Insights
By: Tristan Dolphin
Healthcare: continued promise for sustainable investors – Tristan Dolphin
What does the future look like for a sector with inbuilt positive impact?
The Healthcare industry is a natural hunting ground for sustainable investment strategies given the high positive impact that many companies create, the attractive investment fundamentals for those that are successful, and the lower correlation to the business cycle than many other industries.
2024, though, will be remembered as a challenging environment for many of the world’s Healthcare companies. A combination of regulatory concerns on pricing, uncertainty on the impact of weight loss treatments and the sector being a less obvious beneficiary of the new Trump administration all weighed on performance during the year. Despite this, there are several reasons to be more optimistic.
First, earlier stage, innovative companies may find themselves less under the scrutiny of US regulators who are more concerned with tackling the large pharma companies’ too-high prices for legacy drugs than they are the smaller companies developing cost-saving treatments. One such company is Alnylam Pharmaceuticals, an independent biopharmaceutical company that has pioneered RNA interference therapeutics that selectively shut off harmful genes. The company’s shares rallied 33%, after they announced in June 2024 that their drug ‘Vutrisiran’ had succeeded in a late-stage study for patients with a serious heart condition known as ATTR amyloidosis with cardiomyopathy.
Another reason for optimism comes from President Trump’s policies, particularly around corporate tax cuts and deregulation. These changes will boost US mergers and acquisitions across sectors, Healthcare among them. In the past few years, it has been difficult for larger companies in the industry to buy smaller businesses, which has had an obvious negative impact on valuations.
Finally, sentiment has been quite negative on the Healthcare sector, with other areas, such as the banking sector, seen to be more likely beneficiaries of the deregulation agenda and an economy that may grow faster. However, it is isn’t typical for Healthcare to stay out of favour for long. It continues to be one of the most innovative sectors due to technological developments feeding increasing demands from aging populations with increasingly complex healthcare needs.
We operate in a world characterised by the interplay between continuing global conflicts, trade challenges, climate change including record temperatures and the ever-widening gap between the rich and poor. Given all this, a sustainable investment philosophy, which is mindful of the positive and negative externalities that investments have, seems a sensible approach to navigating an uncertain world. Given the obvious link between human wellbeing and the environment, Healthcare clearly has a vital role to play.
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