Healthcare after COVID-19HealthcareafterCOVID-19

COVID-19 Transforms the Healthcare Sector

Q: Is the pandemic as transformative to the global health sciences sector as many investors might suspect?

A: It does feel like all COVID, all the time. And it is clear that healthcare is going to change in a dramatic way as a result of this experience. We are going to see faster product rollouts, faster development times, and far more user engagement. As a society, we’ve become so much more technology savvy and so much more health savvy. That’s a powerful combination.

Tech Allows Healthcare Optimization

Q: So, you anticipate more consumer demand?

A: People everywhere are thinking much more about their healthcare and are conscious of the things that they can do to help themselves, including through the use of personal care devices. Sure, maybe some of the self-administrated blood oxygen measurements and thermometers that we’ve all been buying will get tossed into drawers. But it seems inevitable that people are going to increase their efforts to optimize their healthcare. And technology is going to play a big role there.

Q: What sorts of new products are you excited about?

A: Think about glucose monitors that provide a continuous glucose monitoring system (CGM). The daily management of diabetes is daunting, and achieving clinically acceptable outcomes requires significant engagement and modified behavior. The availability of actionable data—such as real-time accurate blood glucose readings—is the first and arguably most critical piece of diabetes treatment algorithms. We are excited about next-generation CGMs, which will have a smaller footprint and increased accuracy. A growing awareness of the direct correlation between the use of real-time glucose data to positive outcomes and fewer complications will drive increased penetration into the large Type 2 population. Ultimately, individuals will have the ability to use CGMs that are more accurate, super user-friendly, and about the size of a large Band-Aid.™ Given that so much of disease control is about personal compliance, developments like this are going to be a game changer. Patients—and their doctors—will be able to look at their real-time data in a more qualitative fashion and make more immediate changes when needed. This will lead to much better outcomes and fewer complications.

Another innovation that has the potential to really accelerate the diagnosis of a disease and more accurately monitor disease progression is liquid biopsy. Using this technology, oncologists use a simple blood sample to figure out the driving mutation that is causing the cancer cells to multiply, instead of an invasive needle biopsy. This allows a patient to receive a more targeted therapy faster, which will hopefully lead to better outcomes.

Opportunities for Skilled Investment Managers

Q: Does this surge in innovation create opportunities for skilled investment managers, especially given the relative lack of correlation of the biotech sector to the broader market?

A: Yes, because the healthcare market is very different in each geography. In the United States especially, it’s quite fragmented. In addition, diseases are heterogeneous; everyone’s body is different, and each technology being developed is slightly different from the next. These small changes are not evident on the surface; they require a skilled eye to decipher. There are countless ways to participate in this market, to find a niche, especially as the science is changing so rapidly. In the biotech sector alone, the number of public companies has almost quadrupled over the past 10 years.

As for correlation, certain companies may be correlated to the market at the factor or macro level, but it is their product cycle or clinical data that will really break that correlation. We are really focused at the innovation level, looking for companies that are raising the standard of medicine across specific areas. There is a lot of clinical data to analyze in our space, and it needs to be put into context with the competing technologies, standard of care, and an ever-changing regulatory and reimbursement environment, so the bar is always moving. When the data for a clinical trial comes out, it’s never entirely in line with expectations, so we are always learning something new. Importantly, the deep analysis that comes with analyzing thousands of clinical trials helps to develop a certain level of pattern recognition, which improves your evaluation process over time. We are also engaged with our management teams trying to guide them and have a positive impact on these companies, from both a strategic and ESG perspective.

Q: You started your own career as biotechnology analyst after an education in health science and physical therapy. What drew you to the investing world?

A: I have always had an interest in healthcare, particularly in personalized medicine, and in advancing healthcare—and I never want to stop learning. Investing in this space is a great vantage point for seeing the innovation curve, which is just so striking now. Millennials are not going to endure the healthcare system that we have today—the lack of information and lack of transparency. There is likely going to be massive change. It’s an incredibly exciting time.

 

¹ Evaluate Ltd, Evercore ISI

A version of this article first appeared in Independent Thinking, the quarterly journal of Evercore Wealth Management.