelerate drug discovery and clinical development – helping reduce costs and improve success rates.¹
• Demand for healthcare is significant. The US faces a $4 trillion cost tied to chronic ailments like heart disease, obesity and pain. Cancer continues to rise, both from an aging population (the global population of people over 60 is set to reach 2.5 billion by 2050) and a worrying rise in incidence among young adults.²
• Policy, which has been a headwind over the last 12 months, is settling with a clear undercurrent of reduced regulation and a preference for innovation. The current administration has shown clear support for novel tools, rare diseases, and digital health solutions. Areas that are the purview of small, innovative companies.³  
• M&A is an absolute must in the sector as key patents, like the largest oncology drug Keytruda, are set to expire. An estimated $280bn of revenue needs to be replaced largely through M&A.⁴
• Healthcare trades at compelling relative valuations. The sector is on a 25% discount to the market on a forward P/E basis, historically an excellent entry point for long-term investors⁵. Healthcare represents the lowest share of the S&P 500 since 2000. Nearly 20% of all small and medium sized biotechnology firms trades below the value of cash on their balance sheet.⁶
• We believe healthcare is a difficult sector to navigate – buffeted by biological, clinical, regulatory, commercial and funding risks. This requires an active approach to mitigate risks and find asymmetric risk/reward opportunities.

Source: IQVIA

Disclosures

Biotechnology Industry Risk: The biotechnology industry can be significantly affected by patent considerations, including the termination of patent protections for products, intense competition both domestically and internationally, rapid technological change and obsolescence, government regulation and expensive insurance costs due to the risk of product liability lawsuits. In addition, the biotechnology industry is an emerging growth industry, and therefore biotechnology companies may be thinly capitalized and more volatile than companies with greater capitalizations.

Sector Focus Risk: Obesity and Cardiology companies are highly dependent on the development, procurement and marketing of drugs and the protection and exploitation of intellectual property rights. A company’s valuation can also be greatly affected if one of its products is proven or alleged to be unsafe, ineffective or unprofitable. The stock prices of Obesity and Cardiology companies have been and will likely continue to be very volatile. The costs associated with developing new drugs can be significant, and the results are unpredictable.

Industry Concentration Risk: Because the HRTS and CANC Fund assets will be concentrated in an industry or group of industries, the Fund is subject to loss due to adverse occurrences that may affect that industry or group of industries.

Oncology Companies Risk: Oncology companies are highly dependent on the development, procurement and marketing of drugs and the protection and exploitation of intellectual property rights. A company's valuation can also be greatly affected if one of its products is proven or alleged to be unsafe, ineffective or unprofitable.