The golden age of biotech is coming – are you ready?

Despite the geopolitical ructions going on around the world, there has hardly been a better time in human history to be alive - particularly as it concerns our physical health. 

Here’s are some of the advances of the past 100 years:

• Penicillin was discovered less than 100 years ago.
• The first successful use of chemotherapy to cure cancer was in 1953.
• The first successful artificial heart transplant was in 1983.
• The human genome was completely mapped 21 years ago, around the same time robotic surgery was introduced to Australia.
• In 2012, scientists discovered how to edit genomic DNA (CRISPR technology – which can even allow editing at the embryonic stage).
• And in a world first, an artificial heart - developed by Australian Dr Daniel Timms - was recently successfully implanted in a human body

The COVID-19 pandemic was a case in point of the extraordinary advances in medical technology. In hindsight, it’s quite mind-blowing how companies like Pfizer were so quickly able to harness existing and frontier therapies to map COVID-19 and produce a vaccine. And AI is set to be another gamechanger.

We’ve never had better opportunities to manage and treat our health concerns, and what makes it all more exciting is that the future of personalised treatments is already upon us.

The implications of all this from a social standpoint are incredible, but it’s also worth remembering that healthcare and biotechnology can be highly lucrative. 

Just look at CSL’s growth in the past 30 years – or even consider that Pfizer made nearly $37bn from the covid vaccine in 2021.

The good news is that you can invest in all of this for your portfolio. The bad news is that this is a highly specialised space and it’s not always easy to pick the winners of tomorrow.

As such, I’ll be interviewing some of Australia’s experts in healthcare and biotech investing over the next week. I'll be asking about the innovations they are watching and how they are investing in this exciting space. But before we get started, here's a run-down of some of the key drivers for the future of healthcare and what the space looks like presently. 

The growth and size of the healthcare sector

The Healthcare Services Global Market Report 2024 highlights that the global market is valued at $8.3tr and expected to grow to $10.9 trillion by 2028, following a compound annual growth rate of 5%.

It’s an area that private companies and governments alike are spending big on. For example, in the US, by far the biggest market for healthcare, spending hit $4.8 trillion in 2023. Closer to home, the Australian government spent $10.57bn on healthcare in 2022-2023.

Spending on healthcare is a necessity and is expected to continue to grow with population growth and an ageing demographic. 

What the healthcare sector actually looks like

The healthcare sector is broad, so it’s worth taking the time to look at each component.

It’s generally broken down into two industry groups and six industries.

1. Healthcare equipment and services
   - Healthcare equipment and supplies - e.g. manufacturers of bandages to MRI machines
   - Healthcare providers and services - hospitals, nursing homes
   - Healthcare technology - data and R&D
2. Pharmaceuticals, biotechnology and services
   - Biotechnology - uses biology, such as cells and molecules and integrates with engineering to produce healthcare products
   - Life science tools and services - analytical tools, clinical testing services and contract research services
   - Pharmaceuticals - drugs and vaccines

2 megatrends driving growth in healthcare

1. The aging population

Western countries are experiencing aging populations, but they aren’t alone; China is also in the mix. This is the concept that country demographics will be tilted towards older people, with fewer people of working age to support the economy. By 2050, the share of people aged over 65 is expected to be 16%, compared to 10% in 2022.

You may wonder what this means for the healthcare industry—it’s a lot. For a start, the sector will need to support the treatment of a large number of age-related diseases, such as dementia or cardiovascular issues. It’s not just treatments; it’s also broader services, such as the need for more nursing staff or nursing home care places. In older patients, care is often more complex.

2. Technology

AI is typically front of mind regarding technological advances, and there’s no question the healthcare sector will be a beneficiary. As we speak, AI is used to sift data to determine what medications to test, or virtual nursing systems. It is also being used to support diagnosis.

They're not the only enhancements.

Robotics have been a surgery game-changer, but they are also investigated as part of care solutions in nursing homes.

Rapid enhancements in Wi-Fi networks, such as the introduction of 5G, have also changed how surgery occurs or allowed for the growth of telemedicine. 3D printing and the use of stem cell technology have also had profound impacts. 

Technology is combining to allow for more precise innovative treatment, the ability to personalise for a person’s genetic coding and to allow for efficiency.

Where to invest to take advantage of the growth?

Healthcare can be a high-risk industry. After all, a small biotechnology company could be tomorrow’s hero or reduced to dust pending the success of its trials and technology. Longevity depends on ongoing innovation rather than relying on patents.

Join me for a series of Q&As with the experts to learn how they assess the market, the innovations that excite them, and which companies they are watching. We’ll start with HB Biotechnology’s Charlie Williams tomorrow.