Healthcare Innovation Monthly Report | October

• The battle to combat COVID-19 is directly benefiting over 20 of our Healthcare ETF's holdings.
• Top performing holdings include Biological Engineering (Biotech) and Medical Devices. 
• Fast adoption rates of Gene Editing, Healthcare Trackers and Telemedicine is being reflected in high growth rates. 
• President Trump using Regeneron anti-body treatment has boosted Regeneron’s stock price to new highs. 
• The top 15 holdings now include Robotics, Neuroscience, Genome Sequencing, Medical Devices and Biotech.

Performance Review

Despite a negative return in September for the HAN-GINS Indxx Healthcare Innovation UCITS ETF (WELL), WELL is up 15.37% for the year 2020, with an impressive one-year return of 32.24%.

For September, the leading subtheme contributors to the gains have been in Medical Devices and Biological Engineering (Biotech), which represent 15 of the 20 best performing holdings.

Both subthemes have enjoyed a rerating as COVID experienced a second surge. Surgical Robotic leader Intuitive remains our largest holding with Illumina, the Gene Sequencing leader, now a top 8 holding. Biotech’s impressive gains for the month were led by Intra-Cellular (up 40.8%), Exact Sciences (35.4%), Quidel (24.7%) and Meridian Bioscience (20.1%).  Medical Device’s benefited most from gains by Venus Medtech (31.3%), Anglo Dynamics (28.8%), Axonics (20.8%) and Cardiovascular Systems (20.5%).

Medical devices remain the largest subtheme weighting in our Healthcare ETF at 56.84%, helping drive double digit returns since inception. However, Biological Engineering at 23.17% is growing fast, followed by Neuroscience (6.68%), Genome Sequencing (5.53%) and Robotics (5.13%) Healthcare Trackers (2.44%).

The COVID-19 pandemic has pushed these newer technologies to the forefront as health insurers increasingly cover procedures including Telemedicine.  These areas continue to benefit from faster adoption rates due to social distancing.

Past performance is no guarantee of future performance. Source of constituent data: INDXX. Data as of 30/09/20 

Healthcare Innovation ETF (WELL) Returns

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf.  *YTD figures based on 01.01.20 - 30.09.20 ** 12 Month figures based on 01.10.19 – 30.09.20

HAN-GINS Indxx Healthcare Innovation UCITS ETF- Performance

Total Return NAV to Date (up to 30/09/2020)

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 30/09/20.

Healthcare Innovation - Industry News

A key trend is increased M&A corporate activity in the healthcare innovation space. This includes two of the largest US Telemedicine operators merging.  Increasingly, Big Tech is also focusing on this space, with Apple, Google and Amazon all offering new healthcare initiatives from fitness/medical wearables, to online pharmacies and AI/Big Data diagnostic devices.

In the wake of COVID-19, the medical device area has seen a significant boost in orders for ventilators, respirators, ultrasound, and CT scan and other devices.  This has led to rerating of this subtheme given the significant boost in recent orders and revenues.

Separately, Frost & Sullivan forecasts a sevenfold growth in telehealth by 2025 – a five-year compound annual growth rate of 38.2% (from 2020).[1] Based on how fast the healthcare industry has embraced remote technology in just the past few months, we believe the growth rate may exceed these projections.

In the US, according to Fairhealth, Telehealth claim lines have increased over 4,000% nationally, from 0.15% of medical claim lines in July 2019 to 6% in April 2020.[2]  This trend has continued ever since March 2020 when the pandemic started its rapid escalation in the United States. The growth in telehealth from April 2019 to April 2020 almost doubled its 4,347% growth from March 2019 to March 2020.[3]

The global fitness tracker market size is expected to reach $91.9bn by 2027, exhibiting a CAGR of 15.2% during the forecast period. The rising adoption of wearable devices among the young population will significantly bolster healthy growth of the market, states Fortune Business Insights.[4]

COVID-19 is also propelling Gene Editing and online Healthcare Cloud Computing.  Cloud usage is seen in the adoption of big data analytics, wearable devices and remote diagnostics. The current trends show:

• Global Healthcare Cloud Market - is expected to reach $64.7bn by 2025 from $28.1bn in 2020 - a CAGR of 18.1%.[5]
• The genomics market is projected to reach $82.6bn by the end of 2027. Huge R&D investments are boosting Gene Therapies and Personalised Medicine. Based on current trends, the $18.9bn Genomics market (2019) is set to enjoy a CAGR (annual growth rate) of 19.5% through 2027.[6]

The rising patient population worldwide and the older US demographic continues to drive largescale investment in healthcare innovation, pushing both Technology upgrades and personalised remote delivery.

Constituent News

WELL currently has 107 constituents, with the US country weighting dominating at 81.03%. It is followed by Japan (5.16%), Switzerland (3.20%), China (2.86%) and the UK (2.23%).  Medical devices remain the largest subtheme in the our Healthcare ETF, with a 56.84% weighting, followed by Biological Engineering at 23.17% (includes Biotech), Neuroscience (6.68%), Genome Sequencing (5.53%), Robotics (5.13%), Healthcare Trackers (2.44), and Bioinformatics (0.19%).[7]

The most notable contributors to WELL’s performance in September are listed below. A growing number of smaller Medical Device companies are amongst WELL’s leading contributors.  This is in line with this subtheme enjoying a rerating boosted by the recent spike and resurgence of COVID cases across the US and Europe. On the Biotech side, President Trump began using Regeneron’s new anti-body treatment, helping the stock to a 57% gain for the year, making it our 7th largest holding at 3.8%.  The US government has also recently placed a $450mn order for their treatment.[8]

Constituent Contributions: Top Contributors- September 2020

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:

Past performance is no guarantee of future performance. Source of constituent data: INDXX. Data as of 30/09/20

Globally, the Gene Therapy market is expected to show a decade long market growth rate of 31.1%, annualised (CAGR).  While the US is currently the largest region, Asia-Pacific is expected to be the fastest growing region over the next decade.[9]

COVID-19 supply constraints are providing a boon to medical device and product manufacturers, particularly those focused on PPE & devices related to the pandemic (e.g. gloves, masks, respirators, ventilators). 

US Government Medicare insurance (reimbursement) rules have recently broadened to include various telehealth services. This ensures Medicare insurance will pay for virtual/remote diagnostics and care now, creating huge demand.  Post-COVID, we expect hospitals to shift a larger volume of patient care to telehealth.  We believe digital health technologies will accelerate adoption.

The healthcare industry is transforming in the following key ways – benefiting a number of innovative healthcare companies:

• An explosion of telehealth visits.

• Huge increase in remote inpatient consultations and family visits.

• Online scheduling and the automation of patient triage.

• Mobilising teams to create PPE (equipment).

• Artificial intelligence to allocate resources and make clinical decisions.

• Supporting remote work and communication for team members.

• Ensuring connectivity at remote COVID-19 testing sites and expanding capacity

Constituent Top Performers:

Past performance is no guarantee of future performance. Source: INDXX. Data as of 30/09/20

Regional Breakdown

Sector Breakdown

Top 15 Holdings - Constituent Breakdown

Source: Bloomberg/HANetf. Data as of 30/09/20

 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.

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