Healthcare Innovation Monthly Report | November

• The top performing holdings in our healthcare ETF were found in Biological Engineering (Biotech) and Medical Devices.
• Combatting COVID-19 is directly benefiting a larger number of WELL’s holdings.
• Fast adoption rates of Gene Sequencing, Healthcare Trackers and Telemedicine is resulting in big growth rates.
• The Biden administration is likely to unleash large US government healthcare spending- supporting medical devices and digitalization.
• Innovative healthcare delivery is now a major US policy priority due to COVID-19.

Performance Review

HAN-GINS Indxx Healthcare Innovation UCITS ETF (WELL) retraced some of its gains, with a -2.07% loss in October.  This loss was smaller than the overall Tech sector. For the year 2020, our healthcare ETF is up 12.99%, with an impressive one-year return of 24.14%.

The leading subtheme contributors to the gains have been in Medical Devices and Biological Engineering (Biotech). They represent 8 of the 10 best performing holdings, with Regeneron gaining after President Trump used its anti-body treatment.

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.  For October, the top Gene Sequencing performer was Beam Therapeutics up 38.8%.  Biotech gains were led by Quidel Corp up 22.3%.

Healthcare Innovation ETF (WELL) Returns

Past performance is no guarantee of future performance.

Source: Bloomberg/HANetf *YTD figures based on 01.01.20 - 31.10.20 ** 12 Month figures based on 01.11.19 – 31.10.20

Top Medical Device holdings for the month included Penumbra Inc (up 34.3%), Align Technology (30.2%), LivaNova PLC (11.4%) and Bio-Rad Labs (13.8%). Medical devices remain the largest subtheme weighting in WELL at 57.7%, followed by Biological Engineering at 23.9%, Neuroscience (6.6%), Genome Sequencing (5.6%) and Robotics (5.0%). The growing possibility of a COVID-19 vaccine is likely to push up Biotech stocks further over the next few months. Telemedicine and Healthcare Trackers continue to enjoy fast adoption rates due to social distancing and new US insurance policies covering such services. Our Indxx benchmark has shown solid gains over the past 4 years – showing 19.9% annualised returns.

Past performance is no guarantee of future performance Source of all data: HANetf, Bloomberg. Data as of 31.10.2020

HAN-GINS Indxx Healthcare Innovation UCITS ETF – Performance

Total Return NAV to Date (up to 31/10/2020)

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 31/10/20

Industry News

A new Biden administration is expected to unleash far more government spending across the healthcare sector.  Rising awareness of huge disparities across the US healthcare sector amidst the COVID-19 pandemic is necessitating the fairer distribution of PPE, medical supplies, and devices. We expect the adoption of far more digitally enabled models, which extend reach, lower cost and manage unique needs of specific populations. This will boost need for digital health innovations.

We see the rising importance of cybersecurity and healthcare cloud adoption rates to ensure high quality access to healthcare across the US and ultimately globally.

Currently there is a lack of standardization across medical records. Sharing medical records throughout the US is hugely problematic.  Healthtech innovations can make a huge improvement, removing silos and speeding up delivery services.  The pandemic has provided glaring examples for the need to access and share records digitally across your providers.

The pandemic has created demand for remotely managed care for patients with chronic conditions. New telemedicine and healthcare trackers can play a meaningful role in improving medical support remotely. COVID has laid bare the dire need for digitalization of healthcare services; it will transform the healthcare industry. 

COVID is driving health systems to transform and innovate. The private US healthcare system is embracing virtual/remote care offerings which will increase in the coming decade.

For illustrative purposes only.

Source: 2020 Peter G. Peterson Foundation. Centers for Medicare and Medicaid Services, National Health Expenditure Data, March 2020

Constituent News

Our healthcare ETF currently has 108 constituents, with the US country weighting dominating at 80.83%. It is followed by Japan (5.12%), Switzerland (3.28%), China (2.94%) and the UK (2.05%).  Medical devices remain the largest subtheme in the WELL ETF with a 57.70% weighting, followed by Biological Engineering at 23.89% (includes Biotech). The leading contributors to WELL’s performance continued to be from these two subthemes.

Inari Medical has been added to the portfolio in the September IPO Review.  While Livongo Health has merged with Teladoc Health and has been delisted.

Increasingly smaller cap players are amongst WELL’s leading contributors. The rerating of healthcare innovation stocks is expected to continue under a Biden presidency as additional government spending on healthcare is projected.

The ongoing search for a COVID-19 vaccine will further boost the various subthemes covered by WELL. Unlike traditional Healthcare sector products, WELL is primarily focused on innovation and healthtech. This area is at the forefront of vaccine research and new ways to deliver and deploy medical treatments.

Constituent Contribution: Top Contributors - October 2020

Sub-Theme Contribution

Past performance is no guarantee of future performance

Source of data: INDXX. Data as of 31/10/20

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.[1]

COVID-19 supply constraints are providing a boon to medical device and product manufacturers, particularly those focused on PPE, as well as older people continuing to embrace telehealth and telemedicine. However, tech companies will play a critical role in creating tools that impact the complexity of their care and chronic conditions. We predict see greater partnerships between tech and healthcare to address health equity within this vulnerable population. In a post-COVID-19 world, healthcare will be required to embrace technology to impact positive outcomes in the lives of patients and their families.

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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