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The West is getting richer and older, which is pushing up the demand for healthcare. And the rapid growth of the middle class in populous developing countries is also a boon for the industry.
Europe’s healthcare leaders are riding this wave.
Whether it is ground-breaking drugs, high-tech surgical simulators or contact lenses, there are plenty of investment opportunities in the space exciting the world’s best portfolio managers tracked by Citywire Elite Companies.
How Citywire Elite Companies works
Our three Citywire Elite Companies shortlists for the Emea region in drug manufacturing, healthcare services and medical devices highlight the five companies in each sector that are most popular with top portfolio mangers.
Drug manufacturers
| Company | Mkt cap | PE | Divi yield | 12-mth return |
|---|---|---|---|---|
| AstraZeneca | £178.4bn | 18 | 2.1% | 18% |
| Indivior | £2.4bn | 16 | – | 26% |
| Novartis | CHF204.2bn | 14 | 3.6% | 11% |
| Roche | CHF224.4bn | 15 | 3.3% | -15% |
| Sanofi | €118.6bn | 11 | 4.0% | 0% |
Source: FactSet. PE = price-earnings ratio. PE and dividend yield based on 12-month forecasts
Find out more: Citywire Elite Companies Awards
This year has been billed as a big one for acquisitions by large drug companies of smaller biotechs. The aim being to boost drug pipelines.
Immunology specialist Sanofi (FR:SAN) has been one of the companies in the fray, although it missed out on buying biotech company Horizon late last year, which went for $29bn. It has had other smaller-scale acquisition successes over recent years, though, including in 2023.
Aside from deals, Sanofi’s growth is being driven by a highly successful anti-inflammatory drug Dupixent, which continues to win approvals for new uses.
British addiction and mental illness drug specialist Indivior (GB:INDV) has been dogged by litigation over the years. While its drugs are billed as offering a solution to the opioid epidemic in the US, where it generates about four fifths of sales, it has been sucked into lawsuits associated with the space.
Most recently, it has set aside almost $300m for a case relating to the marketing of one of its drugs. The company is engaging actively with the litigation.
Indivior’s markets do offer growth potential, though, and the company hopes a recent dual listing of its shares in the US will generate increased interest from investors.
AstraZeneca (GB:AZN) is reaping the rewards of increasing its focus on research and development over a decade ago.
The Anglo-Swedish company has had several notable drug development successes which are diving growth, particularly in cancer drugs. The company is also doing well in emerging markets while seeking partnerships to explore exciting new drug technologies.
Swiss pharma giant Roche (CH:RO) focuses on diagnosis as well as drug development. Its business has been under pressure from competition from biosimilar drugs in recent years, but it has also been developing exciting new products, particularly for eye treatments.
While Roche has been struggling with biosimilars, fellow Swiss group Novartis (CH:NOVN) is getting out of the game. It is working on plans to spin off its biosimilars business Sandoz following disposals of other non-core business.
The slimmed-down group will be left focused on its fastest growing markets, which include treatments for cancers and rare diseases.
One of Novartis’s previous spinouts, eyecare company Alcon, is itself a favourite with elite investors and can be found among the companies shortlisted for the Citywire Elite Companies Emea medical devices award.
Healthcare services
Source: FactSet. PE = price-earnings ratio. PE and dividend yield based on 12-month forecasts
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Nursing home provider LNA Santé (FR:LNA) has grown to 80 establishments since it was founded in 1990. Its homes aim to provide residents with hotel-quality service alongside a rich social and cultural life.
The company also cares for complex medical needs such as Alzheimer’s, developing in-house know-how and operating its own training school for staff.
Sweden’s Medicover (SE:MCOV.B) is a hospital chain focused chiefly on central and eastern Europe. It also has operations in India, where it generates 11% of sales. The location of the business plugs it firmly into emerging prosperity trends as well as the rising demand from ageing populations.
As well as operating 175 medical clinics and 41 hospitals, Medicover’s healthcare services division runs dental clinics, fertility centres, pharmacies, and gyms. It also offers a broad range of laboratory tests across its markets.
Germany’s Nexus (DE:NXU) provides software solutions for the healthcare sector, helping various organisations to share healthcare documents. The company can cater to almost all the needs of healthcare providers and serves markets from hospitals to elderly care.
Irish group Uniphar (IE:UPR) operates a drug distribution and logistics business. This is an area where rules, regulations and reputation mean strong relationships are key.
The company has grown through acquisitions as well as organically and over 50 years has moved into 160 countries, where it now works with many of the world’s leading drug and meditech companies.
With the advent of virtual reality what we can experience in the digital world is becoming ever more sophisticated. This is great for Surgical Science Sweden (SE:SUS), which specialises in offering medical simulations that are used for training and marketing.
Surgical Science develops its products with medical associations to provide reassurance to customers. Its products include simulations to train doctors to use surgical robots, which are becoming increasingly common in hospitals.
Medical devices
Source: FactSet. PE = price-earnings ratio. PE and dividend yield based on 12-month forecasts
Swiss eye care business Alcon (CH:ALC) was spun out of drug company Novartis in 2019. It is possibly best known for its contact lenses and other widely used products such as eye drops.
However, over half Alcon’s sales come from eye surgery equipment. This division benefits from recurring revenues based on the sale of consumables used in operations.
Given Swiss cleanroom specialist Skan (CH:SKAN) came to market in the white heat of the growth-stock boom in late 2021, the shares have done very well to be comfortably ahead of their flotation price today.
The company certainly has a good growth story. It specialises in so-called asepic technology, which creates environments that have near-zero contamination risk during drug development.
While producing these ultra-clean conditions is highly complex, it also reduces costs for drug developers. There is strong demand for these services from biotech companies and especially those developing gene therapies, and Skan boasts many blue chips as clients.
Norway’s Medistim (NO:MEDI) makes blood flow monitoring devices that reduce risk and enhance the quality of cardiac, vascular and transplant surgery. The company is a leader in Europe and Japan and also has a growing presence in North American and Asia.
Medistim also operates a distributor network through 65 companies through which it represents about 100 other meditech companies.
Formed through a €48bn merger of French lens company Essilior International and Italian eyewear business Luxottica, EssiliorLuxottica (FR:EL) is a global leader in its field. The company does everything from developing lenses and optometry equipment through to selling specs and shades in shops and online.
EssiliorLuxottica operates 18,000 stores, is present in 150 countries and has 150 brands in its stable, including the likes of Ray-Ban and Oakley. While classified in the medical devices sector, this is a company that has a foot in the consumer sector too.
An ageing and increasingly affluent population should be a boon for a company making replacement hips and knees. However, Smith & Nephew’s (GB:SN) orthopaedic business has been struggling for some time. Deepak Nath, who took over as chief executive last year, is focusing on turning this business around.
The company’s wound care and sports management divisions look in much ruder health than orthopaedics. Here too, though, there have been problems of late. Grinding post-Covid supply chain restraints meant the company struggled last year to keep up with demand.
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