Investments in the healthcare sector are commonly classified as countercyclical, meaning that their returns are not closely correlated to the general business cycle. A clear example of this resilience occurred in 2022, when the MSCI World index fell more than 12%, while the global health sector equity index limited its losses to 5.4%. However, it is important to note that the healthcare sector is not without risk. Nine out of ten drugs fail to pass the testing stage to reach commercialisation. It is crucial to emphasise that the healthcare sector is not only about drug production, but also encompasses a wide range of other sectors.
The healthcare sector has significant points of convergence with innovation in areas such as biotechnology, robotics, digitisation and artificial intelligence. Medical research is constantly progressing, and more and more surgical procedures make use of the most advanced technologies. In addition, pharmacology and healthcare treatments benefit from innovation and research, which can lead to the development of more effective treatments and therapies.
Two notable examples of the application of innovation to medicine include:
1. Advance diagnosis of lung cancer: a project developed by Northwestern University and Google uses artificial intelligence to diagnose lung cancer in an early stage.
2. Telemedicine: this technology enables remote surgery, offering new opportunities for the provision of medical care even in remote areas.
Vinay Thapar emphasises that investment strategy in the healthcare sector should aim to combine innovation and research with sound business models. This strength can be measured by return on total capital and return on investment, indicating efficient use of resources in operations as well as in research and development.
The healthcare sector offers interesting investment opportunities owing to its countercyclical nature and its connection to innovation and research. Investors seeking to protect and grow their assets may find value in this evolving sector.
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