Interview with Adeline Salat-Baroux and Sébastien Malafosse, Fund Managers of the Healthcare strategy.
How is the healthcare sector valued at present?
Historically, the healthcare sector has benefited from a premium over the market, reflecting its defensive characteristics and long-term structural growth. However, this premium has shrunk considerably: the P/E ratio of the MSCI ACWI Healthcare index stood at 18.3x at the end of August, versus 16.9x for the MSCI ACWI - which represents a premium of 8%. After its strong resilience in 2022, the sector is now consolidating and should offer attractive entry points, having underperformed other sectors, such as Tech.
However, building allocations will require a high degree of vigilance and strong valuation discipline. We have observed a dichotomy between on the one hand, large biopharma players that are trading at substantial discounts, and on the other, medtechs, biotechs and digital health players, that are still benefiting from high valuation premia.
Where do you see investment opportunities at the moment?
Generally speaking, we target high-impact companies that are addressing unmet medical needs and improving access to care, or the quality of care.
The portfolio is highly exposed to the oncology segment, notably via AstraZeneca. This strong investment conviction will enable the fund to benefit from breakthroughs in cancer care driven by the development of novel targeted therapies. The fund is also positioned on the treatment of obesity, a nascent market that could potentially grow to over 40 billion dollars by 2030 according to estimates. We own shares in the American company Eli Lilly and in the Danish group Novo Nordisk. The latter’s obesity treatments have already been approved.
Major breakthroughs have also been observed in the treatment of Alzheimer’s disease. The fund invests in Biogen, which has developed a treatment that slows patients’ cognitive decline. Also in this area, we are interested in medical imagery and diagnosis companies such as Siemens Healthineers, as scanners will be increasingly used to detect the disease at early stages, or RadNet, which offers radiology services based on artificial intelligence to help with preliminary diagnosis.
Generally speaking, we consider the area of diagnosis to be particularly attractive.
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October 2023. This document is issued by the Edmond de Rothschild Group. It has no contractual value and is designed for information purposes only.
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