No end to demand
Health has no price for most of us, and we are all getting much, much older. This demographic revolution is putting increasing strain on health services and making them more expensive and political, as can be seen in the funding difficulties of the NHS, and with Obamacare in the US. But even The Donald needs doctors, so medical research is likely to trump president Trump himself.
The need is for entrepreneurial and innovative thinkers to assess which problems can be solved, and how cheaply, just like stents versus bypass operations. So the best way to invest is not through large diversified companies – such as Johnson & Johnson, where medicine is just a tiny part of their total activities – but smaller, groundbreaking specialists.
However, not all new medical techniques find favour, and some do not work. And some of these companies can and do fail. So the answer for all of us is a closed-end investment trust with specialised investment mangers.
Reducing investment risk
The first place for investors to look is the sector specialist part of the Association of Investment Companies (AIC) website – specifically biotechnology and healthcare. With the help of AIC researchers, some of the medical trusts, together with the areas in which they specialise, can be found below.
But as with any investment trust, would-be investors must read the annual report, and see how well the chairman’s view of the corporate aim is allied to that of the investment manager. Then, if there is accord, investors should use their common sense to choose which areas of investment most appeal to their own sensibilities.
Not surprisingly, there is considerable crossover in these companies’ portfolios.
- International Biotechnology’s top holding is Biogen, an American company developing, manufacturing and commercialising biologic drugs primarily for inflammatory and autoimmune diseases as well as cancer.
- One of BB Healthcare’s top holdings is Celgene, another American company that develops medicines for cancers; its products include a leukaemia treatment.
- One of Biotech Growth’s top holdings is Amgen, which manufactures treatments for areas of unmet medical need such as cancer and heart disease.
- Worldwide Healthcare holds a company called Boston Scientific which develops implantable medical devices, such as stents, for use in cardiology, neurovascular, endoscopic, urologic, gynaecologic and pain management procedures, to name a few.
But like engineering, technology has no clear distinctions, and many trusts that invest in the nuts and bolts of electronic and scanning activities find themselves with medical investments. A while ago I mentioned two such companies. These were:
- Polar Capital Global Healthcare. It holds Sanofi, which produces treatments for a variety of conditions, including rare diseases, multiple sclerosis and diabetes. Sanofi is also the world’s largest supplier of flu vaccines.
- Herald Investment Trust is another, and this has a company called Craneware in its top holdings, which is the leader in automated value cycle solutions. These help US healthcare provider organisations discover, convert and optimise assets to achieve the best clinical outcomes and financial performance for patients and doctors alike.
Meanwhile, Baillie Gifford Japan holds Cyberdyne, which produces exoskeleton robots to support recovery from stroke or spinal injury. The robots’ control systems use the patient’s own nerve signals to control movement – this is an incredible technology driven by the ageing population of Japan, and which will have an application to the severe shortage of care workers predicted for the Atlantic world.
In addition, no investor should forget Scottish Mortgage, which invests in Illumina, a company that produces a type of gene-sequencing equipment that has brought down the cost of sequencing a person’s genome significantly and is likely to have a big impact on early detection of diseases.
Scottish Mortgage also invests in Grail, which is a spin off from Illumina. While this is more on the research side, it could be interesting, as it is working to develop a blood test to detect cancer early – and has recently made the headlines with this very service.
