At the $240 million Perennial Better Future Trust, healthcare stocks are a critical component of our ESG-focused portfolio.
These stocks, many of which have global reach, have the potential to generate attractive returns while shaping a better healthcare outcome for patients – a critical ingredient in making a positive contribution to society.
Although healthcare has been caught up in the recent market sell-off due to higher interest rates and more specific concerns about the potential impact of weight loss drugs such as Ozempic might have on demand for healthcare, we remain cautiously optimistic about the sector’s long-term prospects, remaining overweight.
Certainly, we have a considered view that the impact of drugs such as Ozempic are likely to have less long-term medical impact than some have suggested, so we see attractive valuation upside in the sector for our dedicated healthcare analysts to pick over.
Our focus is typically on company-specific drivers, seeking to invest in those stocks that are exposed to tailwinds and likely to grow even in a more challenging economic environment. In healthcare, that means what we term “traditional healthcare” and “emerging healthcare” stocks.
Emerging healthcare stocks are mostly biotech companies that are helping solve global healthcare issues such as cancer imaging and treatment, rapid pathogen testing or improving surgical technology, while traditional healthcare stocks are doing more established medical work such as diagnostics, health insurance, or treating sleep apnoea.
Some examples of the innovative healthcare companies in the portfolio are Immutep Ltd (ASX: IMM), Neuren Pharmaceuticals Ltd (ASX: NEU) and Impedimed Limited (ASX: IPD).
Immutep’s “efti” product activates the immune system to work in combination with existing cancer treatments to improve patient outcomes. Immutep is well-advanced in trials in several cancer indications including breast and lung cancer. It has US Food and Drug Administration (FDA) Fast Track designation for the approval process to use efti in combination with a leading cancer therapy called Keytruda in lung cancer that is showing very promising results in trial patients.
Immutep share price
We see significant potential upside for the company as it moves to a commercialisation phase over the next few years. There is also potential for corporate interest.
We recently added Neuren to the portfolio. Earlier in the year, the pharmaceutical DAYBUE, which Neuren developed, achieved FDA approval for the treatment of Rett Syndrome (“Rett’s”) in adult and paediatric patients. This is the only treatment approved for Rett’s, a seriously debilitating neurodevelopment disease that occurs almost exclusively in females following apparently normal development for the first six months of life.
Neuren Pharmaceuticals share price
Most patients require life-long medical care and DAYBUE has been shown to improve patient outcomes. Neuren has granted a worldwide licence of the drug to NASDAQ listed Acadia Pharmaceuticals and will receive royalties for sales. Initial sales have been ahead of expectations and are expected to generate significant cashflows for Neuren in the form of royalties, sales milestones, and other amounts from Arcadia.
Neuren is developing further products for neurodevelopmental diseases including Fragile-X syndrome, Phelan McDermid Syndrome and Pitt Hopkins Syndrome.
Impedimed’s SOZO device is used to assess the risk of breast cancer survivors suffering from lymphoedema. Lymphoedema is a chronic and often significant swelling in a limb that can occur as a side effect of cancer treatment when lymph nodes have been removed or damaged. The US National Comprehensive Cancer Network (“NCCN”) Clinical Practice Guidelines were amended earlier this year to, in effect, recommend screening for lymphoedema using SOZO.
Impedimed share price
This is a significant development for Impedimed that has been working with US health insurers to secure reimbursement for the SOZO test now that it is recommended by these key NCCN guidelines. Although this process is complex given the fragmented nature of the US health insurance system, it has recently announced good progress with the largest and fifth largest private health insurers in the US that will drive SOZO sales in the key US markets as additional insurers confirm reimbursement for the SOZO test.
