Erste Asset Management Investment Blog

Megatrend healthcare: medical care and costs as challenge

Megatrend healthcare: medical care and costs as challenge
(c) Erste Asset Management GmbH

The good news: we live longer on average and can make the most of our life for longer than previous generations 20 or 30 years ago. But the population on our planet is growing, and we don’t always treat health as if it were a priority. Changes in our lifestyle and consumption habits have led to a worldwide increase in meat and water consumption.

In the emerging economies that are at the doorstep of the developed world, the menu looks more and more like that of any industrialised nation. Where rice and vegetables used to be the staple foods, burgers and steaks have entered the picture (and the kitchen). Lifestyle diseases such as diabetes and high cholesterol are therefore hard to curb and as a result beset more and more countries.

Number of pensioners exploding

The average age of the global population is on the rise – even more so in the Western industrialised nations. Experts expect the set of people who are 65 and above to account for almost 30% of the EU population by 2080.

This group will then be more than half as big as the working population (15 to 64). At the same time, global life expectancy is up – by 8.7 years in the past 25 years.[1] This is mainly due to the improved standard of living and the progress in medicine.[2]

The demographic shifts have resulted in many challenges. The demand for home/outpatient care and medical care is rising. Also, the segment of senior citizens constitutes a growing, wealthy group of consumers gaining in relevance. Healthcare spending may be strained. According to the OECD, it will increase from currently 6% of GDP to 9.5% by 2050.

Pharmaceutical, biotechnology and care companies set to benefit

Companies providing products in connection with medical care and eldercare can benefit from this development. Among them are, for example, the operators of hospitals and nursing homes.

Other companies regarded as beneficiaries operate in the pharmaceutical, generics, and biotechnology sectors with a wide focus on the development, production, and sales of drugs as well as nutrition and healthcare companies. The development of innovative drugs and the activities aimed at preventing the healthcare costs from exploding can be regarded as mega trends.

Biotechnology has become a particularly interesting interdisciplinary technology in the past two decades (please also refer to our blog about biotechnology shares https://blog.en.erste-am.com/what-potential-do-biotechnology-shares-hold/).

Biotechnology has uses across many areas. In cancer and gene therapy, biotechnological procedures try to balance or remedy genetic disorders. Cell-based cancer therapy is still in its infancy. That said, investors can already participate in the success of innovative drugs that stabilise diseases or improve the state of patients and thus contribute to welfare.

Another field of application are the so-called lifestyle diseases such as obesity and diabetes, with pricing playing an increasingly crucial role as well.

Price pressure on drugs

Discussions about healthcare spending are a common theme in the run-up to elections in the biotechnology Mecca that is the USA. Democrats have repeatedly declared themselves in favour of more regulated prices but have failed to prevail so far.

It is also unclear what ideas President Trump is following in his efforts to finance the healthcare system.  One of the results of the increasing pressure on prices is the rising volume of biosimilars entering the market (i.e. generic versions of originally biotechnological drugs; after the expiry of the patent of the so-called ethical drug, i.e. the original, other companies can reverse-engineer the drug).

Biotechnology is also applied for numerous neurodegenerative diseases such as multiple sclerosis and Alzheimer’s disease. The number of patients is rising rapidly, and there are not really any drugs around that provide conclusive help; plus, we can see an ongoing sequence of setback and failures.

 

Date: 26.09.2019 Note: Past performance is not indicative of future development.

 

Biotechnology shares with relative upward potential

Foto Erste AM Fondsmanager Harald Kober: Biotechnology shares with catch-up potential

Chances are that biotech shares will continue their growth momentum in the coming years. The expected positive research results in diseases with high medicinal requirements and increasing sales and earnings growth are arguments in favour of buying.

According to Erste AM fund manager Harald Kober, the companies in this sector command valuations that are the lowest in years. Biotech shares have not joined in the most recent upswing that other sectors experienced. “We do see upward potential in the sector, relatively speaking,” as Kober explains.

Investors should keep an eye on the possible large price fluctuations and the repercussions for the companies in the event of a failure in the R&D process or if an expected approval by the health authority falls through.

Healthcare and biotechnology in the ERSTE FUTURE INVEST fund

The newly launched ERSTE FUTURE INVEST fund currently available for subscription at Erste Bank und Sparkasse contains biotechnology shares. This fund covers five large meg trends, which the experts of Erste Asset Management have defined. In addition to healthcare, these are lifestyle, technology & innovation, environment & clean energy, and emerging markets. For more information on these megatrends, please follow the link here. <German>

Warning notices according to the Austrian Investment Fund Act of 2011

ERSTE FUTURE INVEST may be subject to elevated levels of volatility due to its composition, i.e. the fund share price may fluctuate significantly both ways within short periods of time.

 

Quellen:

[1] Source: Eurostat (2016)

[1] Source: Eurostat (2019)

 

Legal note:
Prognoses are no reliable indicator for future performance.

RESPOND TO THE ARTICLE

Legal disclaimer

This document is an advertisement. Unless indicated otherwise, source: Erste Asset Management GmbH. The language of communication of the sales offices is German and the languages of communication of the Management Company also include English.

The prospectus for UCITS funds (including any amendments) is prepared and published in accordance with the provisions of the InvFG 2011 as amended. Information for Investors pursuant to § 21 AIFMG is prepared for the alternative investment funds (AIF) administered by Erste Asset Management GmbH pursuant to the provisions of the AIFMG in conjunction with the InvFG 2011.

The currently valid versions of the prospectus, the Information for Investors pursuant to § 21 AIFMG, and the key information document can be found on the website www.erste-am.com under “Mandatory publications” and can be obtained free of charge by interested investors at the offices of the Management Company and at the offices of the depositary bank. The exact date of the most recent publication of the prospectus, the languages in which the key information document is available, and any other locations where the documents can be obtained are indicated on the website www.erste-am.com. A summary of the investor rights is available in German and English on the website www.erste-am.com/investor-rights and can also be obtained from the Management Company.

The Management Company can decide to suspend the provisions it has taken for the sale of unit certificates in other countries in accordance with the regulatory requirements.

Note: You are about to purchase a product that may be difficult to understand. We recommend that you read the indicated fund documents before making an investment decision. In addition to the locations listed above, you can obtain these documents free of charge at the offices of the referring Sparkassen bank and the offices of Erste Bank der oesterreichischen Sparkassen AG. You can also access these documents electronically at www.erste-am.com.

N.B.: The performance scenarios listed in the key information document are based on a calculation method that is specified in an EU regulation. The future market development cannot be accurately predicted. The depicted performance scenarios merely present potential earnings, but are based on the earnings in the recent past. The actual earnings may be lower than indicated. Our analyses and conclusions are general in nature and do not take into account the individual characteristics of our investors in terms of earnings, taxation, experience and knowledge, investment objective, financial position, capacity for loss, and risk tolerance.

Please note: Past performance is not a reliable indicator of the future performance of a fund. Investments in securities entail risks in addition to the opportunities presented here. The value of units and their earnings can rise and fall. Changes in exchange rates can also have a positive or negative effect on the value of an investment. For this reason, you may receive less than your originally invested amount when you redeem your units. Persons who are interested in purchasing units in investment funds are advised to read the current fund prospectus(es) and the Information for Investors pursuant to § 21 AIFMG, especially the risk notices they contain, before making an investment decision. If the fund currency is different than the investor’s home currency, changes in the relevant exchange rate can positively or negatively influence the value of the investment and the amount of the costs associated with the fund in the home currency.

We are not permitted to directly or indirectly offer, sell, transfer, or deliver this financial product to natural or legal persons whose place of residence or domicile is located in a country where this is legally prohibited. In this case, we may not provide any product information, either.

Please consult the corresponding information in the fund prospectus and the Information for Investors pursuant to § 21 AIFMG for restrictions on the sale of the fund to American or Russian citizens.

It is expressly noted that this communication does not provide any investment recommendations, but only expresses our current market assessment. Thus, this communication is not a substitute for investment advice, does not take into account the legal regulations aimed at promoting the independence of financial analyses, and is not subject to a prohibition on trading following the distribution of financial analyses.

This document does not represent a sales activity of the Management Company and therefore may not be construed as an offer for the purchase or sale of financial or investment instruments.

Erste Asset Management GmbH is affiliated with the referring Sparkassen banks and Erste Bank.

Please also read the “Information about us and our securities services” published by your bank.

Subject to misprints and errors.

Share post:
Exit mobile version