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More and more people are getting better and better treatment through drugs and medical devices – 50 drugs were approved in the US market alone in 2021, continuing the positive growth trend of recent years. However, compared with the achievements and commercial potential of pharmaceutical companies, the return of investors is not high, so it is more appropriate to take a long-term view of the development of the pharmaceutical industry.
Valuations in the biopharmaceutical industry are more attractive relative to the valuations of the overall market and other healthcare sub-sectors. This also begs the question: What are the current factors that will lead financial markets to become more conducive to biopharmaceutical investment?
Patent expiration is one of the important reasons that will have an impact on big pharma companies in the coming years. thereforeBellevue Asset Managementforecast2022M&A activity will increase significantly during the year. At the same time, due to the attractive valuation of biopharmaceutical stocks and the high double-digit growth rate, the industry should be revalued. In recent years, on the one hand, the laboratories of biopharmaceutical companies have developed numerous new treatments; On the other hand, the biopharmaceutical sector has demonstrated its strong ability to innovate with impressive speed in developing solutions to respond to outbreaks. At the same time, these solutions have also developed new applications, such asmRNAThe technology could be used for new vaccines against infectious diseases and cancers, and these applications are already in clinical trials, it is expected2022There will be new data in the year.
Among the already successful heavyweights, companies such as Vertex Pharma and Biogen are reinvigorating their growth momentum by developing new products, and any clinical breakthrough success of these industry veterans could lead to a positive shift across the biopharmaceutical industry. In 2022, in the field of Alzheimer’s treatment, there are expected clinical and regulatory updates, which is exciting. Among them, the final data obtained by Biogen/Eisai’s study of early Alzheimer’s disease is very critical, and the antibodies they study are designed to prevent the deposition of β amyloid protein in the brain; Eli Lilly is expected to present data from the Phase III study of Donanemab, Roche and Morphosys Phase III data on gantenerumab may be submitted in the second half of 2022.
In the field of oncology, where a large number of data on antibody drug conjugates (ADCs) and bispecific antibodies are expected to be published in 2022, Gilead is working to expand the use of its anti-cancer drug Trodelvy to triple-negative breast cancer (TNBC). In addition, in this area, Gilead will compete with AstraZeneca/Daiichi Sankyo, the latter in 202111111 Encouraging early product data was provided each month. Both companies are also looking into the use of the approved ADC drug Enhertu for the treatment of breast cancer patients with low HER2 expression, and Genmab will also provide its lymphoma/ For the latest information on the Blood Cancer Program, Xencor will provide validation data on its bispecific technical concept.
Pharmaceutical Groups Are Like Banks
At first glance, the New York Stock Exchange (NYSE).ARKPharmaceutical Index (ARCA Pharmaceutical Index) in2021It grew throughout the year24.2%, this performance is not bad. But the main reason for this is Pfizer (Pfizerand the strong performance of a few pharmaceutical companies such as Eli Lilly, if you take into account corporate value and EBITDA (EBITDAvaluation indicators such as the ratio,ARKThe pharmaceutical index is higher than the S&P500The index is going to be lower on average25%。 At the same time, there are a series of facts that show that pharmaceutical companies are in the same place compared to companies in other industries2022years to be able to better cope with the market environment.
Due to the continuous inflow of large amounts of funds, large pharmaceutical companies generally have huge cash reserves. In the case of Pfizer, revenue from the Covid-19 vaccine and, more recently, the Covid-19 drug Paxlovid, further boosted its cash reserves; In addition, Johnson & Johnson, Novartis and GSK Other pharmaceutical groups can also receive significant inflows from the planned spin-offs of various parts of the company, distributing billions of dollars as dividends to shareholders. For a large number of investors, high dividend returns are a key reason to buy pharmaceutical stocks. In addition, large pharmaceutical companies will also invest heavily in cooperation and take advantage of the current lower valuation of the biotechnology sector for acquisitions.
The Medical Technology Industry Has A Bright Future
The increase in the life expectancy of the world’s population, the improvement of people’s living standards and the innovation of equipment and medical devices have laid a good foundation for the long-term structural growth of the medical technology field, Bellevue Asset Management expects the growth rate of the medical technology industry to be 5 to 6%, much higher than the global economic growth rate, and its profitability is expected to further increase.
In recent years, the driving force for innovation of mature products and technologies in the market has mainly appeared in diabetes treatment, minimally invasive heart valve replacement, nerve stimulation of neurological diseases and surgical robotics. A good example is Dexcom, a U.S. company that specializes in diabetes detection instruments and is a leader in using data analytics to monitor blood sugar levels in real time, and they will launch a new generation of products this year.
For service providers and insurers, the vertical integration of producers, the increasing number of health insurance companies, and the reduction in management costs and efficiency brought about by the continuous digitization of the industry demonstrate the high growth potential of the medical technology industry. Delayed equipment orders during the covid-19 pandemic and research into medical treatments for non-fatal diseases will also give the industry another boost, ensuring a steady growth rate for the industry, making the medical technology sector one of the most stable and defensive sectors in the financial markets.
The Development Of Digital Health Is Underestimated
As in other areas of work and everyday life, the use of sensors, cloud data storage, and artificial intelligence is on the rise in healthcare. Disruptive technologies, such as digitizing patient data, can improve treatment and increase efficiency. In the field of digital health, small and medium-sized enterprises dominate.
In 2022, the strongly growing digital health sector remains intact. In terms of sales and earnings, most companies will be able to maintain their previous growth momentum in 2022, and for now, healthcare is still one of the least digital industries in the world, so its future development is also promising.
All in all, biotechnology and digital health are generally volatile investments with higher growth rates, with pharmaceuticals acting as defensive hedges in times of inflation, while medical technology has a bright future and will benefit from the post-COVID-19 rebound effect.