31 January 2022
The Outlook for Healthcare in 2022 by
Matthew Cole, Partner, Consilium Strategic Communications
As we come to the end of the first month of 2022, it is worth reflecting on the emerging trends that we are seeing in healthcare and the outlook for the rest of the year.
Global healthcare continues to be fundamentally impacted by COVID-19, marked most recently by the rapid spread of the highly transmissible Omicron variant. After two years of pandemic, and despite the tremendous achievements of so many to rapidly develop and administer treatments for patients, huge challenges remain in areas such as the global distribution and supply of vaccines and other treatments such as antivirals, and the impact on the overall healthcare supply chain and utilisation.
In addition to the direct impact of COVID-19 on patients and healthcare systems, the pandemic has led to widespread reductions in access and delivery of non-COVID-related medical care. Postponements or failure to provide a wide variety of services such as check-ups, screening and treatments for both chronic and acute conditions have had a devastating impact on patients whose conditions have not been diagnosed or treated early enough or whose chronic diseases have deteriorated due to inadequate management.
Moreover, this has led to an enormous backlog of demand for care, which we would expect gradually to unwind if no new serious variants emerge and the overall impact of COVID-19 lessens. This is looking more hopeful now with the apparently less severe impact of the Omicron variant, rising vaccination rates, faster diagnosis and improved treatment protocols including the use of oral antivirals. The unwinding of this backlog of demand will result in better outcomes for patients and should be beneficial for the healthcare sector overall.
The pandemic has also been a catalyst for significant changes in healthcare innovation and delivery. The past two years has seen the rise of rapidly evolving digital health technologies, new care delivery models such as virtual consultations and the widespread use of in-home diagnostics in the form of lateral flow tests, outsourced and collaborative working and creative trial design, and clinical innovation. These and other advancements should sustainably support improvements in the development and delivery of better treatments for patients in the future.
These changes are also impacting the nature of innovation in the healthcare sector. Now more than ever, innovation in healthcare is multidisciplinary and collaborative. The journey from “bench to bedside” is increasingly characterised by strategic academic and industry collaborations and licensing agreements, the use of AI or other high-tech development approaches, outsourced clinical research and managed access programs, contract manufacturing, complex access and reimbursement negotiations, engagement with KOLs and patient advocacy groups.
As a result of this collaborative approach to innovation, there is a greater intersection between big pharma, biotechs and academia and the larger players are seeing opportunities to replenish their pipelines and technologies through M&A. According to McKinsey, the majority of forecast blockbusters in the coming five years will originate from small biotechs rather than pharmaceutical companies. This presents opportunities for both sides of the industry and also for investors. We only need to look at the development of COVID-19 vaccines and where these vaccines originated – Oxford University / AstraZeneca, BioNTech / Pfizer, Janssen / Johnson & Johnson, and Moderna – the demand was critical, but the returns made by some of these companies and associated share price increases has been nothing short of spectacular.
In addition to this, valuations in the healthcare sector are low after a challenging second half of 2021 on healthcare indices, and this trend has carried on in to 2022. One explanation for this is we are currently in a high inflationary cycle and healthcare typically underperforms other sectors in this environment. In the past year, we have seen well-funded private equity firms circling around many targets and this is unlikely to change whilst inflation remains high and share prices are lower. Whilst this could lead to consolidation in the sector, companies can defend their positions through communication, and using their key messages and investment thesis, they can also maximise value should there be a change in ownership.
COVID-19 has impacted the healthcare industry, presenting opportunities and challenges throughout, however, if we now believe that COVID-19 is reaching an endemic level and we are able to live with it, healthcare activity is only going to rise as the huge backlog of patient needs postponed or abandoned during the pandemic demand attention. This will not only lead to existing methods being used to treat patients but has also fostered innovation that will lead to new therapies and technologies, new ways to treat people and a fundamental shift in how we use technology and data, that will be equally of benefit to patients and investors.