Why Is Health Technology Attracting Investor Interest?
The pandemic has increased awareness of the importance of healthcare resources, and has led to steep increases in the valuations of many listed companies in the sector.
Even before the pandemic, healthcare companies were already catching investors’ attention. The sector is supported by strong fundamentals, such as an ageing population globally and a growing middle class, particularly in Asia.
Dr Jonathan Seah, executive chairman of holistic wellness firm LifeHub, says that healthcare spending is likely to be further boosted by growth in what he describes as the “consumerisation of medical knowledge,” as people look for ways to improve their health.
The sector is also set to be a beneficiary of the application of new technologies such as artificial intelligence, big data and robotics.
Watch the video below to hear the round table in full:
As a result, Patrick Ho, chief investment officer, North Asia for HSBC Private Banking and Wealth Management, thinks the health technology sector will offer structural growth opportunities in the next five to ten years.
“Investors are comparing health technology with the internet and AI sectors, which have had very strong growth in the last 20 years,” he says.
Chibo Tang, managing partner at venture capital firm Gobi Partners, identifies three core areas within the health technology sector where he expects to see growth: general health and wellness, remote healthcare and at-home diagnostics, and supply chain optimisation. He adds that the application of AI and big data will help to optimise drug research, while robotics can facilitate operations and medical care.
See also: Get to Know Candice Chan, CEO of LifeHub
Seah expects the pandemic to lead to a greater focus on preventative medicine, which he describes as an underdeveloped middle ground between hospitals and clinics—set up for major illnesses—and the wellness side of gyms and pharmacies. Within this space, he is excited about the potential AI offers in enabling the development of personalised treatment for individuals that is both affordable and accessible.
Tang agrees that personalised medicine is likely to be an area of growth, with genetic testing providing people with data that helps them understand their particular vulnerabilities and potential treatments. “Once you have the data, there are any number of ways you can leverage it to live a better life,” he says.
See also: Prenetics Founder Danny Yeung On Helping Restore Normality During Covid-19
Despite its huge potential, the health technology sector is not without risks, and the recent spike in interest from investors has led to high valuations for many companies. Tang thinks this is particularly the case in the secondary market: “There is so much liquidity in the market and tech is the new frontier.” He advises investors to look for companies that address real problems.
Ho also warns that there can be a policy overhang between breakthroughs in R&D and applications and treatments becoming available to the public, which can lead to volatility in valuations.
For investors interested in getting into the sector, Ho expects to see an increase in the number of specialist health tech investment funds available in the next few years. In the meantime, he stresses the importance of having a diversified portfolio with varied exposure.
“We’re looking at three broad categories within the healthcare sector: R&D, because this part of the vertical is high risk, high return; treatment and diagnosis, because this is usually the first line of application for the results of R&D; and efficiency, such as tele-medicine and systems that can integrate people’s information so they can have better healthcare services and reduced supply chain costs.”
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