After a tumultuous two years for healthcare, attention towards the sector appears to finally be moving beyond the Covid-19 pandemic. While significant Covid challenges remain, the healthcare space is continually witnessing breakthroughs in numerous other areas of need, as innovative companies capitalise on the opportunities offered by cutting-edge technologies.
In light of World Health Day last week, four investors highlight the stocks set to thrive as the sector spotlight extends beyond the pandemic.
Neurocrine Biosciences
Marek Poszepczynski, co-investment manager of the International Biotechnology Trust
While antipsychotic drugs are life-changing for patients, the side effects can be severe and in certain cases develop into treatment-induced tardive dyskinesia – involuntary movements similar to those experienced by patients suffering from Parkinson’s disease. US biopharmaceutical company Neurocrine Biosciences is working to tackle this problem. Its Ingrezza drug improves quality of life for patients on antipsychotic medication, while its Ongentys product is used to treat Parkinson’s disease.
During the pandemic, sales of these drugs were hit hard, as movement disorders such as Parkinson’s tend to be diagnosed in person. The share price of Neurocrine subsequently fell sharply, bringing its valuation down to a more attractive level. While it will take a while for its sales trajectories to recover to the levels seen before the pandemic, the long-term growth prospects of this company remain appealing. The company’s drugs address high, unmet medical needs, and few other competitors operate in the space.
Medica
Ken Wotton, manager of Strategic Equity Capital plc
Medica is the leading provider of teleradiology services in the UK, working primarily with NHS hospital radiology departments. Demand for radiology services in the UK is growing rapidly, driven by the developing sophistication and clinical application of medical imaging, as well as an increasing incidence of chronic conditions and cancer due to the country’s ageing population.
The NHS struggles to meet this demand due to a severe – and long term – shortage of qualified radiologists. Medica’s technology platform and roster of more than 500 consultant radiologists therefore plays an essential role in helping to fill this gap both safely and economically, improving patient experiences and outcomes in the process.
Eckert & Ziegler
Hywel Franklin, manager of the Mirabaud Discovery Europe Fund
German healthcare company Eckert & Ziegler, which supplies radioactive isotopes for medical and industrial applications, has been among our best performing stocks in two out of the last three calendar years. Its isotopes are a critical tool in the detection and categorisation of cancers, and in the delivery of personalised treatments to cure those cancers. Handling and transporting radioactive material is highly regulated and the science at play is difficult.
Personalised medicine helps improve healthcare outcomes through significantly increasing the efficacy of medicines, while also boosting compliance and facilitating insurance reimbursement. As personalised medicine grows, demand for isotopes is likely to expand significantly, driving an acceleration of Eckert & Ziegler’s sales, and helping to improve healthcare and save lives.
International Biotechnology Trust
Vincent Ropers, co-portfolio manager of the TB Wise Multi-Asset Growth Fund
For discerning investors able to act opportunistically, the healthcare and biotechnology sectors seem particularly compelling. The spaces appear to have been unjustifiably punished post the Covid-19 rebound and look particularly attractive, both from an absolute and relative valuation standpoint. Moreover, the sectors are underpinned by structural long-term growth drivers that show no signs of abating.
We recently added to our holding in International Biotechnology Trust, a specialist investor in both quoted and unquoted biotech innovators across the globe. As the trust is trading at an abnormally wide discount, we have been able to play the healthcare theme at a double discount – both on the asset class and on the trust itself – making the opportunity even more appealing.
