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

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.



[1] Source: Eurostat (2016)

[1] Source: Eurostat (2019)


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


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