How are innovative companies preparing for tomorrow’s healthcare?

    How are innovative companies preparing for tomorrow’s healthcare?

    Jérôme Berton, Healthcare Portfolio Manager, Pharmacist, MBA, CEFA

    We have never seen as many resources being pooled together, in the healthcare sector, in the fight against Covid-19. This has not only at the vaccine level but also in terms of testing and drugs to better care for those infected with the virus. Much of these challenges are still at play including research, vaccine supplies and logistical issues. Furthermore, healthcare systems in many countries are also facing huge structural challenges beyond the pandemic.

    Hear from expert Jérôme Berton, a healthcare portfolio manager and pharmacist, who analyses the current challenges and opportunities and the underlying healthcare trends that Covid-19 has accelerated.

    We have never seen as many resources being pooled together, in the healthcare sector, in the fight against Covid-19

    Our healthcare model is clearly no longer sustainable

    Our current healthcare system is no longer viable over the long term, according to Jérôme Berton, who believes it to be short-termist, fragmented and inflationary. Our model is facing three major problems. The first is clearly demographic, with an ageing population and increasingly sedentary lifestyles. "The second major problem is more economic. Since the 1970s, healthcare expenditure has exploded and far outpaced economic growth. According to the OECD, some countries are spending between 15% and 20% of their GDP in the area of healthcare. This share has trebled over 50 years," explains Jérôme Berton. This is obviously unsustainable given the expected economic growth for these countries in the years to come and their debt burden. "Lastly, there are also political, societal and even geopolitical challenges that have been exacerbated by the Covid crisis, including access to care, medical cover, healthcare sovereignty and even interdependence in logistical chains at international level. This means that we have to adapt to new circumstances."

    What does the future of healthcare look like?

    Jérôme Berton believes that while Covid has not created any new trends in healthcare, it has certainly exacerbated some existing trends. Take for example diagnostics. This clearly shows that we were unprepared to tackle such immense healthcare problems. Public authorities have well understood the challenge and are now implementing investment programmes to better manage the current crisis and also anticipate future crises.

    …while Covid has not created any new trends in healthcare, it has certainly exacerbated some existing trends

    A second underlying trend is, of course, digitalisation, where a noticeable effort has been made and major steps forward have been taken, be that in telemedicine or prevention, such as remote healthcare coaching.

    "Globally, we are seeing what has tended to be very positive feedback from the field – from patients, doctors and paying agencies – with costs being significantly lower," adds Jérôme Berton.

    Telemedicine goes well beyond a simple GP consultation. It is possible to manage chronic conditions including diabetes and hypertension, as well as cover areas such as ophthalmology and psychiatry. "For example, we have identified a company that makes a wearable medical device – a bit like a patch – that transmits blood sugar levels to the wearer's smartphone in real time, without them having to prick their finger. It's completely revolutionary. This provides personalised data and enables real tracking that the patient can send to their doctor, who can then adjust their treatment if necessary." A similar example is another company that has developed a wearable medical device which can detect potential heart problems.

    This demonstrates that telemedicine goes far beyond on-screen doctor-patient interaction and still harbours considerable potential. Digitalisation will extend even further and play a major role in the actual development of drugs in the future, as laboratories will be able to track progress in clinical trials in real time, which will improve processes and productivity.

    Digitalisation will extend even further and play a major role in the actual development of drugs in the future…

    New technologies and a new investment approach

    Overall, the current crisis has enabled validation of some new technology platforms, such as messenger RNA1. This is completely disruptive and transforms the human body into a "drug production plant" to tackle diseases that are untreatable using more traditional technologies. These could include certain cancers, as well as viral and auto-immune diseases, which could be treated in this way in the years to come.

    "Finally, another lesser-known trend which we believe is destined for significant growth is synthetic biologicals. For example, we take an interest a company that is capable of manufacturing synthetic DNA on a large scale and at a low cost. This could have multiple applications, not only in healthcare and new medications, but also in agriculture, chemistry and the development of new materials, or even IT and data storage."

    In terms of investment, it should be noted that valuations are still attractive in different segments of pharma and healthcare in general. But the market has altered considerably. Structurally, the era of "mega mergers" between pharma companies is over. What we are tending to see now is large corporations buying innovative solutions developed by small companies via shares or acquisitions. A high level of diligence is therefore required when selecting securities.

    In molecular biology, messenger ribonucleic acid (mRNA) is a single-stranded molecule of RNA that corresponds to the genetic sequence of a gene, and is read by a ribosome in the process of synthesizing a protein.

    Important information

    This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.

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