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Fat pharm set to be the new medical tonic

In its global healthcare review, Threadneedle says that while major companies such as Pfizer still dominate the pharmaceutical investment area, the rest of the sector is split between a diverse mix of stocks, including hospital management groups, distributors, biotech firms and medical technology companies.

Global healthcare fund manager Anne Marieke Ezendam believes healthcare funds which invest in medical technology stocks will do well, servicing the needs of an older and fatter population. Examples are companies that supply hip replacements, dental implants and Zimmer frames. By contrast, drug stocks have suffered from a number of problems, including expiring patents, poor product pipelines, regulatory and pricing pressures and weak volume growth.

Threadneedle refers to the “Supersize Me” phenomenon, where obesity has doubled in the US over the last forty years. A similar trend is also unfolding in Europe, with obesity and longer life contributing to a rise in heart disease and diabetes and to increased hip and knee replacements. The number of knee procedures has more than doubled globally since 1990.

Ezendam says: “Pharmaceuticals moved from the easy-ride profit centre for many health portfolios to the most unliked sector in the healthcare index. I do not see the easy pharma profits coming back near term and we need to look for new themes and technologies that fill a natural need. Obesity and life-improving solutions are the main drivers.”

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