Healthcare Innovation Monthly Report | May

Learn more about the Healthcare innovation ETF

• Biotech and Gene Sequencing dominate WELL’s year to date performance.        
• The Biden Administration is supporting Gene Sequencing growth as it offers mainstream medical solutions.        
• Big Tech is targeting more acquisitions in the Health Analytics space after the Nuance-Microsoft deal.        
• WELL added additional subthemes in April, bringing total number of subthemes to 10.        
• US government health insurance plans are boosting digital adoption rates.        
• Cloud spending across healthcare seeing the fastest adoption rates.

Healthcare Megatrend ETF (WELL) Returns

Past performance is no guarantee of future performance. Source: INDXX, HANetf * 12 Month figures based on 30.04.20 - 30.04.21.

Performance Review

HAN-GINS Indxx Healthcare innovation ETF (WELL) gained 4.52% in April.  It is up 16.39% over 6 months and 35.61% over 12 months.  

The leading subtheme contributors to these gains continues to be in Biological Engineering (Biotech), Genome Sequencing and Medical Devices. They represent the majority of the 10 best performing holdings in April.  Bioinformatics, Neuroscience and Healthcare Analytics companies rounded out our top performers (table below).

Top biotech performers were led by Cellink (up 100.5%), GW Pharma (89.8%) and Beigene (33.0%).  Gene Sequencing leaders include Myriad Genetics (up 52.8%), 10X Genomics (39.7%) and Intellia Therapeutics (41.1%). 

The single largest April contributors to WELL’s return were a mix of seven of our 10 subthemes.  As Big Tech expands into the Healthcare Innovation space, Nuance Communications jumped 21.8% due to Microsoft’s buyout offer. The Genomics and Biotech space continues to be rerated higher as their offerings become more mainstream across the medical field. Translate Bio was our single largest contributor, announcing an aggressive new pipeline of mRNA treatments that include COVID-19 and related clinical stage programs.  Cellink, Microport Scientific, Health Catalyst, Alkermes and Intuitive Surgical 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 is likely to boost this area further. The global genomics market size was valued at USD 20.1 billion in 2020 and is expected to expand at a compound annual growth rate (CAGR) of 15.35% from 2021 to 2028.

HAN-GINS Indxx Healthcare Innovation UCITS ETF

– Performance As of 30.04.21

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 30/04/2021

Industry News

The Pandemic has boosted Cloud-based hospital spending, speeding up digital transformation beyond just Telemedicine. Data management is being upgraded as Healthcare Analytics becomes a fast-growing subtheme.  Big Tech players are targeting this space as seen with the recent Nuance-Microsoft $16bn deal.

The US healthcare industry is embracing new treatments in a drive to enhance productivity and offer more precision medicine.  The two big winners that have enjoyed upward rerating’s are Gene Sequencing and Biotech companies. 

Huge cost inefficiencies with Healthcare now represent almost 20% of US GDP as Baby Boomers age and present an industry that is ripe for transformation. Many hospitals have suffered during the pandemic as elective surgeries were cancelled which are normally a big money spinner.

The next frontier in healthcare includes mainstream usage of Remote Wearables/Trackers which provide effective and relatively low-cost ways of providing early warning signs for a variety of illnesses.  They can help with a wide variety of monitoring, from blood sugar levels (important for diabetes), to tracking urine samples, heart rates, body temperature, sleep patterns and much more.

Digital Health is expected to grow close to 30% annually – with North America representing almost half of this gain.  Online applications, trackers and Telemedicine are predicted to be amongst the strongest subthemes for years to come.

For illustrative purposes only. Source: https://www.gminsights.com/industry-analysis/digital-health-market Gartner

Constituent News

In April our WELL product expanded its underlying themes to include standalone themes Telemedicine and Healthcare Analytics.  At least 100 holdings will always comprise WELL.  April saw both Gene Sequencing and Biotech’s weightings rise, while Medical Devices saw its weighting decline.   

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

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

WELL’s broad holdings have helped it participate in strong gains across Telemedicine, Healthcare Analytics and Medical Device themes.

• WELL is truly global – the US represents 70%. Japan 7.2%, China 6.6% and Switzerland 3.3% follow as our largest country weights.        
• WELL’s updated benchmark, the Indxx Global NextGen Healthcare Index, holds a minimum of 100 companies.       
• WELL does not relax revenue thresholds to boost the number of constituents, instead maintaining a minimum revenue threshold of 50% from target sectors.  
• WELL includes more established companies – requiring a $500m market cap versus just $200m for HEAL.

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 continues to boost WELL’s holdings in the medical device and biotech areas.

Outlook

WELL’s benchmark has benefited significantly from large holdings across three key subthemes – typically all above 20% weightings.  These include Genome Sequencing. Medical Devices and Biological Engineering (Biotech).

The recent 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 Cloud Healthcare market is expanding rapidly across hospitals and is likely to dominate IT spending in this space for the next few years.  Cybersecurity spending is also likely to see a big increase in the healthcare space as privacy concerns and potential hacks, increasingly concern most hospital groups.

For illustrative purposes only. Past performance is no guarantee of future performance. Source: Bloomberg. Data as of 30.04.2021