Portfolio

Vaccines, Recovery and Innovation in the Healthcare Sector

How has the healthcare sector fared during the pandemic? We spoke with Jenny Chang, a portfolio manager who covers healthcare for Goldman Sachs Asset Management’s Fundamental Equity team, on the sectors she and her team are focused on this year.

Can you give us a sense of how the COVID vaccine rollout is affecting the sector?

Jenny Chang: The demand for COVID vaccines is leading to a very tight demand-supply situation across the entire drug supply chain. There simply isn’t enough supply to make all the drugs and vaccines to meet that demand. From our view, we expect the demand-supply conditions to persist for several years given that many countries outside the U.S. still need access to the vaccine. In addition, vaccine manufacturers, such as Moderna and Pfizer, are starting to work on annual booster shots that would provide protection against the different variants. We are also hearing that the booster shots may move to a prefilled syringe configuration compared to the current six doses per vial configuration.  If this is the case, it will make the already tight demand-supply dynamic even tighter.

And as economies emerge from the pandemic-induced lockdown, where do you expect to see pent-up demand?

Jenny Chang: One area that was severely disrupted last year was the medical-device sector, as many patients delayed elective surgeries. With vaccines rolling out, we think these companies are well positioned for recovery. In fact, the companies’ first-quarter results are confirming that trend with management teams commenting they’re seeing a sharp rebound in elective procedures which are nearly back to pre-COVID levels. So overall, we’re seeing encouraging signs of demand.

Has the pandemic led to any structural shifts in the sector?

Jenny Chang: The pandemic has brought unprecedented funding and investment into the entire healthcare ecosystem. As a result, we are seeing faster innovation and faster drug-development timelines. The best example of this is probably COVID vaccine development. The last new vaccine prior to COVID took four years to develop. This time around, it took one year to come up with the COVID vaccine. So something structurally has changed. Our view is healthcare innovation is at an inflection point, and we’re continuing to focus our investments around innovation in the space. The overall setup and the outlook for the healthcare sector is quite positive over the next few years.

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