With vaccines and roadmaps from the lockdown allowing the world to look beyond Covid-19, hope is that the pandemic has opened people’s eyes to the importance of proper health care.
The lessons learned over the course of these challenging 12 months, which will continue to be recorded every day, should further a better understanding of how best to manage health in the years to come. Our focus as sustainable investors is on a cleaner and safer world in the future, but we also emphasize that people need to be healthy enough to enjoy this. By and large, the key is to take a more proactive stance in monitoring and preventing diseases before they occur. While this may feel expensive, it’s much cheaper and ultimately better in terms of patient outcomes than treating a disease later. However, this requires a major shift in both mindset and approach.
We also hope that the pandemic has changed the perception of a healthcare sector that continues to be a large part of our Sustainable Future (SF) funds and will be a key area for the Liontrust ESG Trust, which is slated to go public in early July. In the past, the industry has been billed for providing health products and services, but most importantly, we understand that this money is well-spent and likely a valuable investment for a more sustainable future.
Before looking beyond Covid, however, it is important to realize the tremendous role healthcare companies have played in fighting the virus and moving quickly to an emergency basis. The pandemic has underscored the importance of the industry as the urgent need for action regarding Covid-19 forces experts, pharmaceutical companies, governments and regulators around the world to quickly band together to offer solutions. The most critical step was the development and distribution of vaccines, which hit the market about a year after the first needs assessment. This was in stark contrast to the traditional time frame for development, testing and production of around 10 years – clear evidence that necessity is inventive.
Another focus was on tests and therapeutics: tests to isolate the sick and monitor the sustained dynamics of their spread (as well as mutations that remain of concern) and therapeutics to relieve the burden on individuals and health systems by reducing the severity of the virus for those who deal with it infect. By providing such solutions, many healthcare companies have seen sales increase in these specific business areas and, depending on the division of their operations, some have benefited more than others. If we look at companies like ThermoFisher Scientific and PerkinElmer in the US, for example, revenue from Covid-related areas has increased more than enough to offset declines in other areas of their business that are more cyclical and therefore closed or slowed significantly during lockouts.
However, our attitude towards some of these companies is already changing, and we recently left our position at PerkinElmer. The company was strong performance both in 2020 and in recent years, and after reviewing the price target, we believed the upside was limited over a five-year horizon. We also found that 40% of 2020 revenue comes directly from Covid testing, which we expect to get more nuanced over time as mass testing becomes less important.
When managing our SF portfolios, we first look for companies that address major societal issues over time, including healthcare innovation and the provision of affordable healthcare. In the years to come, as the world recovers from Covid and goes beyond it, we expect healthcare companies to continue to do well by doing good. Roche, for example, saw significant demand for its diagnostic equipment during the pandemic and we expect it will continue to expand its global presence. Even if the number of Covid-19 tests falls, these devices will be used to check for other serious diseases that governments have been less interested in investing the initial spending, such as tuberculosis or hepatitis C.
Taking a step back, there are many reasons why investing in health care has become increasingly important: the aging population is critical, but more importantly, the need to change technologies that will help treat disease more effectively. Companies like Illumina, which we added to our funds last year, continue to drive down the cost of understanding the human genome. In this way, experts can tailor therapies more specifically to individual needs and with fewer side effects and relieve the health system.
Traditionally, the treatment model has had a large element of trial and error, with people seeking help when they feel sick and hoping that any medication or procedure prescribed will be effective – but this intervention often turns out to be too late. In contrast, we are moving towards a more personalized system where we can understand how a person’s genetic makeup makes them susceptible to certain diseases, and this opens up new avenues to address diseases such as cancer, dementia and Parkinson’s.
Major areas to keep an eye on include gene therapies – which promise to be a one-time cure from disease (as opposed to the traditional pharmaceutical model of taking the pill regularly for the rest of your life) – and liquid biopsy, which enables the early detection and monitoring of cancer and other diseases through blood draws rather than complex and intimidating solid tissue samples. This paves the way for early diagnosis and preventive treatment to test babies before birth and adults early and continuously. We anticipate that the price of genome sequencing will continue to decrease as devices for these tests become more common and testing is more convenient. Ultimately, we’ll see more targeted vaccines: mRNA technologies can help treat cancer, for example, and move the industry beyond more traditional “vaccinated” areas.
We write recentlythrough GW Pharmaceuticals, which we owned shortly after our SF funds were launched in 2001, and our experience with that company reflects in many ways the patience that is often required when investing in healthcare. GW is the world leader in the development of cannabinoid-based treatments that are changing the lives of many people with epilepsy, but its groundbreaking Epidiolex product wasn’t approved by the U.S. Food and Drug Administration until 2018 and became a prescription drug the following year NHS added. It took nearly two decades for the company to reap the rewards of its investments in science and manufacturing. In recognition of this expertise, Ireland-based Jazz Pharmaceuticals has signed a $ 7.2 billion deal to acquire GW and expand its neuroscience portfolio. The transaction closed in May and will result in the company exiting our portfolio.
While healthcare companies are currently in the public eye due to their efforts against Covid-19, we are investing in the sector as its innovation remains vital to a more sustainable future. People need to be healthy enough to enjoy the cleaner, safer world our companies are helping to create, and we will continue to invest in companies that innovate, work to address unmet medical needs and ensure that health solutions are available to the largest possible cross-section of the world’s population.
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Main risks
Past performance is not a guide to future performance. Remember that the value of an investment and the income from it can go down as well as up and cannot be guaranteed. As a result, you may not get back the amount originally invested and you may risk a total loss of capital. The majority of the Liontrust Sustainable Future Funds hold holdings that are denominated in currencies other than sterling and that are subject to fluctuations in exchange rates. Some of these funds invest in emerging markets which may be more risky due to less well regulated markets and political and economic instability. As a result, the value of an investment can go up or down in accordance with foreign exchange rates. Liontrust UK Ethical Fund, Liontrust SF European Growth Fund and Liontrust SF UK Growth Fund invest in a narrow range geographically and have a concentrated portfolio of securities. There is an increased risk of volatility, which can lead to frequent increases and decreases in unit prices in the fund. Liontrust SF Managed Fund, Liontrust SF Corporate Bond Fund, Liontrust SF Cautious Managed Fund, Liontrust SF Defensive Managed Fund and Liontrust Monthly Income Bond Fund invest in bonds and other fixed income securities – fluctuations in interest rates can affect the value of these financial instruments. If long-term interest rates rise, the value of your stocks will likely fall. When you need quick access to your money, selling holdings in corporate bond funds can be difficult in difficult market conditions. This is because there is little trading activity in the markets for many of the bonds held by these funds. The above five funds can also invest in derivatives. Derivatives are used to protect against currency, credit and interest rate fluctuations or for investment purposes. There is a risk that derivative positions could result in losses or that counterparties fail to enter into transactions.
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The information and opinions provided are not to be understood as investment advice in any of the named products or securities, as an offer to buy or sell units / shares in the named funds or as an invitation to buy securities of a company or investment product. Always research your own investments and (unless you are a professional or a financial advisor) consult the suitability of a regulated financial advisor prior to investing.
Monday, June 28, 2021, 10:50 a.m.
Disclaimer of liability
Liontrust Asset Management plc published this content on June 28, 2021 and is solely responsible for the information contained therein. Distributed by public, unedited and unchanged, on June 28, 2021 11:07:08 AM UTC.
source https://dailyhealthynews.ca/liontrust-asset-management-healthcare-investing-in-a-post-covid-world/
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