Autumn rolls into healthcare markets
Third quarter reporting kicked off this month, once again showing the strong fundamentals of the sector. The sector outperformed world equities, with broad based performance. Tools name stood out with a recovery spurred by returning demand in end markets. At the ESMO conference, PD1xVEGF drugs consolidated their status as likely new oncology standards of care.
Overall, we expect robust fundamentals and improving sentiment to continue driving performance.
Third quarter reporting
Two fifths of companies in the healthcare index have already reported third quarter earnings.
70% of companies beat sales expectations, with an average year on year growth of 11%, and 80% beat earnings expectations, with a growth rate of 14%.
On the services side, the trend is clear so far: medical costs continue to grow at a high rate. These growing medical costs were also reflected in strong growth on the MedTech side.
Insurance companies expect this growth trend to continue into next year, affecting all segments. In addition, these companies plan to price their products to recover margin next year, passing on the additional costs to customers.
On the therapeutics side, sustained demand across indications drove growth across product categories. While there see been little development on the policy front, management teams share investor’s confidence in being able to achieve a resolution at a bearable cost.
Separately, acquisition activity has continued to pick up
Overall, we have seen strong fundamentals this month, which we expect to continued drive performance across sub sectors.
Further Trump Pharma pacification
AstraZeneca has announced an agreement with the Trump administration regarding drug prices in the US. As with Pfizer’s deal late last month, we view this as a positive development which lessens regulatory pressure without incurring significant costs.
Overall, we expect these and similar moves from large cap peers to continue reducing the pressure on the sector and driving its performance.
Top 5 this month:
- Illumina Inc – 30% – Earnings
- Natera Inc – 24% – Earnings
- Cardinal Health Inc – 22% – Earnings
- Intuitive Surgical Inc – 19% – Earnings
- Satorius Stedim – 18% – Earnings
Bottom 5 this month:
- Molina – -20% – Earnings
- Baxter – -19% – Earnings
- Pro Medicus – -16% – Earnings
- Cigna – -15% – Earnings
- Dexcom – -13%- Earnings
Source: Bloomberg Finance L.P., Kieger
This news article has been issued through Kieger AG and is for distribution only under such circumstances as may be permitted by applicable law. This document is for information purposes only and does not constitute an offer. Past performance is not a reliable indicator of future results. The details and opinions contained in this document are provided by Kieger without any guarantee or warranty and are for the recipient’s personal use only. All information and opinions contained in this document are subject to change without notice. This document may contain statements that constitute “forward looking statements”. A number of risks, uncertainties and other important factors could cause actual developments and results to differ materially from our expectations. Data source: Statestreet / Factset.
