Global healthcare endured a challenging decade of rising costs, increasing regulations and swelling demand. These pressures will not only continue, but increase as the growing population ages, the demand in emerging markets develops and technology and scientific advances change what were once fatal conditions into chronic diseases with lengthy treatment programs. These added stresses offer challenges and opportunities to investors, informing our interest in the sector.
Given the increasing pressure on margins, we are interested in targets that facilitate cost reduction and improved efficiencies for either the payors or providers through cost and utilization management, shifting the location of care to more cost-efficient locations, or better processes, technology and service. In addition, market niches benefiting from continued volume growth, such as the expanding aging population and the emerging markets’ middle class, generate attractive deal flow for us. Heightened awareness and education leads to more patient-driven decisions and the rise of consumer healthcare. Lastly, we are also examining non-reimbursed segments, such as animal health and OTC.
These themes dovetail with the key trends in each major healthcare sub-sector. We continue to focus on three major areas:
Margin pressure in pharmaceuticals is increasing as the industry faces patent expiries and generics continue to penetrate the market and drive down prices. As a result, we are interested in companies targeting the branded generics space and providing outsourced services to the pharma industry.
Healthcare funding deficits, ever-increasing demand, and inefficiencies due to changing industry dynamics are creating opportunities for service providers. Provider and payor services – such as homecare services, diagnostics, IT/analytics providers and acute and post-acute care facilities – that offer reduced costs and improved healthcare quality, remain a core focus for Advent.
Defensive due to favorable healthcare, demographics, medical technology, including diagnostics to improve healthcare decisions and medical and dental supplies, continue to offer attractive investment opportunities.
With all of our investments in healthcare Advent brings a high degree of focus on improvement of both product and service quality. We believe that patient safety and outcomes are key success factors for any business operating in healthcare. Given the dynamics in the healthcare industry, we believe our thematic approach applied to the individual sub-sectors will help us to identify unique opportunities, like CARE Hospitals and Biotoscana Farma, where growth is underpinned by improved outcomes and care.