Four key factors impacting health and med-tech stocks in 2018

Hospitals and health systems around the world are facing pressures ranging from lowering costs to meeting the changing demands of patients in a world of instant communication.

That’s creating opportunity for stockmarket-listed health and medtech stocks — and there are hundreds on the ASX alone vying to be the next big healthcare solution.

But how to pick a winner?

Investment bank JP Morgan Chase recently looked beyond the medical technology makers and biotech developers to review the most pressing issues facing the healthcare industry in 2018.

“Hospitals and healthcare systems are increasingly seeking out innovative approaches to solve the most urgent challenges facing the industry,” reported JP Morgan in its Leading Themes in Healthcare Today report.

“Whether it’s the process-improvement opportunities presented by Big Data or the myriad operational and clinical difficulties imposed by the US opioid crisis, these are the topics on the minds of healthcare executives in 2018.”

Here are four key themes for health investors to keep in mind in 2018:

Big data

Rising costs are a top concern for any healthcare organisation — and access to better data is the first step to solving it, says J Morgan.

“Having access to actionable data now makes it possible to identify and address disparities in the cost of specific healthcare procedures,” the report says.

Examples of ASX stocks working in the health data space include Alcidion (ASX:ALC) which makes computer systems to better manage hospitals and clinics.

Volpara (ASX:VHT) uses machine learning to analyse breast screening data from around the world to improve the process.

G Medical Innovations (ASX:GMV) makes inexpensive devices to digitally monitor patient health. It’s ‘Prizma’ medical phone case turns a smartphone into a clinical-grade mobile medical monitor to measure vital signs such as ECG, respiration, oxygen saturation, heart rate, temperature and stress analysis.

Blockchain stocks that operate in the health space offer another investment angle. Blockchain technology helps secure sensitive data so it can be reliably shared.

Genetic Technologies (ASX:GTG) recently formalised a deal with an Indian start-up that wants to build a blockchain-based health network called Project Shivom.

Project Shivom, launched last October in northern India, has the ambitious plan of “growing to be the largest genomic and health data-hub on the planet“.

Here are some more ASX-listed health stocks focused on data.

Shifting to a consumer-driven healthcare model

In 2018, patients expect health services that give the same convenient experience as an app on their phone.

“Patients increasingly expect digitally enhanced and mobile service and healthcare systems are adapting by providing a more retail-based patient experience,” JP Morgan notes.

A local example is 1ST Group (ASX:1ST) which offers a patient-facing medical practice system called MyHealth1st.com.au with a range of features beyond online booking.

For example, the system can offer online education content that’s relevant to the type of medical bookings a patient has made. It can also make offers on health products such as contact lenses if a patient is due for a new set.

MedAdvisor (ASX:MDR) markets an app that tracks medications and scripts for patients and connects to doctors and pharmacists without the hassle of juggling paper scripts.

“The emphasis shifts from creating a relationship once a patient is actively receiving care to building a strong brand connection before a patient even needs care,” JP Morgan says.

“Patients want real-time responses, immediate scheduling availability, a simple process, price transparency and a variety of bill-pay options.”

Even drug delivery technology can benefit from consumer technology. For example Adherium (ASX:ADR) “gamifies” the process of using asthma inhalers to get patients sticking to their medication regime.

Battling the Opioid crisis

In the US, a nationwide opioid crisis is putting financial strain on healthcare systems.

The situation is not as bad in Australia as the US, though prescription opioids were responsible “for twice as many drug-induced deaths as heroin in 2016“, says the bureau of statistics.

One of the best-known examples among ASX-listed companies is Medical Developments (ASX:MDV) which markets the “green whistle” — a non-opioid pain relief inhaler commonly used in trauma settings for self-administration.

“In the short term, some providers are changing pain management protocols to reduce opioid prescriptions, or treating patients with anti-craving drugs like buprenorphine to lower re-admissions and reduce the total cost of care,” JP Morgan said.

Hospitals investing in med-tech companies

In the US, hospitals and healthcare systems are going a far as investing in innovative health and med-tech companies to gain access to improved operating margins — and JP Morgan expects that to continue.

The primary purpose for investing “is to build a pipeline of emerging companies whose services can resolve specific operational issues or even transform the delivery of care across the continuum”, JP Morgan notes.

The investment bank expects health organisations to invest in innovative health companies in four ways: direct investment, strategic fund investment, internal innovation centres and accelerator partnerships.

“As new treatment challenges emerge and consumer expectations rise, healthcare organisations need to re-examine their processes to better serve patients and adapt to industry changes,” the report says.

Read the full report here.