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'More innovation': What 2022 and beyond looks like in health care

·Finance reporter
·5-min read
A healthcare work holds doses of the Sinovac COVID-19 vaccine. (Source: AP)
The rapid development and distribution of COVID-19 vaccines is one of the reasons experts are bullish about the future. (Source: AP)

The next few years are set to be a period of rapid growth and innovation in the healthcare sector, according to industry experts.

From a financial markets point of view, the sector - which encompasses hospitals, mental health, physical well-being, biotechnology, life sciences, diagnostics, medical technology and much more - has begun a slow recovery after another year affected by the global COVID-19 pandemic and associated lockdowns.

Over the past two months, the Australian S&P/ASX 200 Health Care index (AXHJ), which tracks some of Australia’s most prominent healthcare companies, has risen to highs not seen since February 2020, before the COVID stock market crash that struck worldwide in March of that year.

The AXHJ index closed at 46,379 points on Monday and, over the past four months, has traded as high as 47,502 points.

Renewed optimism after long winter

Scott Power, senior analyst at stockbroker Morgans, said innovation in the Australian healthcare sector would increase as financial markets continued to gain confidence.

A graph showing fluctuations in the S&P/ASX 200 Health Care index.
The S&P/ASX 200 Health Care index has fluctuated over the past 24 months.

“Now that we are moving past the COVID era, we’re going to see a lot more innovation in a wider range of sectors,” Power said.

“I think over the next 12 months, we are going to see a swing back towards the importance of health care, and some of the trends that we have seen over the past two years will continue to take hold."

One of the biggest developments to come out of the COVID-19 pandemic, and a trend that would continue to play out, was the shift to what Power described as “hospitals without walls”.

“There has been a lot of emphasis on remote monitoring, telehealth and we expect to see this trend continue for there to be more emphasis on monitoring outside hospital walls," he said.

“The idea of a hospital without walls puts health care back into the hands of patients, and we’re seeing a lot more money being thrown at this, for example, with rapid COVID-19 antigen tests and trying to find new therapeutics.”

A technical assistant holds a box of COVID vaccines above a trolley full of boxes. (Source: AP)
Rapid COVID-19 and flu antigen tests, which will allow people to test themselves at home, are in high demand. (Source: AP)

Power said the healthcare sector was looking towards 2022 with renewed optimism, after multiple lockdowns and a slow vaccine rollout initially took their toll on the general public's outlook.

“The heat came out of the sector this year,” Power said. 

“It has been down overall, and we have seen a rotation out of COVID where the original COVID beneficiaries have been outpaced by the reopening of trade.

“The first year of the pandemic was strong for the healthcare sector, but the second year was weak.

“Hospitals were pushed to their limits, a lot of elective surgeries had to go on hold and routine monitoring of non-COVID patients suffered."

Power said the sector was only now starting to play catch-up, as high vaccine coverage meant governments were more confident in opening up the economy.

Where are the investment opportunities?

Last year, as most of the population pivoted to working from home and venues closed, services such as telehealth and remote diagnostics boomed.

A doctor in her office in speaking to a COVID patient via video on a laptop. (Source: AP)
More and more doctors around the world conducted check-ups via telehealth in the past two years than ever. (Source: Getty)

When the pandemic hit originally, many biotech and drug-development companies attempted pivots to show their research could be effective against COVID-19. Very little has come of those developments, with the vaccines made readily available by large pharmaceutical companies such as Pfizer, AstraZeneca and Moderna proving successful.

Power said developing trends would move away from a focus on tackling COVID-19, with medical diagnostics, cancer treatments and infection control three sub-sectors of particular interest.

Immuno-oncology

“The drug-development area will be interesting to watch," he said.

"Over the past few years, we have seen the great rise of immuno-oncology.”

Immuno-oncology is the study and development of drugs and treatment therapies that take advantage of the body's own immune system to fight cancer.

“We have seen significant market moves from Australian companies like Imugene and Immutep, who are at the forefront of some of the really interesting work being done in this space," Power added.

The company's lead product is HER-Vaxx, a therapeutic cancer vaccine for gastric and breast cancer.

Imugene shares began rapidly climbing in late April and early May, when the company had its Phase 1b clinical trial data published in the prestigious American cancer journal, Clinical Cancer Research.

Medical technology

Power also pointed to several companies in the medical technology space as ones to look out for, namely ResMed, ImpediMed, Volpara and Nanosonics - all of which are listed on the ASX.

ResMed is a bonafide leader in the medtech sector, with a market capitalisation north of $65 billion. It offers cloud-connected medical devices that transform care for people with sleep apnea, COPD and other chronic diseases. 

Up-and-coming ASX medtech businesses include ImpediMed, which in late October announced a trial of its L-Dex technology resulted in a lower rate of progression to chronic disease than patients with early detection from volume measurements using a tape measure.

Volpara provides clinically validated, AI-powered software for personalised screening and early detection of breast cancer, empowering both patients and clinicians, while Nanosonics is focused on preventing the transmission of infections.

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