NIE 2023 | Frost & Sullivan Executive: Healthcare Investments —— Global Market Snapshot and Investment Opportunities

Dr. Dillan pointed out that in the past 20 years, the annual return on investment for the technology industry has been about eight to ten percent, while for biotech companies it has been about 12% to 15%, and could even reach 18% to 20%, which is a very optimistic situation.

There is also incremental capital in the capital market, with PE/VC raising a large amount of funds. They have been waiting for an opportunity for two to three years. However, due to various macroeconomic reasons and significant market uncertainties, PE/VC have been implementing strict risk control strategies from the first quarter of 2020 to the first quarter of 2023. It was not until the second quarter of 2023 that they gradually increased their positions and expanded investments.

Dr. Dillen pointed out that the total returns on different markets and different market segments, as well as those over 30 years, 20 years, 10 years, and short-term returns, are completely different. The healthcare industry in the United States has very impressive long-term returns over thirty and twenty years compared to other industries, making it a worthwhile long-term investment because it requires time for drug research and development as well as medical device research and development. From the perspective of supply and demand, due to the increasing demand for healthcare in modern society, investments in industries such as healthcare and Biotechnology will be one of the best investments.

Data shows that the Asia-Pacific region has seen a rapid growth rate in medical equipment, reaching 6.3%, compared to other regions where the growth rate was 2.7% in North America and 2% in Europe, mainly driven by the development of wearable devices and minimally invasive surgical robots. In terms of revenue, the Asia-Pacific region is also approaching $12.99 billion, reaching $12.71 billion, close to that of Europe.

Dr. Dillen pointed out that in the VC transactions volume for the second quarter of 2023, there was a 9.5% increase, which came from an increase in venture capital funds; investments in related fields such as surgical robots, cancer care, and neurostimulation showed growth; people around the world are showing an increased interest in elective surgeries; healthcare utilization rates have risen in Latin America; industry mergers and acquisitions have intensified, with a total of $1.2 billion in market value mergers and acquisitions occurring this year in the fields of liquid biopsy and insulin patches. The amount of VC investment in the first quarter of 2023 increased from $2.5 billion to $2.8 billion, although lower than the same period in 2021/2022, but the increase in transaction volume can be considered as the financing level has returned to normal.

VC transactions in niche areas have seen the first public offering in the Medtech sector, with Xi'an Medical, a minimally invasive surgical equipment manufacturer, going public at a valuation of $1 billion. Within 12 months, transactions in the surgical instruments and tools niche sector reached a transaction value of $3.9463 billion, leading other niche sectors.

Dr. Dillen stated that the growth opportunities in the healthcare industry lie in two areas: one is the transition to care outside hospitals, such as home hospitals and increasing links with electronic health records in North America and Europe; the other is smaller, smarter medical devices, which have seen a significant increase in their appeal during the Covid-19 pandemic, with an ongoing increase in related products; thirdly, the development and application of robots in the healthcare industry. During the Covid-19 pandemic, disinfection robots have been used in hospitals across most regions, while small portable robots are being used in hospitals without enough space to accommodate large systems. Remote surgery becomes possible with the help of robots, which will significantly address the issues of geographical imbalance and shortage of healthcare workers.

Finally, Dr. Dillen concluded that the prevalence of medical robots in the Asia-Pacific region may lead to competition and differentiation among companies in related niche markets, which is a valuable investment window period for investors.