COVID-19 Shifts the Health Care Conversation, But Innovation Perseveres
It’s an election year, so the health care conversation is supposed to be locked squarely on candidates’ views on the US health care system, and their plans to “fix” it, whether through keeping the status quo with the Patient Protection and Affordable Care Act, implementing Medicare for All, or a to-be-determined third option. Instead, much of the news since late February has focused on COVID-19—a disease caused by a novel coronavirus that has infected hundreds of thousands of people around the world—and its impact on the world economy.
But outside the election rhetoric and the rapid spread of COVID-19, there is plenty of innovation happening in the health care space that’s worth noting, including advancements in immunotherapy, a growing interest in precision medicine, and the rise of the home-based care market. For investors with long time horizons, health care should be on the list of areas to watch.
“We really believe health care is an all-weather opportunity,” said Erin Xie, managing director and portfolio manager of the BlackRock Health Sciences Opportunities Fund, in a recent BlackRock blog post. “The past two years offer a microcosm: In 2019, the sector lagged the broad market but was still up an impressive 23%. And in 2018, health care’s resilience was on display: Global equity markets were down 9%, but the sector was up 2%. It’s also worth noting that trade disputes have led to increased market volatility, but we’ve seen limited read-through to the health care sector.”
COVID-19 Creates Market Panic
There’s no sense avoiding the elephant in the room. The US stock market has plunged sharply since mid-February once it became clear that the novel coronavirus was not just a “China problem” that started in the country’s Hubei province. The markets underwent a knee-jerk reaction, posting record losses, with the bottom of the fallout not yet in sight. The Fed responded by dropping interest rates to zero, and Congress is working on an economic stimulus package with hopes of pumping life into the economy.
US Treasury Secretary Steven Mnuchin told CNBC’s “Squawk on the Street” on Friday that the market sell-off will be short-lived and looks like a compelling opportunity for investors looking to buy equities at a discount.
“This is a short-term issue. It may be a couple of months but we’re going to get through this, and the economy will be stronger than ever,” Mnuchin said. “I look back at people who bought stocks after the crash in 1987, people who bought stocks after the financial crisis. For long-term investors, this will be a great investment opportunity.”
One place to turn might be health care real estate investment trusts (REITs). Companies that own and operate hospitals, medical offices, and life sciences and biotech facilities are well positioned to weather the storm. But all health care REITs are not equal.
“Health care REITs are generally the most defensive, economically resilient property type in the REIT industry,” CFRA Research analyst Kenneth Leon wrote in a recent report. “The group offers steady cash flow, low risk of rental rate volatility, and stable occupancy levels.”
But not all health care real estate firms will thrive. Leon thinks investors should avoid companies that run senior living centers because they won’t be able to safely show their properties to prospective new residents.
Steven A. Wechsler, president and CEO of the Nareit association, also says health care REITs are a good move. “While COVID-19 has created near-term economic uncertainty, the REIT industry’s strong earnings, solid balance sheets, and high occupancy rates demonstrate that they are entering this situation well-positioned to handle a potential economic slowdown,” Wechsler told CNN.
Meanwhile, pharmaceutical companies such as Gilead Sciences Inc., GlaxoSmithKline, and Johnson & Johnson, as well as a handful of other companies and startups, have stepped forward to work on developing vaccines or treatments for COVID-19. Experts, however, say it could be months—or longer—before treatments are available.
Other solutions being discussed in the medical community include the use of interferon therapy and elderberries. In an article for Progress in Cardiovascular Diseases, Mark F. McCarty of the Catalytic Longevity Foundation and James J. DiNicolantonio of Saint Luke’s Mid America Heart Institute said that, “Both influenza and coronavirus cause an inflammatory storm in the lungs and … [this] leads to acute respiratory distress, organ failure, and death. Certain nutraceuticals may help to reduce the inflammation in the lungs from RNA viruses and others may also help boost type 1 interferon response to these viruses, which is the body’s primary way to help create antiviral antibodies to fight off viral infections.”
The authors point to several clinical studies in humans that have found that over-the-counter supplements such as n-acetylcysteine (NAC) and elderberry extracts present evidence suggesting the duration of influenza is shortened by about two to four days and its severity is reduced. The authors also note that “several nutraceuticals such as spirulina, beta-glucan, glucosamine, and NAC have either been found to reduce the severity of infection or to cut the rate of death in half in animals infected with influenza.”
“Therefore, it is clear that certain nutraceuticals have antiviral effects in both human and animal studies,” DiNicolantonio said. “Considering that there is no treatment for COVID-19 and treatments for influenza are limited, we welcome further studies to test these nutraceuticals as a strategy to help provide relief in those infected with encapsulated RNA viruses.”
Cancer Deaths are Dropping, While New Cases Grow Slightly
The mortality rate from cancer in the United States is dropping among men, women, and children, according to the latest Annual Report to the Nation on the Status of Cancer from the American Cancer Society. From 2013 to 2017, the latest period reported, cancer death rates fell approximately 1.5% per year. However, from 2016 to 2017, the death rate fell 2.2%, the largest single-year decline in cancer mortality ever reported, according to the American Cancer Society. Since 1991, the rate has dropped 29%, which translates to approximately 2.9 million fewer cancer deaths than would have occurred if the mortality rate had remained constant.
However, rates of new cancers diagnosed from 2012 to 2016 remained about the same in men while increasing slightly among women, according to the American Cancer Society.
Promising Advancements in Cancer Treatments
Rapid advancements in cancer treatments are making the improvements possible. Among the latest advancements, different types of immunotherapy are gaining ground, including CAR T-cell and cancer vaccines.
One method that harnesses the body’s immune system to seek out and destroy cancer cells is generating excitement throughout the medical community: chimeric antigen receptor (CAR) T-cell immunotherapy. The treatment is currently FDA-approved for two types of cancer: acute lymphoblastic leukemia (ALL) and large B-cell lymphoma.
“I predict we will see CAR T approved this year for patients with mantle cell lymphoma and multiple myeloma,” Louis J. DeGennaro, the Leukemia and Lymphoma Society (LLS) president and CEO, wrote in a December blog. “Compelling data for both of these blood cancers was presented at the American Society of Hematology meeting in December. I’m especially excited about so called ‘off-the-shelf immunotherapy’ that doesn’t require engineering individual patients’ T cells, making manufacture of these cells less costly and time consuming.” Versions of CAR T-cell immunotherapy with additional genetic modifications are now being tested in order to extend their benefits to solid cancers.
In terms of cancer vaccines, in particular those that target patient-specific mutations called neo-antigens, they’re getting more personalized, less expensive and easier to manufacture. Vaccines have shown significant progress in initiating immune responses against patients’ cancers. However, experts say that in order for vaccines to achieve meaningful clinical benefit, they will likely need to be combined with other treatments to enable vaccine-associated immune responses to be maintained and eliminate tumors.
The Rise of Precision Medicine
DeGennaro says the rise of precision medicine—giving patients a drug based on their molecular profile—is showing great promise in acute myeloid leukemia (AML) and chronic lymphocytic leukemia (CLL). “While chemotherapy, drugs that directly kill cells, remains an important component of many treatment regimens, I predict we will see less reliance on these types of drugs as more targeted therapies, drugs that work by interfering with molecules that help drive cancer growth, gain approval,” he said.
Precision medicine allows doctors to select treatments based on a genetic understanding of the patient’s disease, and to create personalized treatment plans. Such detailed profiling, of course, requires the use of technology. Blockchain technology and artificial intelligence (AI) are helping doctors analyze patterns in patient data and provide insights that can help create customized medicine.
Home-based Care Market on the Rise
Today’s health care goes beyond the doctor’s office or hospital—many companies are now focused on bringing care to patients in their own homes. “Connected” health care solutions powered by the internet of things (IoT) can be passive, such as fall detectors placed under carpets or devices that capture metrics such as restlessness, sleep interruptions, or breathing patterns. They can also be active, such as devices that capture vital statistics and send them to a remote provider. The good news: The consumer technology market driven by tools such as Amazon’s Alexa home assistant or Google Home has made patients—even older ones—more accepting of home-based care.
This has piqued the interest of private equity investors, who had already increased their investments in this space over the past few years. PriceWaterhouseCoopers reports that when 2019 numbers are analyzed, there will have been more than 750 health care deals involving private equity buyers and sellers, compared with 299 in 2009.
“There has been a large increase in private equity interest in health care,” Matt Picciano, principal at Alpine Investors, said in a recent interview. “Overall, the market is big and growing, so you’re seeing private equity become more comfortable in the health care space. It’s a flywheel effect.”
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