London, UK, 12 November 2024

Edison issues thematic report: Healthcare-focused trusts – A sector on the mend

Robust business models rarely go out of favour, though temporary setbacks are not unheard of. Driven by megatrends and with innovation as its backbone, the healthcare sector offers strong business models, with varied opportunities for diverse risk appetites. Following a tumultuous period, with a COVID-19-driven valuation upsurge giving way to capital flight and sector rightsizing, we believe the space is primed for a turnaround. With the recent reversal in interest rate trends and the conclusion of the US election, we expect the focus to shift back to fundamentals, with lower-than-average valuations potentially offering an attractive entry point. In this report we summarise the sector’s overall performance versus the broader market, with a focus on small- and mid-cap biotech companies, which we believe will drive growth. We explore key themes including the patent cliffs faced by big pharma, promising therapeutic areas and biotechs ripe for M&A. Finally, we analyse the role and positioning of investment companies (with an overview of selected funds) as a means for investors to navigate the complexities of the sector and partake in the potential upside, while mitigating the risks.

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