Efficient patient care, affordable medicines: healthcare systems in Asia need to adapt to an aging population and that is creating opportunities, Cyrill Zimmerann from Bellevue Asset Management writes.
Von Cyrill Zimmermann, Head Healthcare Funds & Mandates, Bellevue Asset Management
The global population is nearing a demographic tipping point. In 2020, retirees will outnumber children under 5 for the first time in history. The World Health Organization (WHO) predicts a trebling of the over-60 population to 2 billion by 2050.
There will then be 500 million elderly people in China alone. The number of centenarians in China is set to rise 10-fold in the same period to reach 200 000. In fact, by the end of the century, China is likely to be home to more than 1.7 million people over a hundred years of age.
Healthcare‘s Demographic Pitfall
Demographic attrition produces a decline in the number of people of working age and therefore has implications for the future of the global economy. According to a McKinsey study, average annual growth in gross domestic product in China alone is set to slow from 7.5 percent over the last 50 years to 5.3 percent over the next 50 years. The downturn is likely to be even more drastic in Brazil and Mexico, the two most populous Latin American countries, where growth is forecast to decline from 4 percent and 3.7 percent to 1.6 percent and 1.3 percent respectively.
Asia-Pacific faces the greatest challenges on a global scale, as home to almost half of the world‘s seniors. The first is to provide access to medicines for rapidly increasing numbers of people with aging-associated chronic diseases such as high blood pressure, diabetes, arthritis and cardiovascular problems, while keeping the associated costs under control. Secondly, national healthcare systems and private and public health insurance payers need to develop new solutions for providing medical care at hospitals and outpatient medical clinics.
Singapore Made Headlines
With more than 25 percent of its population over 65 years of age, Japan is at the forefront of developments in aging Asia. Alongside medical care, priority areas in healthcare are senior-friendly housing and supportive home care, including the use of domestic robots. The city-state of Singapore has also made headlines with its programs to provide seniors with integrated care within their own homes.
The greatest challenge currently facing China is to provide equally efficient medical care in both urban centers and rural areas. The establishment of local medical facilities throughout the country plays a major role here, as does the use of web-based telemedicine. Preventive medicine is also being promoted, for example with blood tests for early detection of new cases of common medical conditions linked to lifestyle choices.
The Chinese government has also presented a new draft of the national reimbursement drug list with the stated goal of promoting innovative medicines to treat diseases with a high unmet medical need.
Wide-ranging Investment Opportunities
These trends open up vast opportunities for investors. Investment opportunities can be found in diverse sectors ranging from drug developers to medical device manufacturers, IT companies and clinical services providers. Given the growing numbers of self-payers from the middle classes, we expect growth rates in the range of eight to ten percent for the generic drugs sector.
Although international players still set the tone here, local suppliers are becoming in creasingly adept at attaining a leadership position in selected niches. These include the biosimilar specialist Samsung Biologics in South Korea, the insulin supplier Tonghua Dongbao in China and pharmaceutical company Kalbe Farma from Indonesia.
Big Ambitions
Samsung Biologics has delivered a strong stock market performance since its listing in November 2016. The electronics and chip giant of the same name had been expanding its biopharmaceutical unit since 2011, which now has the capacity to undertake large-scale contract manufacturing of biopharmaceuticals for pharmaceutical companies like Roche and AbbVie.
The newcomer has big ambitions and is seeking to become a globally leading manufacturer of biotech products. Medy-Tox, South Korea‘s largest Botox manufacturer, teamed up with Allergan to meet skyrocketing demand for cosmetic care products and medical applications in its home market. Tonghua Dongbao is China‘s leading domestic insulin producer and is positioning itself as a full-service provider from diagnosis to long-term treatment.
Given the current figure of about 100 million diabetes patients in China, industry experts expect the company to post annual growth rates of 20 percent over the next five years.
At Breakneck Pace
Clinical services providers can position themselves as suppliers of new models for inpatient and outpatient care. IHH Healthcare from Singapore has subsidiaries in China, India and Turkey, but is mainly active in its home market and neighboring Malaysia. Bangkok Dusit Hospital dominates the private healthcare market in Thailand and is in the process of expanding into Cambodia and Myanmar.
As in developed countries in the western world, electronic communication between outpatient doctor‘s practices and hospitals is developing at a breakneck pace in Asian healthcare systems. M3 from Japan is the leading portal site for Japanese doctors, 80 percent of whom use it.
Trends of the Future
The company also has broad international appeal, catering to more than 4 million doctors worldwide who appreciate the continuous round-the-clock availability of advisory services. M3 also hosts platforms used by contract manufacturing companies to provide information about their services and provides a recruitment service for doctors and nurses in Japan.
These trends of the future in newly industrialized countries, especially those in Asia, are reflected in the investment strategy pursued by our portfolio managers for the BB Adamant Asia Pacific Health Fund and the BB Adamant Global Generics Fund. Drug companies are clearly the most heavily weighted positions in the portfolio.
