Do investments in healthcare also have a positive impact on your portfolio?
At 65 billion francs, the Swiss healthcare market is twice as large as the energy market. The healthcare market is likely to expand further as a result of population growth and the aging of society. Sustainable investments make it possible to drive forward developments in the healthcare sector whilst generating returns at the same time.
It starts with an ordinary smartphone and an app just about anyone can master by watching a two-minute tutorial.
With this app, even someone with no formal training can conduct a basic eye exam and send the patient’s data to a remote specialist, who can then flag those who need follow-up eye care. It’s simple, cost-effective and mobile — and, by the end of this year, Peek Vision, as the app is called, will have been used to screen some 200,000 schoolchildren in Botswana and Kenya.
Call it a happy, productive marriage of medical technology and social good: Some 36 million people suffer from blindness worldwide, yet the vast majority could retain or regain their sight with simple interventions. Peek Vision aims to be a platform that connects people in need of vision care with the professionals who can provide it.
Cutting-edge medical treatments may capture the public’s attention, but increasingly, it is the smaller entrepreneurs and more high-tech interventions that are making a difference in the health and life quality of millions across the globe. There’s not only a moral imperative at work here, but also a strong economic rationale for supporting innovators like Peek Vision.
Healthier citizens create more robust and productive work forces and can reduce the financial burden on governments and citizens because they often treat health conditions in their early stages. “Cash-strapped governments in developing countries can more efficiently help citizens by empowering local doctors and health workers with low-cost health tech like telemedicine,” says Mark Haefele, Global Chief Investment Officer at UBS Wealth Management.
These new health initiatives aim for sustainable, long-term solutions — the type of solutions that investors, both in public and private sectors, are looking to put their money into.
Opportunity fueled by a growing need
Globally, noncommunicable (chronic) diseases such as diabetes, complications from smoking and obesity contribute to more than 40 million premature deaths a year.
Even when health care is available, the financial cost to individuals can be crippling. An estimated 800 million people spend more than 10 percent of their household income on health care. Globally, medical costs push some 100 million people annually into poverty.
Game changers are needed, which is why technological advances that bring remote and underserved populations closer to caregivers and make treatments cheaper are so eagerly anticipated. “Newer technologies can help identify ailments and offer more targeted treatments, even in environments where health care infrastructure is underdeveloped,” says Haefele.
Telemedicine, portal medical devices and diagnostics powered by artificial intelligence have begun to shrink the distances between providers and patients, and to make insurmountable problems of access and diagnosis potentially manageable — and potentially profitable as well.
The financial side of global health
Consider the health care needs of a fast-expanding and aging global population: The ranks of people at least 65 years old is expected to swell by 60 percent between 2015 and 2030. In developing economies, Haefele points to the declining cost of heart-related medical devices as having the potential to increase demand. “That could help keep treatable heart conditions from worsening and reduce government outlays on corrective cardiovascular surgery in expensive, infrastructure-intensive hospitals,” he says.
Advancements in oncology drugs are also a key development, as older people have a higher incidence of cancer. Haefele notes that a new wave of oncology therapies “have the potential to treat cancers at an earlier stage, and more effectively, raise life expectancies while reducing the cost burden of long-term treatments to health systems in developing markets.” UBS estimates that oncology drug revenue could expand to $150 billion by 2020, a 50 percent increase from 2015.
The continued mainstreaming of generic drugs is also an important investment opportunity. “We see generic drugs as part of the provision of affordable care,” says the UBS Global Health Care Analyst Lachlan Towart. UBS estimates that the global generic drug market, with about $185 billion in annual revenue, should continue to grow at “a low- to mid-single-digit rate” into the next decade.
Overall, the implications for investors who see multilayered value in the development and implementation of new health care systems is astounding: These new global health enterprises could generate $1.65 trillion in new business value by 2030.
Some of that will come from government funding of projects as well as privately held businesses focused on health-care-related goods and services. But there is also a growing universe of publicly traded companies focused on products that support the sustainability goal of greater global access to health care. Towart points out that many generic drugs and medical device solutions are manufactured by publicly traded companies. And there should be a pipeline of new investment opportunities in the years ahead. For instance, Towart notes that the rising incidence of cancer and diabetes in China is fueling the world’s fastest-growing biotech market. In 2017, Chinese biotech initial public offerings were valued at $2.8 billion.
While the demand for greater global access to health care creates a strong tailwind for this investment theme, Towart cautions: “Questions remain about which technologies will dominate, which companies will have the competitive edge in using these technologies and which ones will most successfully monetize data to create commercial and societal value.”
A continued commitment to classic fundamental security analysis of a given stock or bond issue gives UBS a unique framework to help investors navigate the opportunities and risks within this vital component of global economic growth.
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