For financial professionals in Finland

Opportunities in healthcare in 2022

Andy Acker, CFA

Andy Acker, CFA

Global Life Sciences | Portfolio Manager


2 Feb 2022

The healthcare sector experienced uneven performance in 2021. Looking ahead, Portfolio Manager Andy Acker believes discounted valuations, innovation and the waning influence of COVID-19 are creating attractive investment opportunities throughout the sector.

Key takeaways

  • COVID-19 has led to swings in healthcare stock returns over the past two years but that could change as the pandemic begins to retreat.
  • In COVID’s wake, we think many stocks now trade at a discount to the value of their underlying companies’ growth prospects.
  • In our view, opportunities can be found throughout the sector, including in biotech where new treatment modalities are revolutionising care; in medical devices where advances in robotic surgery are improving patient outcomes; and in managed care, which is benefiting from expanded government health insurance programmes and a robust job market.
View transcript Expand

 Andy Acker: COVID continued to influence the performance of healthcare stocks in 2021, as returns were quite uneven throughout the sector. As we go through the Omicron wave now, we believe that the impact of COVID-19 will begin to wane.

So far, what we’ve seen is the Omicron variant comes on quickly, but in many parts of the world, declines just as quickly. And also, its severity seems to be less than other variants that we’ve been through before. So, this starts to raise the question of what will the world look like in a post-pandemic era?

As we think about the outlook for healthcare, we see opportunities across all four of the key sub-sectors. In the biotechnology sector, the innovation remains extremely high, with all new modalities of treating human disease, from cancer to heart disease to diabetes. We have new modalities including precision-guided antibody drug conjugates. We have gene therapy; we have gene editing that can now be done in patients; and we have to remember that the majority of the new medicines that are developed today come from small- and mid-cap biotech stocks, which have seen the biggest losses recently, and we think have a  positive outlook going forward.

Within the pharmaceutical sector, we see continued innovation across these areas, as well, and valuations that, we think, trade at a substantial discount to the market, mostly because of unfounded fears about significant changes to drug pricing, which we think are less likely to become reality.

When we think about medical devices, there are advances that are getting patients out of the hospital faster. We’re using robotic surgery to go beyond the potential of the human hand to conduct surgeries more accurately and with better outcomes for patients.

And in the managed care sector, we think stocks will benefit and companies will benefit from the improving labor market and from the growth of government programmes.

The COVID-19 wave that we’re currently in will hopefully be one of the last ones that we face, and hopefully the market will be able to get back to a more normal situation where true innovation beyond just for pandemics, including addressing high, unmet medical needs like cancer and heart disease and diabetes and new medical technology, will really come to the forefront in the minds of investors.

So, we continue to see opportunities across the healthcare landscape. We believe the valuations are significantly discounted relative to their history and relative to the market. And so, we continue to have a favorable outlook for the healthcare sector despite the current volatility that we are experiencing.

These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. Any securities, funds, sectors and indices mentioned within this article do not constitute or form part of any offer or solicitation to buy or sell them.

 

Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

 

The information in this article does not qualify as an investment recommendation.

 

Marketing Communication.

 

Glossary

 

 

 

Important information

Please read the following important information regarding funds related to this article.

Janus Henderson Capital Funds Plc is a UCITS established under Irish law, with segregated liability between funds. Investors are warned that they should only make their investments based on the most recent Prospectus which contains information about fees, expenses and risks, which is available from all distributors and paying/facilities agents, it should be read carefully. This is a marketing communication. Please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions. The rate of return may vary and the principal value of an investment will fluctuate due to market and foreign exchange movements. Shares, if redeemed, may be worth more or less than their original cost. This is not a solicitation for the sale of shares and nothing herein is intended to amount to investment advice. Janus Henderson Investors Europe S.A. may decide to terminate the marketing arrangements of this Collective Investment Scheme in accordance with the appropriate regulation.
    Specific risks
  • Shares/Units can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • Shares of small and mid-size companies can be more volatile than shares of larger companies, and at times it may be difficult to value or to sell shares at desired times and prices, increasing the risk of losses.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • The Fund is focused towards particular industries or investment themes and may be heavily impacted by factors such as changes in government regulation, increased price competition, technological advancements and other adverse events.
  • The Fund may use derivatives towards the aim of achieving its investment objective. This can result in 'leverage', which can magnify an investment outcome and gains or losses to the Fund may be greater than the cost of the derivative. Derivatives also introduce other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If the Fund holds assets in currencies other than the base currency of the Fund or you invest in a share/unit class of a different currency to the Fund (unless 'hedged'), the value of your investment may be impacted by changes in exchange rates.
  • When the Fund, or a hedged share/unit class, seeks to mitigate exchange rate movements of a currency relative to the base currency, the hedging strategy itself may create a positive or negative impact to the value of the Fund due to differences in short-term interest rates between the currencies.
  • Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
  • The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
The Janus Henderson Horizon Fund (the “Fund”) is a Luxembourg SICAV incorporated on 30 May 1985, managed by Janus Henderson Investors Europe S.A. Janus Henderson Investors Europe S.A. may decide to terminate the marketing arrangements of this Collective Investment Scheme in accordance with the appropriate regulation. This is a marketing communication. Please refer to the prospectus of the UCITS and to the KIID before making any final investment decisions.
    Specific risks
  • Shares/Units can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • Shares of small and mid-size companies can be more volatile than shares of larger companies, and at times it may be difficult to value or to sell shares at desired times and prices, increasing the risk of losses.
  • If a Fund has a high exposure to a particular country or geographical region it carries a higher level of risk than a Fund which is more broadly diversified.
  • The Fund is focused towards particular industries or investment themes and may be heavily impacted by factors such as changes in government regulation, increased price competition, technological advancements and other adverse events.
  • The Fund may use derivatives towards the aim of achieving its investment objective. This can result in 'leverage', which can magnify an investment outcome and gains or losses to the Fund may be greater than the cost of the derivative. Derivatives also introduce other risks, in particular, that a derivative counterparty may not meet its contractual obligations.
  • If the Fund holds assets in currencies other than the base currency of the Fund or you invest in a share/unit class of a different currency to the Fund (unless 'hedged'), the value of your investment may be impacted by changes in exchange rates.
  • When the Fund, or a hedged share/unit class, seeks to mitigate exchange rate movements of a currency relative to the base currency, the hedging strategy itself may create a positive or negative impact to the value of the Fund due to differences in short-term interest rates between the currencies.
  • Securities within the Fund could become hard to value or to sell at a desired time and price, especially in extreme market conditions when asset prices may be falling, increasing the risk of investment losses.
  • The Fund may incur a higher level of transaction costs as a result of investing in less actively traded or less developed markets compared to a fund that invests in more active/developed markets. These transaction costs are in addition to the Fund's Ongoing Charges.
  • The Fund could lose money if a counterparty with which the Fund trades becomes unwilling or unable to meet its obligations, or as a result of failure or delay in operational processes or the failure of a third party provider.
Andy Acker, CFA

Andy Acker, CFA

Global Life Sciences | Portfolio Manager


2 Feb 2022