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MARKET OUTLOOK - Healthcare, Pharma & Biotech


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this is the view of one fund manager, as they seek to navigate changes in the Healthcare sector, especially as they deal with a transition to digital tech.

Healthcare cloud solutions to watch

How to invest in technology companies that help manage patient and healthcare outcomes.

Elio D'Amato

As Australia emerges from the pandemic and life returns to normal, healthcare is set to experience more complex and challenging operating practices.

Having to juggle the new normal with business as usual will likely put a strain on many organisations. One key pillar seen by the sector as a means of managing this challenge is to harness technology to boost the data exchanging to which healthcare providers and other stakeholders have access.

In a report tabled by Deloitte into the outlook for global healthcare, it was noted that spending on cloud solutions by medical practitioners increased by 11 per cent in the second quarter of 2020, with more likely to come.

Further, it noted that artificial intelligence is gaining traction in the healthcare setting ... not only to automate manual processes but also to solve complex clinical and non clinical problems.

Greater understanding and engagement

This move to a more holistic model (where prevention and socioeconomic change is coupled with patient care and monitoring) is further reinforced by the Australian Medical Association which, in its Vision for Australia’s Health report, states as one of its pillars the need to embrace technology to facilitate better access to new and innovative value-based healthcare at a lower cost.

The goal is greater understanding and engagement between patients and practitioners

While COVID19 has hastened advances in this area, many medical software as a service (SaaS) providers had already identified the evolving nature of healthcare and had been developing software to help manage this next stage.

In what is a crowded space with many competing offerings, these are the ASX businesses gaining traction and helping the sector rise to the challenge, in Australia and overseas.

Alcidion Group: ALC offers software that combines task management, communication tools, data flow and interpretive consoles within any health setting to help with client care and practice management. Its flagship product, Miya Precision, sells solutions to the British and Australia /New Zealand markets. It services more than 300 hospitals and 60 healthcare organisations.

In its latest quarterly report, new contracts took the company total contracted revenue to $17.2 million, 70 per cent of which is recurring. Since the end of the quarter, another $3.1 million of revenue has been added. With more than $20 million cash in the bank, the company is well placed to pursue expansion plans.

Beamtree Holdings: BMT offers a range of innovative solutions across the health sector. Using artificial intelligence, BMT aims to improve the accuracy and timeliness of health data collected to help support a better quality of patient care in a cost efficient manner. Its software does this through peer level benchmarking to provide clinical decision support and improved patient outcomes.

It recently acquired Potential(x), a complementary business that provides benchmarking and analytical data to the healthcare sector. On a pro forma basis the company will earn $16.2 million in annual revenue, while improving margins and increasing recurring earnings. With more than 1000 sites in over 20 countries, BMT is our market’s largest health analytics platform.

Global Healthcare: GLH manages a portfolio of SaaS and software applications aimed at helping health businesses and their patients better manage outcomes efficiently. The solutions target organisations that provide healthcare services to people living with chronic conditions who require regular care.

After a heavily dilutive capital raising in June this year which incited investor angst, the latest quarterly update showed the company remained focused on growing sales, building out its tech and seeking new opportunities.

It has set an ambitious goal of achieving an average revenue growth rate of 25 per cent per annum for the next three years. It aims to do this by focusing on its key markets of community health services, hospitals and mental health, while exploring overseas expansion in the second half of this financial year

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There are six broad industry classifications in the health sector .... each with their own volatility and performance characteristics.

  • Medical equipment makers range from companies that make bandages to firms that make complex and expensive high-tech machinery used in medical procedures.
  • Providers and services is a very broad category ranging from distributors and wholesalers of health care products to companies that manage hospitals and other care facilities.
  • Healthcare technology companies that provide services software and IT services primarily to doctors, hospitals or businesses operating in the primary care network.
  • The pharmaceutical category includes companies engaged in the research, development or production of prescription and over the counter drugs, often creating a stable stream of revenue from continued sales.
  • Biotech firms, on the other hand, are far more speculative, with a focus on genetic analysis and engineering. They include companies specialising in protein based therapeutics to treat human diseases. Investors in these companies can wait years for a financial payoff as testing and regulatory approval processes take their course.
  • Life sciences tools and services companies support pharmaceutical companies and biotech firms by providing analytical tools, instruments, consumables & supplies, clinical trial services and contract research services.

Large pharmaceutical and biotech companies tend to rank well on quality metrics with a strong return on equity and a relatively low volatility in earnings growth. Some small cap companies, however, tend to demonstrate more equity momentum characteristics ... with strong positive earnings revisions and relatively lower value and quality characteristics.

The advantage of investing in health care stocks is that the sector is expanding at a faster rate than the broader economy. Despite government efforts to rein in the growth of spending and drive further efficiencies in the healthcare system, overall health spending is likely to continue to outstrip GDP as private individuals spend an increasing amount of their disposable income on longevity and wellness.

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