Three sustainable names shaking up the healthcare sector
A number of companies in the global healthcare industry offer compelling opportunities for investors interested in sustainable businesses, according to Kames Capital.
While Kames’ sustainable investing team uses a bottom-up stock selection process to select attractive equities, common themes can build up within the portfolio.
One such theme is within healthcare, where innovative companies have the opportunity to provide innovative solutions can help reduce the cost of healthcare overtime and offset the rising burden of healthcare costs on society.
Craig Bonthron, manager of the Kames Global Sustainable Equity fund, says the US is in the worst predicament of all with 16% of GDP spent on healthcare versus 10% for Western European countries, whilst also having a lower life expectancy.
Tackling the costs associated with healthcare is a political hot potato in the US where costs have spiralled, with drug companies attracting particular criticism by dramatically increasing prices with no clear improvements in outcomes.
“We are focussed on identifying the innovative and disruptive solution providers,” says Bonthron; “companies that are working to tackle this very dilemma”. Below, Bonthron highlights three such names which aim to tackle the soaring cost of healthcare in the US head on.
“This US-listed manufacturer of disposable insulin pump patches which improves management of diabetes, reducing very costly emergency and secondary impacts from bad management of the condition.
“The stock itself is attractive because we believe the improvement in returns and the size of its addressable market are under-appreciated. With no direct competitors, and a US demand catalyst expected in 2017, there is currently low penetration for the solutions it offers in an expanding market. The company could see margin expansion as they scale up and open automated manufacturing lines in 2019. It is also has the potential to be acquired by a larger competitor that seeks access to their unique technology.”
“Listed in Australia, the global leader in implants for the profoundly deaf has one of the most attractively-priced solutions for clients. As with Insulet, we believe that the market under-appreciates the size of the market opportunity and extremely high competitive advantages that the business model has.
“Combined with its new distribution strategy focused on underserved US pensioners, a strategy that is already bearing fruit, it also offers investors recurring revenue streams because of the high cost of switching providers.”
“Another US-listed name, this cloud-based software analytics company is used specifically by pharma and biotech companies to improve the efficiency and speed of their drug discovery and development process. It means they can create more effective, more specific drugs much faster, and at a lower cost.
“Medidata is attractive because of misconceptions about the size of its marketplace, and the sustainability of its returns via leveraging its speciality in in order to minimise distribution costs. The business is also expanding its market with new products on top of the core offering, and has very high retention rates amongst existing clients.”