- Innovation is modernizing the healthcare sector, as technology adoption is improving the patient experience, influencing lower costs.
- Advancements in the ability to diagnose, monitor, and treat diseases with personalized therapeutics is creating a broad set of investment opportunities.
- Value-based care models are helping patients by shifting the liability to the provider of care, which is encouraging technology investments and driving better outcomes.
- We believe the current wave of innovation is presenting opportunities for select companies with access to data to demonstrate durable, outsized growth over the next decade, similar to what we observed in the information technology sector from 2010 to 2020.
Healthcare Races toward Tech
Today’s US healthcare system is interconnected. Changes in one industry impact the others. As innovation continues, we expect the sector to resemble the information technology sector over the next decade.
Currently, there are a handful of large tech conglomerates with entrenched competitive advantages. We expect this dynamic to play out in healthcare. Companies that can continue to innovate should benefit. Data will play a crucial function in defining winners. Over time, we expect the healthcare companies that can effectively collect, process, and make sense of data to emerge as the industry’s large conglomerates with established competitive advantages. For example, managed care organizations with hundreds of millions of members are able to collect patient data across different demographics and identify the best treatments for individual patients.
Multiple Ways to Access Therapeutic Breakthroughs and Clinical Research Growth
Advances in DNA sequencing, artificial intelligence, and computational biology in the biotech space have translated into new treatments for chronic diseases such as diabetes and obesity.
There are also early signs that more effective obesity treatments are having a positive impact on cardiovascular disease, which is among the world’s deadliest and most costly conditions to treat. For investors, these advancements are creating new opportunities among select pharmaceutical companies that have the depth of resources—including large balance sheets and sizeable manpower—to capitalize on this enormous market for cardiovascular treatments and prevention.
Additionally, the increase in publicly traded biotech and biopharma companies during the past five years is just one of many ways to gain exposure to potential breakthrough discoveries.
The global experience of COVID-19 highlighted that there has not been nearly enough investment in basic research to develop new treatments. As a result, funding has poured into healthcare innovation since the start of the pandemic. This R&D spending extends to companies along the healthcare supply chain and is creating a much broader investment opportunity set. As one example, the process of analyzing a molecule in a biotech company’s research lab requires, among other things, specialized chemicals and research tools produced by different types of companies.
Opportunities Emerging from Value-Based Care Models
Innovation in healthcare is designed to improve access to care, quality of diagnosis, and patient outcomes, which collectively reduce costs across the healthcare system. At its core, these are the goals and catalysts for innovation in the sector. A shift towards a value-based care model where costs are directly associated with the quality of the result is encouraging technology investments to increase efficiencies.
Healthcare service providers are guiding this evolution, with access to patient data and developing methods to monitor and optimize the delivery of care.
Jennison's investing approach is rooted in our fundamental research and security selection; all of our portfolios are built from the bottom-up, security by security.