Sector report: Healthcare

The health sector has been going through various technological shifts in the context of an increasingly digitised, mobile and data-driven world. This trend predates the covid-19 pandemic and the nearly universal lockdowns of last year but it was undoubtedly accelerated by it. It is the life sciences sector that has developed in record time effective vaccines that have given hope that the world will be back to normal soon. When it comes to innovation in drug discovery, medical devices and the digitisation of health services, the role of general economic conditions and, particularly, low interest rates cannot be overstated. We had been living in a low interest rate environment since the end of the Global Financial Crisis in 2008 and with the shock of the Covid-19 pandemic, rates have hit a new record low. The benefits for life sciences sectors stemming from cheap credit are rather simple to comprehend – abundant cash translate into more capital available for the costly research and development (R&D) activities of the sector. Inventing new medicinal drugs and devices is an infamously expensive, slow and risky undertaking. According to data of Pharmaceutical Research and Manufacturers of America, it takes at least 10 years, on average, for a new drug to go from initial discovery to the marketplace. The average costs of a successful drug are estimated at $2.6bn. According to a study on clinical trial success rates in the US from 2019, only about seven out of every hundred newly created molecules obtain approval by the Food and Drug Administration. Despite all this, there have been fewer times in the history of modern medicine and pharmacology when it became so apparent how vital the pharmaceutical sector is for normal human existence as it has been since the beginning of the pandemic. Given the magnitude of business risk involved and cheapness of credit, it is no surprise that many incumbents in the industry have opted to externalise R&D costs and share risks with other co-investors – through licensing, spinouts, mergers and acquisitions, venture investing and joint ventures. As long as there are no drastic changes in the costs of capital, such practices in the industry are unlikely to change. In parallel, the life sciences sector has also been undergoing digitisation and datafication, like most other sectors of the economy. The “2021 Global life sciences outlook” by auditing and consulting firm Deloitte notes the central role of digital tech in the sector over the past year: “Corporate…

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