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Healthcare Innovation Monthly Report | April

  • COVID has shown Healthcare’s urgent need to digitize and upgrade software and data.        
  • Big Tech is increasingly likely to make acquisitions in Digital Health analytics space.        
  • Telemedicine is growing at over 30% annually. (see chart below)        
  • The Healthcare innovation ETF is adding additional subthemes in April, bringing to total number of subthemes to 10        
  • Gene Sequencing is amongst the biggest beneficiaries of Biden’s $1.9 trillion stimulus plan.       
  • US government healthcare insurance plans are boosting digital adoption rates.        
  • Cloud related healthcare is amongst the fastest tech adoption areas.

 

Healthcare Innovation ETF (WELL) Returns

March

12 Month*

-1.97%

45.08%

Past performance is no guarantee of future performance. Source: Solactive, HANetf * 12 Month figures based on 01.04.20 - 31.03.21. as fund performance.

 

Performance Review

The HAN-GINS Healthcare Innovation ETF (WELL) lost 1.97% in March, but remains up over 45% over 12 months.  

The leading subtheme contributors to these gains continues to be in Medical Devices, Genome Sequencing, Neuroscience and Biological Engineering (Biotech). They represent all of the 10 best performing holdings in March. 

For 2021 to date, Neuroscience’s best performers are led by Prothena (up 109.2%), while Gene Sequencing leaders are Myriad Genetics (up 54.0%) and Intellia Therapeutics (47.5%).  Biotech gainers in 2021 are GW Pharma (87.9%) and Meridian Bioscience (40.5%).

The main March contributors to WELL’s return are a combination of Medical Device and Biotech holdings below.  Regeneron was our single largest contributor - just announcing it has a new antibody drug that helps prevent COVID.  Biogen, Steris, Agilent Beigene and Shandong Weigoa were our other top contributors.

We expect further acquisitions in this space from Big Tech who are driving up valuations across Healthcare, particularly in the genomics, biotech, trackers/wearables and telemedicine space.  US government spending on gene sequencing via the Biden stimulus plan will boost this area further, as it becomes increasingly mainstream.  

 

Company Name

Sub-Themes

March return

Regeneron Pharmaceuticals, Inc.

Biological Engineering

5.0%

STERIS Plc

Medical Devices

9.0%

Agilent Technologies, Inc.

Medical Devices

4.2%

Biogen Inc.

Neuroscience

2.5%

BeiGene, Ltd. Sponsored ADR

Biological Engineering

8.8%

Shandong Weigao Group Medical Polymer Co

Medical Devices

14.9%

Fisher & Paykel Healthcare Corporation Limited

Medical Devices

5.7%

Hologic, Inc.

Medical Devices

3.2%

Sysmex Corporation

3.7%

Sonova Holding AG

Medical Devices

3.5%

Past performance is no guarantee of future performance. Source: INDXX. Data as of 31.03.2021

 

HAN-GINS Indxx Healthcare Innovation UCITS ETF

– Performance As of 31.03.21

 

 

1M

3M

6M

YTD

12M

SI

HAN-GINS Indxx Healthcare Innovation

-1.97%

-1.59%

9.06%

-1.59%

45.08%

39.79%

Indxx Advanced Life Sciences & Smart Healthcare Thematic Indxx (NTR)

-1.92%

-1.52%

9.25%

-1.52%

45.91%

41.74%

Past performance for the index is in USD. 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: Bloomberg / HANetf. Data as of 31/03/2021

 

Industry News

The Pandemic has highlighted the need for healthcare providers to not only innovate but adopt more digital centric processes and software.

Huge cost inefficiencies and COVID demands in the US has resulted in predictions that Healthcare will make up just under 20% of US GDP by 2028.  As Baby Boomers age, the costs may increase further.  Innovative techniques such as gene sequencing and telemedicine hold the prospect for better precision medicine and data gathering. The area of Healthcare Analytics is fast growing. Microsoft’s $16bn acquisition of Nuance Communications is the latest sign that Tach’s next battleground is in healthcare.

The fast adoption of Cloud-based hospital usage is speeding up the digital transformation and increasing productivity too.

Gene Sequencing and Biotech are increasingly mainstream for healthcare solutions such as vaccines.  Not only has this led to a rerating of holdings in these areas, but they are key to precision medicine.  This will allow far more targeted medicines to tackle specific genetic mutations amongst individual patients – as opposed to using broad prescriptions.

Remote Wearables/Trackers are effective in providing early warning signs of COVID.  Increasingly health-conscious people are incorporating trackers into their daily lives as reports find they can help with a wide variety of monitoring, from blood sugar levels (important for diabete), to tracking urine samples, heart rates, body temperature, sleep patterns and much more. Between February and March 2020, the number of US adults who reported intent to use telemedicine rose from 18% to 30%.

For illustrative purposes only. Past performance is no guarantee of future performance. Source:  https://www.businessinsider.com/digital-health-ecosystem

Constituent News

In April our healthcare innovation ETF is expanding its underlying themes to include standalone themes Telemedicine and Healthcare Analytics.  At least 100 holdings will still comprise WELL, with Gene Sequencing and Biotech’s weightings rising.  Medical Devices will see its weighting decline.  The US country weighting will also decline to around 77% - from above 81% currently.   

Key changes include an Equally Weighted approach, no longer a Market Cap approach.  This ensures more innovative smaller players will receive a slightly larger weighting than before.  An ESG screen is also being added.  A total of 10 subthemes will now be covered by WELL:

  • Robotics        
  • Nanotechnology        
  • Genome Sequencing       
  • Healthcare Trackers      
  • Biological Engineering (Biotech)       
  • Bionformatics        
  • Neuroscience       
  • Medical Devices        
  • Telemedicine        
  • Healthcare Analytics

This ensures WELL will capture key medical trends moving forward. The ETF is being renamed Healthcare Megatrend to reflect this broadening out of our holdings. These subthemes are expected to benefit from significant increased US government healthcare spending under a Biden presidency.  Faster adoption rates of digital healthcare due to COVID continue to boost WELL’s holdings in the device and biotech areas.

Top Contributors- March 2021

 

Company Name

Sub-Themes

March (contribution to return)

Regeneron Pharmaceuticals, Inc.

Biological Engineering

0.22%

STERIS Plc

Medical Devices

0.14%

Agilent Technologies, Inc.

Medical Devices

0.13%

Biogen Inc.

Neuroscience

0.11%

BeiGene, Ltd. Sponsored ADR

Biological Engineering

0.10%

Shandong Weigao Group Medical Polymer Co

Medical Devices

0.09%

Fisher & Paykel Healthcare Corporation Limited

Medical Devices

0.09%

Hologic, Inc.

Medical Devices

0.06%

Sysmex Corporation

0.05%

Sonova Holding AG

Medical Devices

0.04%

 

 

Sub-Themes

March

Weight

Bioinformatics

-0.11%

0.59%

Biological Engineering

-0.68%

21.68%

Genome Sequencing

-0.76%

6.77%

Healthcare Trackers

-0.06%

0.40%

Medical Devices

-0.06%

58.82%

Neuroscience

-0.49%

6.23%

Past performance is no guarantee of future performance. Source: INDXX. Data as of 31.03.2021

 

Outlook

Increasingly Big Tech is moving aggressively into the healthcare space.  From Amazon buying the largest online pharmacy and pill dispenser, to Google buying Fitbit the tracker company – and now Microsoft acquiring Nuance Communications.

The Nuance deal reinforces the fast-growing Healthcare Analytics and AI-Software theme in medicine.  Key features that this deal highlights for the future of healthcare include:

  • Nuance digitizes doctors & hospital conversations from patient visits - facilitates clinical documentation.        
  • Nuance’s speech-recognition software capitalizes on demand for better Healthcare software.        
  • Microsoft’s Cloud (Azure) - ensures Nuance’s software become more easily accessible globally.

The Global Telemedicine Market is valued at USD 27.04 Billion in 2019 and Expected to Reach USD 171.81 Billion by 2026 with a CAGR of 37.2%.

The Cloud Healthcare market is expanding rapidly across hospitals, with annual growth expected to be 23% through 2024.

 

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