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The healthcare sector delivered a robust return of ~43% in the past one year. So far, in 2020, despite the coronavirus threat, the performance of the sector has been reasonably good as the healthcare companies are continually trying to find a cure and control the outbreak. On a year to date basis, the sector had attractive returns of ~7.0%.
The healthcare industry mainly includes companies that offer ambulatory care in an outpatient setting or at home. These companies use advanced and innovative medical technologies for diagnosis, observation, consultation, rehabilitation services and treatment. Healthcare companies are involved in improving future approaches by executing the digitalisation process. Smartphones and artificial intelligence (AI) are driving the digitalisation growth exponentially. Moreover, the changing demographics with an increasing aged population has played a significant role in improving the spending of the healthcare industry.
Technology, for decades, has played a crucial role in numerous industries, and one of them is the healthcare industry. The continuous change in technological know-how has the ability to change the healthcare sector, with an increased focus on investments.
Source: Unsplash
Here are a few significant trends and themes that will aid the healthcare industry in the upcoming years:
- Cost Efficiency & Encouraging Demographics: The main advantage of healthcare companies is cost-effectiveness. The outpatient medical care clinics offer a broad range of medication and diagnostic options and even minor surgical practices. Financial motivations like health plans and government program payment policies are also accountable for the growth in outpatient care. The healthcare industry should also benefit from the rising elderly population, growing incidence of prolonged diseases, and reduction of responsibility for healthcare sector due to a significant decline in the daily patient admissions.
- Advancements in clinical development and drug discovery: Digital technology also plays a critical role and is utilised in pharmaceutical research and development. The use of such technology helps to lessen the responsibility of clinical documents and certifications during the drug discovery phase. Digital solutions are replacing specific lab experiments like computer-assisted trial design, modelling and simulation, clinical trial simulation, model-based drug discovery, and development, to name few.
- Mergers & Acquisition: Over the past few years, the industry has started consolidating through mergers & acquisitions, mainly due to the difficulties of healthcare reform. The move has aided the players in establishing operational efficiencies, and financial value for their business. Several deals have assisted the industry to effectively handle costs and enhance productivity, thus leading to economies of scale.
- Ever-increasing access to healthcare services- Digital health is considered to be a strong enabler for offering services in the rural and remote locations in the developing countries. Digitalisation plays a vital role in bridging the gap between patients and doctors in order to provide health facilities. The unnecessary referrals and expenditure relating to treatment can be minimised by using mobile technology to centralise healthcare expertise.
- Artificial Intelligence’s Dominant Role: AI has been a flourishing success in healthcare. Healthcare companies choose automated techniques and bots for controlling, administrating and managing health information. With the help of AI, hospitals can achieve better outcomes, while patients will receive more efficient and individualised care.
Let’s dig deeper and look at three ASX-Listed healthcare stocks.
Healius Limited (ASX:HLS)
Healius Limited is engaged in offering diagnostic and pathology services to consumers and their consulting practitioners. The Company has three main units, namely Pathology, Medical Centres and Imaging, along with three growing businesses Dental, IVF and Day Hospitals.
1HFY20 Performance for the Period Ended 31 December 2019: The Company recently announced its interim results for the period ending 31 December 2019, wherein it reported an increase of 4% in underlying EBIT of $75.7 million and a growth of 8% in underlying NPAT at $42.1 million. Productivities from organisational redesign and cost savings initiatives were the key catalysts. Revenues for the period stood at $945.1 million as compared to $878.9 million reported in the prior corresponding period, a growth of 7%. The Company is one of the top market network leaders in Australia with over 2,558 total sites, 2,318 pathology centres, 95 medical centres and day hospitals, along with 145 imaging centres. HLS declared an interim dividend of 2.6 cents per share (fully franked).
What to Expect: The Company has increased the bottom end of the FY20 guidance range and anticipates underlying NPAT to be in the band of $96 million to $102 million. Healius has simplified its organisation structure and has identified further savings in 2H20.
Stock Information
On 03 March 2020, the HLS stock was trading at $2.985 (at 03:08 PM AEDT), up by 1.186% from its previous close. With almost 622.74 million shares outstanding, the company’s market capitalisation stood at nearly $1.84 billion.
Clinuvel Pharmaceuticals Ltd (ASX:CUV)
Clinuvel Pharmaceuticals Ltd is an Australia-based biopharmaceutical company dedicated to the development of drugs for the treatment of a wide range of severe skin diseases. The Company focuses on R&D initiatives for patient’s treatment by the interaction of skin with its environments, seeking to provide innovative medical solutions for photoprotection, regimentation, and genetic defects.
1HFY20 Financial Highlights for the period ended 31 December 2019: On 27 February 2020, the Company recently released its half-year results wherein it reported a strong balance sheet with no debt. During 1H20, the revenue of the company stood at $9.971 million, representing an increase of 11% year over year and reported an 8th consecutive half-year with net profit, which stood at $1.059 million. Total cash at the end of the period came in at $57.432 million, up 34%.
The Company has announced that it is investing in further expansion of VALLAURIX R&D facilities in Singapore. CUV is adding new, highly skilled local personnel to its existing team to further improve the progress of its product pipeline.
Stock Information
On 03 March 2020, the CUV stock was trading at $18.460 (at 03:08 PM AEDT), up by 7.953% from its previous close. With almost 49.41 million shares outstanding, the company’s market capitalisation stood at nearly $844.92 million.
Pro Medicus Limited (ASX:PME)
Pro Medicus Limited is one of the top medical imaging IT providers. The Company provides a wide range of radiology IT software and services to hospitals, imaging centres and health care groups on a global basis. Pro Medicus has also purchased Visage Imaging, a global provider of leading-edge enterprise imaging solutions.
1HFY20 Financial Highlights for the period ended 31 December 2019: During the period, revenue soared 15.7% and came in at $29.3 million. Profit after tax witnessed a rise of 32.7% to $12.1 million while the underlying profit before tax stood at $14.8 million, up 45.3% year over year. The Company's cash reserves at the end of the period were $38.8 million, an increase of 20.2% year over year. During the period, cash from operations grew sharply to $16.1 million, up from $6.4 million as on 30 June 2019. The Company also reported a robust balance sheet with no debt. Owing to the decent financial performance, the Board declared a fully franked interim dividend of 6 cents per share, payable on 20 March 2020.
What to Expect: The company is expecting constant growth from Partners, Duke, OSU and existing clients. PME is strategising growth from new product offerings and expansion in geographical markets.
Stock Information
On 03 March 2020, the PME stock was trading at $20.890 (at 03:08 PM AEDT), up by 1.064% from its previous close. With almost 103.95 million shares outstanding, the company’s market capitalisation stood at nearly $2.15 billion.
