'Natera is a leader in oncology medicine'
'Other interesting companies in this segment are BioNTech and BeOne'
3' min read
Key points
- In addition to trade policies, Trump has focused on the healthcare sector and drug prices in recent months. How is the sector reacting to the volatility caused by his statements?
- Geographically, besides the US, could China represent a new frontier in the sector? And Europe?
- Are there any interesting titles at the moment?
3' min read
In pharmaceuticals, the oncology segment will remain decisive. There are many innovative drugs thanks to investments in research and several companies with attractive growth potential. This is explained in detail by Servaas Michielssens, Head of Healthcare, Thematic Global Equity at Candriam.
In addition to trade policies, Trump has focused on the healthcare sector and drug prices in recent months. How is the sector reacting to the volatility caused by his statements?
Healthcare is under constant scrutiny over drug prices. Now, with the 'Most Favoured Nation' clause, Trump aims to bring US prices in line with those of other countries. The implementation mechanism of the President's executive order is still being negotiated and is to be approved in mid-November. Uncertainty, therefore, continues to weigh heavily, but current valuations largely reflect the worst-case scenario, suggesting ample opportunity for a reversal or even a re-bound effect.
How do stabilisation and falling interest rates affect the sector's performance?
The healthcare sector in general is little impacted by rate movements due to strong balance sheets and steady cash flows. However, valuations, especially for early-stage companies, are more sensitive to interest rates because with cash flows projected into the future, they behave like long-lived investments. Therefore, stable or falling rates favour innovative companies that can achieve higher valuations.
What are the prospects?
The sector has gone through several periods of regulatory uncertainty. These phases were characterised by low valuations, which then reversed, as is happening today. Despite fears, the long-term outlook is supported by demographic factors and innovation. In the oncology segment, for example, Iqvia reports that 132 new active substances have been approved globally in the last five years, compared to 79 in the previous period. The momentum continues, with 9 oncology drugs already approved in the US this year. Even as Keytruda, the world's best-selling oncology drug, nears patent expiry, oncology sales are expected to grow from USD 252 billion in 2024 to USD 441 billion by 2029, thanks to the continued approval of new drugs.
After years of slowdown in M&A's activities in the pharmaceutical sector, are there signs of recovery? Which segments are the most dynamic and potentially profitable for investors?
The inevitable loss of exclusivity or patents of major pharmaceutical companies, combined with strong balance sheets and cash flow generation, suggests that M&A's activities are set to accelerate, although the timing remains uncertain, and we expect the oncology segment to remain dominant.
