It is forecast to rise to a total of 440 million in 2024, according to Deloitte.
The market for wearable devices and related apps is growing swiftly.
They assist the elderly with walking, standing, rehabilitation and bathing.
Increasingly, robots are also being used to replace care workers in countries such as Japan and China, where people are aging fast.
Source: Scientific American, 2022; Reuters, 2022
Source: BBC, 2023
Source: World Intellectual Property Indicators, 2023
358,000
MedTech, biotech & pharmaceutical patent applications filed globally in a single year.
OUTFRONT SERIES
THE HEALTHCARE REVOLUTION:
A PRESCRIPTION FOR GROWTH
And yet these therapies come with a high price tag, which are an obstacle to their use.
$25.84 bn
The global gene therapy market is expected to increase from $6.93 billion in 2023 to $25.84 billion by 2028.
For instance, treatments for beta-thalassemia and hemophilia, two blood disorders, cost $2.8 million and $3.5 million respectively.
That’s a remarkable compound annual growth rate exceeding 30%.
GLP-1 blockbuster drugs set to be “world’s largest pharmaceutical”
In development since the 1990s, it promises to transform treatment of serious diseases such as cancer, as well as neurological, blood, immunological and cardiovascular illnesses. It’s one of the fastest-growing areas of healthcare, with over 2,000 therapies in development globally.
Gene editing to help millions
Gene therapy is a game changer that’s arisen from decades of scientific research and could help millions of people.
Over 90% of those applications came in the last two years and most were for use of AI at some point in the clinical development stage.
By 2030, it says, it expects AI to help shave two years off the decade or more it typically takes to develop a drug.
The U.S. Food & Drug Administration received about 300 applications incorporating AI or machine learning in drug development from 2016 through 2022.
For instance, AMGEN, the pharmaceutical giant, is leveraging a data-driven machine learning model, ATOMIC, to speed up clinical trials.
Individuals can take a more proactive approach to their health.
For as little as $100 to $2,000 it’s possible to buy a genetic test showing people what illnesses such as diabetes or cancer they’re at high risk from. Such a personalized health profile paves the way for preventative medicine, alerting people to take treatments or change their lifestyles.
Smartwatches, bracelets and rings track heart rates, blood sugar, exercise levels and sleep patterns – but they have also evolved to diagnose diseases such as cancer and heart disease, as well as to track real-time biometrics including blood pressure.
In 2003, the Human Genome Project finished mapping the 20,000 genes in humans, paving the way for understanding of which genes are linked to hereditary diseases. This has led to the development of new diagnostic methods and treatments.
Robot surgeons are no longer a thing of the future.
Wearable devices can operate in tandem with genetic testing, going way beyond the original fitness trackers.
Gene sequencing has opened the door to medicine that’s tailored to an individual’s genetic make-up.
This will speed time to market as well as cutting the substantial costs and risks of drug development.
As well as transforming areas of healthcare such as diagnostics, AI promises to shave years off the time taken to develop a drug.
AI accelerates drug discovery
All in all, healthcare’s wave of innovation and growth bodes well for investment opportunities. But investors will need to be highly selective.
The long and the short of it
Source: Evaluate Pharma, 2023
The number of acquisitions rose to 135 in 2023, up from 126 in 2022, according to Evaluate. The value of these acquisitions reached $153 billion for 2023, the highest since 2019’s $239 billion.
To replenish drug pipelines, pharmaceutical companies have been acquiring smaller companies with promising drugs in development.
To give a sense of the scale of innovation, 2021’s 357,640 MedTech, biotech and pharmaceutical patent applications globally compare with 379,000 for computer technology. Clearly, today’s healthcare industry is a hotbed of innovation.
Yet there will be a big gap in the fortunes of winners and losers.
The share prices of pharmaceutical firms that do not have drug pipelines benefiting from next-generation drugs are languishing. There’s a patent cliff looming: the percentage of prescription drug sales at patent risk in 2027-2028 will reach the highest level since 2015, Evaluate Pharma says.
The broad index performance masks a wide range of returns.
In pharmaceuticals alone, revenues are estimated to climb from $1.1 trillion in 2023 to $1.6 trillion in 2028, according to Evaluate’s forecasts. The growth rate may be still greater in biotech and MedTech.
CONCLUSION
The healthcare industry is pushing at new frontiers that should lead to profits growth.
While Novo Nordisk and Eli Lilly have risen to become two of the most valuable companies globally in recent years, other healthcare companies have struggled. Broadly speaking, the sector has trailed global equity markets. During 2023, for instance, the MSCI World Health Care Index rose by just 4.27% compared with the MSCI World’s 24.42% rise.
High M&A in face of patent cliff shows potential for both winners and losers.
More than 11 million robotic surgeries have been performed worldwide using “da Vinci” robots. The surgeon guides the robot through a console, making it possible to operate through small incisions.
According to research from Bain & Company, the market is already worth more than $3 billion worldwide and will continue to grow, with applications across a range of areas.
Source: Medi-Tech Insights, 2022
Source: Bain & Company, 2023
With obesity at the root of many health problems, demand from the huge U.S. market alone is outstripping supply.
But Novo Nordisk and Eli Lilly will soon see competition.
Eli Lilly, the U.S. pharmaceutical giant with the Mounjaro anti-obesity drug, has seen a still greater stock surge.
Indeed, brokers estimate the weight-loss drugs market could grow from $6 billion to as much as $100 billion by the end of the decade.
The popularity of the weight loss drugs could also create new consumers of lifestyle purchases as a healthier population looks to stay in shape.
Source: MIT Technology Review, 2024
While their specific drugs are protected by patents, the GLP-1 class of medications originally developed for Type 2 diabetes is not. More than 70 anti-obesity treatments are in development, according to STAT, a medical news site.
As of March 26, its market capitalization was approximately $576.5 billion, propelled by the prospects for the Wegovy and Ozempic anti-obesity drugs. On August 8, 2023, Novo Nordisk announced that its medication also reduced the risk of heart attacks or strokes, spurring the latest leap in its share price.
Robotics
Wearables and real-time biometrics
Tailoring treatment to genes
As a leader in developing GLP-1 drugs, Novo Nordisk has swiftly become Europe’s most valuable quoted company.
160
280
130
250
100
220
85
190
2024
2023
2022
Wearable Medical Sensors and Devices
Smartwatches and Fitness Trackers
2021
11% CAGR
19% CAGR
Number of units shipped globally (millions)
Source: Deloitte, 2022
For instance, clinical trials are currently testing mRNA vaccines against a range of cancer types including melanoma, ovarian, head and neck, colorectal, lung and pancreatic. These are the first cancer therapies entirely tailored to one patient’s DNA.
Healthcare can also be tailored to a person’s genetics.
Source: Scientific American, 2021
Derailing a potentially lethal illness such as spinal muscular atrophy.
Training the immune system to fight cancer.
Precision editing for blood disorders.
Gene swaps to prevent vision loss.
Four Promising Gene Therapy Success Stories
Healthcare Patents on the Rise
Source: PGIM, 2024
Principal at PGIM Fixed Income
Scott Swanson
As the weight comes off, lifestyles will start to change. So we could see more gym memberships or gym equipment sales. And as people become more active, people will start investing in new hobbies such as golf, gardening, hiking, whatever, all which could drive increased purchases of consumer products. . . . People with obesity spend just under $2,000 more a year on medical costs, and people with severe obesity spend about $3,000 more.
So these savings could be added back to a household budget, benefiting other areas in the consumer sector.”
Source: PGIM, 2024
Portfolio Manager, Jennison’s Healthcare Strategies
Daniel Matviyenko
Our belief is that over the next three to five years, GLP as a class will become the largest pharmaceutical the world has ever seen. Demand is being driven and will continue to be driven by Type 2 diabetics as well as by people looking to lose weight overall... In addition to weight loss, we do believe that there are other benefits from GLPs: be it on heart health, on things like sleep apnea and so on and so forth. So, our view is that it’s a multi-factorial set of drugs and the applications are fairly wide open.”
Innovation is flourishing (see chart). Total pharmaceutical, MedTech and biotech patent applications increased from more than 197,800 globally in 2011 to almost 357,640 in 2021. For every drug or new medical device that’s approved, many patents are filed to protect intellectual property.
New drugs have the potential to transform treatment of serious diseases, including diabetes, obesity, cardiovascular disease and cancer. Yet not all healthcare companies will be winners. While the true innovators will prosper, others look likely to be left behind.
It’s a defining moment for healthcare. From drug discovery to digital delivery, a once-in-a-generation revolution is promising to introduce new cures for some of the most intractable illnesses, as well as personalized treatment at a lower cost.
Cumulative Index Performance
Gross Returns (USD) (Jan 2009 – Jan 2024)
An experienced manager can really look and take advantage of the volatility on both the long and the short side, creating a hedged portfolio that is defensive, by using knowledge and expertise seeking to find the winners and losers in volatile sectors.”
Portfolio Manager at Jennison Associates
Debra Netschert
Mirati Therapeutics
Five Largest Acquisitions in 2023 Q4
Date: Oct. 8
Value: $4.8bn
Purchaser: Bristol Myers Squibb
2023
2022
2021
2020
2019
Combined Deal Values (USD Billions)
Quarterly Deal Counts
Healthcare M&A
Annual MSCI Index Performance %
We want to own the stocks of those companies where it's true innovation. Where as we look out three years, this company has created a market or changed an existing market by improving the outcomes for the patients while at the same time improving the cost profile of that therapy.”
Portfolio Manager, Jennison’s Healthcare Strategies
Daniel Matviyenko
General Surgery
Cardiology
Neurosurgery
Orthopedics
Vascular Surgery
10-Year Growth Projection by Specialty Type
Source: Bain & Company, 2023
Shell
Roche
Novo Nordisk
Novartis
Nestle
LVMH
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
$600
$500
$400
$300
$200
$100
0
2000
2001
Europe’s Most Valuable Companies Over 20 Years (USD Billions)
Source: LSEG, Reuters, 2023
Source: World Intellectual Property Indicators 2023
120,000
40,000
160,000
80,000
Pharmaceuticals
Biotechnology
Medical Technology
0
180,000
100,000
20,000
140,000
60,000
DAWN OF A NEW ERA IN
DRUG DISCOVERY AND TREATMENT
1
$200
$400
$600
2009
Source: MSCI, 2024
MSCI ACWI
MSCI World
MSCI World Health Care
552.97
510.94
585.25
2024
2019
2014
Company Acquisition
Other Deal Types
Mega-Mergers ($30bn+)
Q4
Q4
Q4
Q4
Q4
Q3
Q3
Q3
Q3
Q3
Q2
Q2
Q2
Q2
Q2
Q1
Q1
Q1
Q1
Q1
Source: Evaluate Pharma, 2023
55
50
45
40
35
30
25
20
15
10
5
0
2022
-10
20
-30
10
30
40
-20
0
2010
Source: MSCI, 2024
MSCI ACWI
MSCI World
MSCI World Health Care
2023
2019
2018
2017
2016
2015
2014
2011
2013
2012
2021
2020
THE CONUNDRUM: HOW TO PICK WINNERS AND AVOID LOSERS
3
NEW FRONTIERS IN THE DELIVERY OF HEALTHCARE
2
2021
2016
2011
Download the PDF
+
0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
$110
Company Takeouts
Source: Reuters, 2023
Source: Market Data Forecast. Gene Therapy Market. March 2023
Source: Reuters, 2023
Source: Reuters, 2023
Source: Medicina, "New Robotic Platforms in General Surgery: What’s the Current Clinical Scenario?" 2023
Source: Evaluate Pharma, 2023
Source: Fierce Pharma, 2024
Source: PGIM, 2023
Source: Evaluate Pharma, 2023
Source: PGIM, 2024
conclusion
winners
delivery
discovery
INTRO
conclusion
winners
delivery
discovery
INTRO
conclusion
winners
delivery
discovery
INTRO
conclusion
winners
delivery
discovery
INTRO
conclusion
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delivery
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INTRO
Quarterly Deal Counts
Combined Deal Values (USD Billions)
Quarterly Deal Counts
Combined Deal Values (USD Billions)
Source: Drug Discovery & Development, 2024
Its share price was up almost 130% over the past 12 months, as of March 26, giving Eli Lilly a market capitalization of $734.6 billion.
Source: Drug Discovery & Development, 2024
Purchaser: Roche
Value: $17.25bn
Date: Oct. 23
Telavant
Purchaser: AbbVie
Value: $8.7bn
Date: Dec. 6
Cerevel
Purchaser: Bristol Myers Squibb
Value: $14.0bn
Date: Dec. 22
Purchaser: AbbVie
Value: $10.1bn
Date: Nov. 30
Karuna Therapeutics
Immunogen
2011
2016
2021
60,000
140,000
20,000
100,000
180,000
0
80,000
160,000
40,000
120,000
2000
0
$100
$200
$300
$400
$500
$600
2010
2020
2024
2014
2019
2024
585.25
510.94
552.97
2009
$600
$400
$200
2020
2021
2012
2013
2011
2014
2015
2016
2017
2018
2019
2023
2010
0
-20
40
30
10
-30
20
-10
2022
Q1
Q1
Q1
Q1
Q1
Q2
Q2
Q2
Q2
Q2
Q3
2019
2020
2021
2022
2023
Q3
Q3
Q3
Q3
Q4
Q4
Q4
Q4
Q4
0
$10
$20
$30
$40
$50
$60
$70
$80
$90
$100
0
5
10
15
20
25
30
35
40
45
50
55
$110
Company Acquisition
Company Takeouts
$25.84 bn