Polar Capital Holdings plc (Polar Capital), the specialist active asset management group, has released the 2022 outlook for the Global Healthcare Team.
“Given the healthcare sector has spent the past two years fighting COVID-19, the biggest thing we are looking at now is the backlog in surgical procedures and diagnostic tests. The pandemic is having a huge impact on utilisation, whether it be from people unwilling to go to a hospital/see their doctor or healthcare systems struggling to manage on top of COVID-19 patients.
2022 is going to be really important year and if we can see a significant reduction in COVID-19 infections, then healthcare systems can start to deal with this backlog. If that starts to correct itself, then the story for healthcare will have a different focus for us compared to the past two years.
The long-term themes we are looking at include the delivery of healthcare, innovation, outsourcing, and emerging markets. Some of those have seen acceleration through the pandemic and we believe will continue to grow over the next several years in their importance. The shorter term is about the opportunities around consolidation. Healthcare is the most fragmented industry and while there has been consolidation at a reasonable pace in the sector over the past year and a half/two years there is a still a great rationale for further consolidation.
One area that has seen a big slowdown in M&A is large pharma and large biotech buying smaller biotech and drug companies. Reasons for the slowdown include policy overhangs, IPOs, worries over financing and so on. Also, going back around a year, management teams and company boards were focused on share prices which were much higher than today because small-cap biotech firms were generally quite weak in 2021.
We believe the opportunity for healthcare is strong in 2022. The macros are really important, and if the rate of inflation slows it will help attract investment flows out of the most sensitive areas back to areas like healthcare. Other pieces of the healthcare puzzle include valuations that we believe are really attractive on a relative basis; the message from companies in management meetings is of strong fundamentals and constructive growth outlooks.
The growth in healthcare may look much more similar to general market growth next year, compared to this year’s more cyclical growth where global market earnings were much more significant – as you would expect coming out of 2020.”
