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Few trends have as long a shelf life as ageing. Governments will come and go, technologies evolve and fashions change. But the world will keep on growing older. Come 2050, the UN predicts, 16 per cent of us will be over 65, up from a tenth now. In Europe and North America the ranks will swell to an estimated 27 per cent.
As long-term growth trends go, this is one investors can bank on. Healthcare is an obvious beneficiary: global spending of $9.8tn in 2021 equated to more than a tenth of economic output, says the World Health Organization.
No surprise then that the sector makes up roughly half of BlackRock’s iShares Ageing Population ETF, which has returned 8.3 per cent over the past year, a whisker behind the benchmark.
The healthcare universe spans pharma, implant and device manufacturers and those providing eye and dental care. Drugmaker Novo Nordisk, riding high on its anti-obesity treatment, is also in diabetes and cardiovascular illnesses. The latter, with higher incidence as people age, is also key for US-based Pfizer and Bristol Myers Squibb.
True, old age has yet to have its Ozempic moment. Pharmacologists tackling Alzheimer’s disease, with which 55mn people are living globally, frequently stumble at phase 3 trials. Failure rates are high and the ability to cash in on pricey drugs with uncertain outcomes (and risks) is elusive.
Still, Eli Lilly last month moved a step closer to US approval when the FDA advisory panel unanimously endorsed its donanemab treatment. Leqembi from Japan’s Eisai and Biogen of the US, which likewise slows progression of cognitive impairment, secured the green light earlier this year and last week was launched in China, its third market after the US and Japan.
Manufacturers of medical devices seem like a safer bet. More arthritic knees to be replaced and failing hearing to be enhanced. But there are pitfalls here too. Lawsuits, such as those that bedevilled Johnson & Johnson’s DePuy Synthes over hip replacements, are one.
There is little repeat custom, fortunately for those undergoing the procedures. Share prices in the sector, in part dented by a weaker US market, do little to inspire.
Shares in UK-listed Smith & Nephew are down by around a fifth in the past 12 months; this is despite the fact it has stuck with its full-year guidance of 5-6 per cent revenue growth and a trading profit margin of 18 per cent or more.
Beyond treatments, financial services and hospital care providers — such as UK-listed Spire Healthcare — play to the sector. Spire, which has benefited from the overburdened NHS, has struggled to woo investors and trades at a discount to peers.
Also parlaying growth in the sector are providers of consumer products such as incontinence pads. Japan leads the way. It is more than a decade since sales of adult diapers overtook those designed for babies at Unicharm and this year Oji Holdings ended its domestic baby diaper business in favour of the fast-growing adult business.
Too grim? S&P offers a cheerier US Retiree Spending Index which, alongside healthcare, plays to the wealth unleashed by baby boomers on housing, transport, entertainment and leisure. Proving not everything is downhill, the index has inched higher over the past year — albeit heavily outpaced by its ageing population peer.