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Healthcare Innovation Monthly Report | September

 

  • A sizable number of our Medical ETF constituents continue to benefit from COVID-19 fast adoption rates – include Genome Sequencing.
  • WELL’s biotech holdings remain at the forefront of vaccine research.
  • Medical device makers saw a big increase in order – leading to a rerating for this subtheme (ventilators, respiratory equipment).
  • Healthcare Trackers, Telemedicine and AI are digital health areas, set to grow rapidly as they become increasingly mainstream.

 

Performance Review

HAN-GINS Indxx Healthcare Innovation UCITS ETF (WELL) continued its strong recent growth, gaining 1.03% in August. For the year 2020, the medical ETF is up 16.59%, while over the past 12 months it has returned an impressive 32.46%. During August, the leading subtheme contributors to the gains have been in Medical Devices, Biological Engineering (Biotech), Robotics and Healthcare Trackers. Surgical Robotic leader Intuitive is currently our largest holding following August gains of 6.6%.  Medical Device impressive gains for the month, included Edwards Lifesciences (up 9.4%), Medtronics (11.4%), Boston Scientific (6.4%), Zimmer (4.5%) and Agilent (4.3%).  Biogen led the neuroscience area with a gain of 4.7%.  In Biological Engineering key performers were Twist Bioscience (24.8%) and Jazz Pharmaceuticals (24.2%).  Genome Sequencing firms Intellia Therapeutics (21.2%) and Cellectis S.A. (17.5%) performed well.

For the month of August, medical devices remained the largest subtheme weighting in WELL.  Consequently, it is not surprising it has contributed most of the subthemes to WELL’s returns. However, Robotics, Biological Engineering, Genome Sequencing and Healthcare Trackers have all shown solid performance – contributing significantly too. These areas continue to benefit from faster adoption rates due to the COVID-19 pandemic.  Increased orders for the likes of ventilators, respirators, ultra-sound and other devices helped boost earnings and led to a positive rerating across the medical device subtheme. The standout August constituent performers include:

  • iRhythm Technologies (Healthcare Tracker) 76.9%
  • Silk Road Medical (Medical Devices) 31.3%
  • Beam Therapeutics (Genome Sequencing) 29.8%

Past performance is no guarantee of future performance Source of constituent data: INDXX. Data as of 31/08/20

Healthcare Innovation ETF (WELL) Returns

August

YTD*

12 Month**

1.03%

16.59%

32.46%

Past performance is no guarantee of future performance.
Source: Bloomberg/HANetf
*YTD figures based on 01.01.20 - 31.08.20
** 12 Month figures based on 01.09.19 – 31.08.20

 

HAN-GINS Indxx Healthcare Innovation UCITS ETF – 12 Month Performance (01.09.19 - 31.08.20)

 

Past performance is not an indicator for future results and should not be the sole factor of consideration when selecting a product. Investors should read the prospectus of the Issuer (“Prospectus”) before investing and should refer to the section of the Prospectus entitled ‘Risk Factors’ for further details of risks associated with an investment in this product. Source: INDXX. Data as of 31/08/20

 

Healthcare Innovation – Industry News

The medical device area enjoyed a significant boost in recent orders and consequently earnings rose above expectations.  This has led to a major rerating of this subtheme.

The COVID-19 pandemic continues to change medical behaviour and is accelerating the fast adoption of telemedicine, robotics, healthcare trackers and increasingly genome therapies.  The healthcare industry’s growing use of remote technology ensures the industry has embraced new technologies far faster than predicted.

Big Tech is increasingly geared towards healthcare Innovation via healthcare trackers.  Besides Google purchasing Fitbit recently for over $2 billion,1 Amazon launched a new Wellness Tracker in late August. It seeks to also compete with the Apple Watch. The Amazon Halo, a health and wellness band, is combined with a suite of AI-powered health features – accessible via the Halo app on Android or iOS.

Gartner Research estimates wearables will be a $52 billion market (revenues) this year - up 27% from 2019.2 This should boost WELL’s Tracker subtheme.  We expect Wearables to become increasingly mainstream – besides wrist devices they’ll be included in clothing too.  Amazon’s Cloud leadership dovetails well with Wearable tech. 

More broadly, Amazon is making big inroads into US healthcare, already operating an online Pharmacy and Amazon Care and a Healthcare JV with JP Morgan and Berkshire Hathaway (for employees).

In the medical diagnostics space, Artificial Intelligence is set to make doctors lives more efficient. Super computers and algorithms, such as those created by Google’s Deep Mind, are now used at London’s Moorfields Eye Hospital and are expected to be increasingly adopted by global healthcare systems. Doctors will use these devices as initial screening devices to assist in major diagnoses. We expect significant consolidation in the gene therapy space. 

Telemedicine and Digital Health have become far more important during the pandemic with large population groups under stay-at-home orders. According to a MarketsandMarkets report, the global AI healthcare market is expected to grow at a compound annualized growth rate (CAGR) of 44.9% between 2020-2026.3 The increase volume of digital healthcare data and enhancing computing power – plus decreasing hardware costs should propel this growth further.

Increasingly government support and the tailwinds of COVID-19 are boosting demand for such therapies.  The global genomics market is expected to exceed $68bn by 2030, according to P&S Intelligence. The industry generated $18.2bn last year, but is likely to grow at a 12.7% CAGR between 2020 and 2030.4 

 

Constituent News

Our medical ETF currently has 107 constituents, with the US country weighting dominating at 81.60%. It is followed by Japan (4.79%), Switzerland (3.08%), China (2.71%) and the UK (2.30%).5

 Medical devices remain the largest subtheme in the WELL ETF with a 43.97% weighting – see full weightings on page 6.  This is followed by Biological Engineering at 27.39% (includes Biotech), Neuroscience (11.48%), Genome Sequencing (5.91%), Healthcare Trackers (5.55%), Robotics (5.23%), Bioinformatics (0.52%) and Nanotechnology (0.06%).

The most notable contributors to WELL’s performance in August include the following holdings. This is based on their weightings during the month.  It is clear that a number of Medical Device companies were the leading contributors in August.  This is in line with this subtheme outperforming all the other subthemes, compared to July which saw Genome Sequencing and Biological Engineering performing best.  A number of these top contributors are part of WELL’s Top 10 holdings.  

 

Top Contributors - August 2020

Company Name

Sub-Themes

August

Medtronic Plc

Medical Devices

0.51%

Edwards Lifesciences Corporation

Medical Devices

0.42%

Intuitive Surgical, Inc.

Robotics

0.29%

Varian Medical Systems, Inc.

Medical Devices

0.29%

iRhythm Technologies, Inc.

Healthcare Trackers

0.28%

Boston Scientific Corporation

Medical Devices

0.28%

Olympus Corp.

Medical Devices

0.24%

Biogen Inc.

Neuroscience

0.21%

Sysmex Corporation

Biological Engineering

0.19%

BeiGene, Ltd. Sponsored ADR

Biological Engineering

0.19%

 

It is clear the largest contributors are mostly Medical Device companies. Due to COVID-19 this is expected to continue as the market’s focus remains on finding a vaccine, plus areas such as testing and tracking.

 

Sub-Theme Contribution – August 2020

Sub-theme

August Contribution (%)

Weight

Medical Devices

1.87%

43.87%

Biological Engineering

-1.59%

27.39%

Robotics

0.30%

5.23%

Neuroscience

0.16%

11.48%

Genome Sequencing

-0.04%

5.91%

Healthcare Tracker

0.33%

5.55%

Bioinformatics

-0.08%

0.52%

Past performance is no guarantee of future performance Source of data: INDXX. Data as of 31/08/20 

 

Our healthcare ETF is positioned to benefit from a number of technological trends spurred on by COVID. The adoption rates seen over the last 6 months would typically take place over a number of years. Public and private hospitals are experiencing a transformation.

The latest predictions show that Asia is likely to grow faster than any other world region.  This is a result of growing population and tech savvy health care sector in the region.  Increasingly, technology is seen as a way to overcome shortages of hospital beds and doctors per patient. The posisiblity of huge cost savings are driving the development of healthcare trackers globally. Reducing family visits to the hospital via trackers and telemedicine is increasingly seen as a way to upgrade public health response.  In the wake of COVID-19, many government and private healthcare systems are supportive of more remote medical services – and are backing innovators in this field.6

Currently activity monitors/trackers accounted for the largest market share of the wearable healthcare devices market. Not only is the pandemic growing demand for this segment, but also rising adoption of sedentary and unhealthy lifestyles.  This is leading doctors to prescribe increasing use of self-monitoring of trackers.

Pharmacies are spear heading the support for the wearable healthcare devices market by distribution channel. Pharmacies are increasingly supplying these self-monitoring and non-invasive diagnostic devices.7 

 

Wearable Healthcare Devices Market by Region ($bn)

 

For illustrative purposes only
Source: https://www.marketsandmarkets.com/Market-Reports/wearable-medical-device-market-81753973.html

 

Constituent Top Performers:

Company

Sub-Themes

August Performance

iRhythm Technologies, Inc.

Healthcare Trackers

76.88%

Silk Road Medical, Inc.

Medical Devices

31.25%

Beam Therapeutics, Inc.

Genome Sequencing

29.83%

Shockwave Medical, Inc.

Medical Devices

28.83%

Twist Bioscience Corp.

Biological Engineering

24.79%

Jazz Pharmaceuticals Plc

Biological Engineering

24.15%

Elekta AB Class B

Medical Devices

22.65%

Varian Medical Systems, Inc.

Medical Devices

21.69%

Intellia Therapeutics, Inc.

Genome Sequencing

21.17%

CYBERDYNE Inc.

Robotics

20.81%

Cellectis SA Sponsored ADR

Genome Sequencing

17.52%

Globus Medical Inc Class A

Medical Devices

17.31%

10x Genomics Inc Class A

Genome Sequencing

16.52%

BeiGene, Ltd. Sponsored ADR

Biological Engineering

15.58%

SAGE Therapeutics, Inc.

Neuroscience

15.08%

Sysmex Corporation

Biological Engineering

13.51%

AngioDynamics, Inc.

Medical Devices

13.38%

Adaptive Biotechnologies Corp.

Genome Sequencing

11.50%

Medtronic Plc

Medical Devices

11.39%

Olympus Corp.

Medical Devices

11.11%

Myriad Genetics, Inc.

Genome Sequencing

10.77%

LeMaitre Vascular, Inc.

Medical Devices

10.06%

Past performance is no guarantee of future performance
Source: INDXX. Data as of 31/08/20

 

Regional Breakdown

Country Breakdown

Weights

United States

81.60%

Japan

4.79%

Switzerland

3.08%

China

2.71%

United Kingdom

2.30%

Other

5.53%

 

 

Top 15 Holdings - Constituent Breakdown

Company Name

Sub-Themes

Weight

Intuitive Surgical, Inc.

Robotics

5.18%

Edwards Lifesciences Corporation

Medical Devices

5.06%

Medtronic Plc

Medical Devices

4.80%

Boston Scientific Corporation

Medical Devices

4.72%

Biogen Inc.

Neuroscience

4.47%

DexCom, Inc.

Medical Devices

4.28%

Regeneron Pharmaceuticals, Inc.

Biological Engineering

4.11%

Illumina, Inc.

Genome Sequencing

4.06%

Agilent Technologies, Inc.

Medical Devices

3.40%

Zimmer Biomet Holdings, Inc.

Medical Devices

3.20%

ResMed Inc.

Medical Devices

2.85%

Align Technology, Inc.

Medical Devices

2.36%

West Pharmaceutical Services, Inc.

Biological Engineering

2.28%

Olympus Corp.

Medical Devices

2.07%

Smith & Nephew plc

Medical Devices

1.95%

Source of all data: HANetf, Data as of 31/08/20

 

Fund Details

HAN-GINS Indxx Healthcare Innovation UCITS ETF (WELL) is a UCITS compliant Exchange Traded Fund domiciled in Ireland.  

WELL tracks the Indxx Advanced Life Sciences & Smart Healthcare Thematic Index (Net Total Return), an index designed to measure the performance of large, mid and small-capitalisation companies primarily listed on an exchange in Developed and Emerging Markets that are involved in the Advanced Life Sciences & Smart Healthcare sector.  

Please remember that the value of your investment may go down as well as up and past performance is no indication of future performance.

 

EXCHANGE BB CODE RIC ISIN CURRENCY INCOME

London Stock Exchange

WELL LN

HAWELL.L

IE00BJQ848

USD

Acc

London Stock Exchange

WELP LN

WELP.L

IE00BJQ848

GBP

Acc

Borsa Italiana

WELL IM

WELL.MI

IE00BJQ848

EUR

Acc

XETRA

W311 GY

W311.DE

DE00A2PE7K4

EUR

Acc

SIX

WELL SW

WELL.S

IE00BJQ848

EUR

Acc

 

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