Each week, a professional investor tells us where he'd put his money. This week: Paul Major of the BB Healthcare Trust selects three promising medical stocks.
The pace of medical breakthroughs has continued to accelerate, fuelled by a combination of technological developments and advanced treatments. Technology is not only helping to develop new cures, but also offers the potential substantially to lower the cost of healthcare for patients and providers.
There is understandably a focus on the price of innovative medicines. However, the proportion of healthcare expense accounted for by drug costs (less than 10%) has remained broadly stable over time. Cost inflation in the other 90% is less visible, but nonetheless important if we are to address the affordability crisis in healthcare.
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The coming years will see the widespread adoption of novel technologies that offer the potential not only to improve care, but also to help avoid substantial future healthcare costs that our traditional delivery model makes inevitable.
How should an investor address this new opportunity? We think that an unconstrained "best-ideas" approach can offer a portfolio that is diversified in its exposure to these new opportunities, but also focused in terms of the number of holdings to offer a high level of operational gearing into the healthcare transformation story.
See your doctor from home
Teladoc (NYSE: TDOC) is a telemedicine provider offering patients a range of services to access medical advice, diagnostic services and prescriptions remotely. We are all aware of the increasing demands on GPs' time and the costs associated with unnecessary visits to hospitals. Teledoc offers lower cost, more convenient interactions with healthcare professionals and matches doctors' time with patients' needs truly a revolution at the frontline of care.
A nudge to visit the doctor
New medicines offering improved safety, efficacy and convenience have revolutionised the treatment of many diseases, such as the longer-acting insulins that allow diabetics better control of blood sugar throughout the day and into the night. Nonetheless, we still have high medical costs associated with the rare but serious episodes of very low blood sugar that patients must contend with. DexCom (Nasdaq: DXCM) develops and distributes discreet wearable monitors, which are an angel on the patient's shoulder, keeping them aware of their blood sugar and forewarning of potential dangerous events well ahead of time, saving money and improving outcomes.
A cancer detector
As we manage chronic diseases better, it is inevitable that cancer will claim more lives. The issue here is less the absence of potentially curative drugs than sufficient warning of this insidious killer's presence to allow early action. However, we have seen rapid progress in identifying the genetic fingerprints of the cellular changes that lead to cancer and, ultimately, routine screening for these markers will be available. If you can detect cancer before it spreads, outcomes are greatly improved. Products by Illumina (Nasdaq: ILMN) industrialise DNA screening, making it both rapid and cheap.
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