Olivier de Berranger et Adrien Bommelaer

Make your health great again

The US presidential election has always been an ideal platform for promising cheaper medicines. “It is like those beautiful dreams which only leave you in the morning the regret of having believed in them”, as Molière wrote in The Imaginary Invalid. These empty promises are disastrous for millions of Americans and worrisome for investors. The healthcare sector underperformed considerably in 2016 after Donald Trump came to power. History doesn’t always repeat itself, though, and 2020 will not be 2016.

Evidently, there is now a new geopolitical dimension to healthcare. The markets are also rediscovering the benefits of this sector, which we think is capable of outperforming indices over the long term. It has plenty to offer and the potential for innovation is immense. The sector is benefiting from structural growth driven by the ageing population, with ever-expanding care needs, and by the emergence of middle classes in many countries. New sources of growth are flourishing in the context of economic development, which imports new conditions such as diabetes and high blood pressure from the West, and constant therapeutic innovation to treat new diseases or illnesses hitherto believed to be incurable.

This industry’s extraordinary capacity for innovation holds promise for our health, and constitutes a structural growth driver. Barriers to entry, especially in terms of research budgets, can protect profit margins. We think that the healthcare industry can offer investors a very attractive risk/reward profile.

Serious crises prompt extensive change. While it is still too early to know the scale of the impact from the COVID-19 crisis, this pandemic will almost certainly be a powerful catalyst for mobilising new knowledge and growth.

We can already foresee three major consequences. Put under strain, healthcare systems revealed their cracks and there is no doubt that spending will rise, especially on hospital equipment. The United States, which currently spends 16% of its GDP on health (compared with China’s current 5%), has already announced an additional USD 130 billion rescue package. Regulators such as the Food and Drug Administration (FDA) will also be bolder and more responsive. They will roll out research support policies, revolutionising the world of biotechnology. Lastly, a cycle of innovation also awaits the diagnosis and vaccination industries.

Medtech, biotech, pharmaceuticals, etc. We have been investing in promising sectors for many years, in companies with a strong track record of growth such as ASTRAZENECA and NOVO NORDISK, which specialises in diabetes, medtech companies THERMO FISHER and SARTORIUS STEDIM, and US biotech company VERTEX. This is an attractive investment area that represents a source of opportunities and alpha for selective stock-pickers and therefore private investors. But above all, for patients.