Portfolio
LGMCORP Investments is a private global asset manager, dedicated to active, high-conviction investing. We use a transparent system of collaboration aimed at identifying the finest ideas to tap into the combined power of our specialists across all markets, disciplines, and geographical locations. Our goal is to consistently and completely surpass our clients’ expectations. As of June 30, 2024, the company was managing US$ 4 billion* for sophisticated worldwide clients spread across multiple asset classes.
Our Capabilities
Active High-Conviction Investing
Active management is especially advantageous in certain asset classes and market sectors where efficiency is lower than in others. We work with clients to attain goals that surpass conventional market benchmarks, pursue greater returns, and actively manage risk in the markets where we believe our high conviction strategy can be most valuable. Investors have the choice to use mutual funds, other pooled vehicles, and individually managed accounts.
Equities
Prior to others realizing their value, we place a strong emphasis on identifying those exceptional businesses that can consistently produce profits in any environment.
Alternatives
We take advantage of opportunities in the middle market where we believe there is untapped growth potential.
Fixed Income
We constantly track all changes in markets and cycles to find credit opportunities that will assist our clients safeguard their investments and earn higher returns.
Multi-Asset
Whether risk-on or risk-off, our multi-asset strategies employ dynamic adjustments to achieve total returns.
$500
Minimum Deposit
$9,999
Maximum Deposit
12 months
Investment Term
Technology Opportunities Fund
The fund mainly invests in equity securities of American and foreign companies across all capitalization ranges, chosen for their capacity to grow rapidly and sustainably through the application, advancement, and development of science and/or technology.
| Ann'l management fee | Portfolio based |
| Daily Income ROI Earnings | 0.50% |
| Growth Income ROI Earnings | 0.55% |
$10,000
Minimum Deposit
$49,999
Maximum Deposit
10 months
Investment Term
Energy and Natural Resources Fund
Invest in a portfolio of equity securities that contains significant holdings of natural resource assets.
| Ann'l management fee | Portfolio based |
| Daily Income ROI Earnings | 0.60% |
| Growth Income ROI Earnings | 0.65% |
$50,000
Minimum Deposit
$99,999
Maximum Deposit
10 months
Investment Term
Real Estate Securities Fund
Invests a minimum of 80% of its assets in equity securities of American businesses that either have 50% of their assets in real estate interests or receive at least 50% of their revenues or profits from the commercial, industrial, or residential real estate sectors. Up to 20% of the Fund’s assets may be invested outside of the US.
| Ann'l management fee | Portfolio based |
| Daily Income ROI Earnings | 0.70% |
| Growth Income ROI Earnings | 0.75% |
$100,000
Minimum Deposit
$249,999
Maximum Deposit
10 months
Investment Term
Health Sciences Opportunities Fund
A minimum of 80% of total assets are allocated to securities of health sciences and related organizations; non-US companies may also be included in the investment portfolio.
| Ann'l management fee | Portfolio based |
| Daily Income ROI Earnings | 0.80% |
| Growth Income ROI Earnings | 0.85% |
$250,000
Minimum Deposit
$499,999
Maximum Deposit
10 months
Investment Term
Emerging Markets Funds
Aims to beat the MSCI Emerging Markets Index by investing in emerging market stocks. Through the integration of comprehensive fundamental research and top-down macro perspectives, the fund aims to provide investors with steady, long-term capital growth.
| Ann'l management fee | Portfolio based |
| Daily Income ROI Earnings | 0.90% |
| Growth Income ROI Earnings | 0.95% |
$500,000
Minimum Deposit
$3,000,000
Maximum Deposit
10 months
Investment Term
LGMCORP International Fund
The fund mainly invests in equity securities of American and foreign companies across all capitalization ranges, chosen for their capacity to grow rapidly and sustainably through the application, advancement, and development of science and/or technology.
| Ann'l management fee | Portfolio based |
| Daily Income ROI Earnings | 1.20% |
| Growth Income ROI Earnings | 1.25% |
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LGMCORP Investments
Is who we are
Our objective is to develop and manage investment strategies that satisfy our clients’ ever evolving needs. The approach used by LGMCORP Investments combines the finest features of both worlds: specialized knowledge from our seven proactive investment firms, providing solutions for all major asset classes, supported by the size, stability, and track record of financial management of LGMCORP.
A best of both worlds strategy
Customer
Driven
At LGMCORP Investments, our clients are our top priority. We provide a broad range of strategies that are tailored to the different goals of our investors. With our specialization combined with scale strategy, which offers the best of both worlds, our clients can access a wide variety of investment capabilities that span all major global asset classes.
Valuable
Collaborations
We collaborate with customers to provide customized wealth management and investing strategies and solutions that address their unique requirements. We work with customers to customize our finest concepts and resources to achieve their objectives, drawing on the financial insights of our investment firms.
Cautious
Hands
We convert ideas, liberty, perception, and confidence into possibilities and answers. Clients view LGMCORP Investments as a navigator, curator, and trustworthy pair of hands due to its vast experience anticipating and meeting the financial and investment needs of governments, pension plan sponsors, firms, foundations, endowments, advisers, intermediaries, individuals, and families worldwide.
Investments may lose value. Investors could not receive their money back.
MARKET INSIGHTS
Gen AI: The Next Wave
What possible effects may artificial intelligence technologies have on companies, investors, and the environment as they gain traction?
The world was first introduced to the capabilities of generative artificial intelligence (Gen AI) roughly two years ago, during the “ChatGPT moment,” when OpenAI’s flagship chatbot revealed to the public the capacity to collect, analyze, and present information to users. The period marked the completion of years of study and advancement in AI. Today’s tech businesses are attempting to use artificial intelligence (AI) to use their massive datasets for problem solving and innovation.
Euphoria and Possibilities
As casual observers of the stock market are aware, investors have been captivated by Gen AI and have been actively bidding up the shares of companies within the AI ecosystem. These companies range from major chipmakers and cloud-based tech giants to software developers and data center providers, among many others.
The competition has been intense for a few well-known names: Microsoft entered the market early owing to its tight ties to and investments in OpenAI. It also swiftly integrated AI Copilot into its Office software suite and the Bing search engine. Google launched the Gemini chatbot to improve the AI capabilities of its search engine in response to ChatGPT. Plans for “Apple Intelligence,” or AI that would be incorporated into new products and apps, such as the “personal assistant” Siri, were recently disclosed by Apple. Many other players have been competing to develop AI capabilities, ranging from startups to mega-caps.
More generally, AI has been welcomed by the corporate sector, whether it is due to excitement about effectively utilizing more proprietary data or worry that their companies would need to leverage AI to stay competitive, save money, and accelerate innovation. Thus, the need for chips, models, and systems from cloud service providers and important platforms like Nvidia is increasing.
To what extent is this just hype? It’s common for euphoria to be ingrained in any technology that changes the game. The promise that many perceive from early generative AI capabilities, however, is also reflected in the excitement of today.
The Waves of Innovation Are Advancing
Consider it. Wouldn’t you want to enhance the frequently unpleasant experience that users have while engaging with operators and online chatbots if you were a telecommunications company? Wouldn’t it be appealing if you were the owner of a software company and could utilize AI to produce reams of computer code or even debug it, so cutting down on development time by roughly 30%? As a customer, wouldn’t it be worthwhile to try having your chatbot arrange everything about your trip, including the hotels and restaurants and transport routes?
Even to the most indifferent spectators, there seem to be countless opportunities to improve both the business sector and, more broadly, the human experience. Use cases for AI are multiplying as it penetrates almost every setting, including homes, farms, factories, vehicles, and machinery. Here are a handful that, in our opinion, highlight the unique potential of AI:
- Discovery of drugs. Finding potentially useful medicinal compounds has always been a laborious, unpredictable process. However, artificial intelligence (AI) can swiftly sift through tens of thousands or even millions of datapoints to identify research topics, and its prediction powers can expedite clinical trials and medication development.
- Digital replicas. Manufacturing plant development and operation is a costly and complex process, with several problems that arise during or after construction that must be resolved quickly. Businesses are increasingly utilizing artificial intelligence (AI) to create and evaluate digital replicas of their proposed facilities in order to identify and address issues before any concrete is laid.
- Enhanced smartphone intelligence. The majority of us carry around minicomputers, but they are about to receive a significant upgrade that will make them into artificial intelligence (AI) digital assistants that can anticipate our needs, record and summarize our meetings, assist us in writing emails, enhance our photos, and much more.
The AI Ecosystem
Cautionary Notes
Having said that, the drawbacks have been thoroughly documented. There have been the odd humorous (but also concerning) gaffes made by AI chatbots: Famously, Google’s Gemini misrepresented a number of historical figures when creating images, and more recently, it was discovered that glue was an ingredient in a pizza recipe. Chatbots also occasionally “hallucinate,” inventing facts for no apparent reason. Moreover, computation errors and responses displaying social or political bias have been observed. Indeed, even while user outcomes have improved through repetition and query refinement, anyone who has engaged with AI at work will see shortcomings in its outputs.
The possibility of AI-enabled wrongdoing is more serious. Though realistic “deepfakes” are making fraud simpler, experts are concerned about the use of AI by terrorists. The news is full with headlines about the threat of AI-powered disinformation in our elections. While many (including the Pope at the most recent G7 meeting) warn against delegating life-and-death decisions to robots, military weaponry look to be a vital battleground for AI development, and competitor nations are racing to acquire a technological edge.
Is Humanity Allowed Here?
Setting aside scarier eventualities, a crucial query is what role each and every person may play in an AI-driven work environment. Prior computer and software advancements increased productivity in paper-intensive industries like accounting and law, while automation modernized service centers and the manufacturing floor, leading to a widespread redistribution of jobs across industries and regions. But AI is currently making its way up to ever-higher levels of the white-collar workforce, where it can do more than just organize and summarize data; it can also create credible, although occasionally inaccurate, business communications, analyze data quickly, and provide important insights that can influence choices at the corporate level.
We answer that, sure, we believe that there will be room for humans even with this in mind—although the nature of labor is probably going to alter. When you take into account the previous pairing of smartphones with faster networks (most recently 5G), it opened up thousands of new applications related to commerce, gaming, entertainment, and engagement in addition to making existing jobs easier. Cell phones become a medium for new, and some would say hyperbolic, activities.
Another encouraging development in artificial intelligence is machine learning (Gen AI). This raises the question, “What kinds of business models and apps can be developed, and what sorts of functions can we humans serve on top of the technology?” We believe that utilizing AI as a foundational tool for work initiatives is inevitable—it can organize, summarize, and analyze information—but the real goal will be to support human decision-making, which will enable it to become more complex and nuanced. Eventually, certain job functions will probably disappear, but new ones will probably arise; the precise ratio of losses to gains is still unclear.
A Lot to Consider
It’s obvious that society needs to reflect. With smartphones constantly watching us digitally, privacy was always an issue. However, artificial intelligence (AI) increases the degree of intrusion and allows companies to profit from the “firehose” of data resulting from our interactions in both the digital and physical worlds. Better protection of personal data may give businesses a competitive edge, even as they work to protect their own proprietary datasets, which can support their expansion through AI.
Another important topic is intellectual property. In order to train generative AI algorithms—which improve their capacity to “borrow” creative and intellectual output to respond to novel queries—tech corporations are scouring the internet and their own apps. While some publishing companies are using AI providers to negotiate licensing terms, others are retaliating through legal action. In the meantime, artists are terrified about how simple it is to replicate the pieces they may have uploaded online in order to gain exposure for them.
Artificial intelligence (AI) offers the potential to reduce waste and emissions for individuals who care about the environment, but its training necessitates a level of processing power that may strain the electrical grid and, in the worst case scenario, increase emissions. Energy efficiency and an openness to many energy sources, including nuclear power, will be essential for any enterprise using or supporting AI.
For instance, Amazon recently acquired a 1,200-acre site in Pennsylvania that is situated close to a nuclear power plant, which will provide the company with electricity. Additionally, work on a next-generation nuclear facility in Wyoming is underway at TerraPower, which was founded by Bill Gates. It will have a liquid sodium-cooled reactor, which is expected to be more affordable, safer, and efficient to construct than conventional water-cooled systems. As more and more datacenters dedicated to AI are built, the prototype might promote adoption.
Finally, as previously mentioned, our assessment is that different geopolitical competitors will probably strive rigorously to develop the benefits that AI may bring to an already technologically advanced arms race. However, when will some uses become unacceptable even to fighters, and will there be sufficient global unity to agree on the most fundamental restrictions?
Leaders will have to consider these concerns and how some protection can be provided by laws, regulations, and treaties without inhibiting innovation.
Looking Ahead
To put it more specifically for investors, the objective is probably to ride the AI wave ahead of them rather than getting swept away by it. In the tech space, semiconductor makers, well-funded cloud, software, system, and device providers, as well as well-positioned startups, may benefit. In general, we believe that businesses should be proactive in spotting cost savings and business prospects while fending against fresh challenges from competitors. Considering industry dynamics are dynamic and long-held “truths” can change quickly, relying solely on past performance and reputation could be a mistake.
In our opinion, now is a great opportunity for almost everyone to experiment with AI, evaluate what it does well, and consider what it shouldn’t be asked to accomplish. This is not the moment to pause, as doing so would only make us less equipped to face the future.
Artificial Intelligence at LGMCORP
Recently, research and experiments at LGMCORP have been primarily focused on developing AI capabilities.
In 2017, we established a data analysis team, and in 2018, we purchased a quantitative investment boutique. Both teams employ “big data” to find alpha signals and give our investing teams information. Any company that began considering AI applications just after ChatGPT launched is many years behind the curve.
Having said that, we acknowledge the advancement that ChatGPT and other generative AI represent. It helps because as investors, we have been concentrating on these ground-breaking innovations. We observe them being utilized in the economy, and we investigate prospective uses in our own company. Because of this, we collaborated with NEXIM to start our own LGM ChatGPT trial program last year. By year’s end, over 700 people in our company were figuring out how to utilize the tool most effectively for different purposes, like translating, and across different divisions, like finance.
It’s not always easy to use ChatGPT; you have to make sure you ask the proper questions and verify the results you get. Both humans and machines are learning through this process. However, we are already witnessing how AI may assist us in rerouting valuable time and energy from labor-intensive and repetitive chores to more innovative and fruitful endeavors. We believe there are a lot of potential for both the larger economy and LGMCORP.
MARKET INSIGHTS
An Actual Investment in the AI Era
One of the reasons we believe this isn’t a bubble is because data and the infrastructure needed to exploit it form the basis of AI.
In Wall Street circles, bubble speculating is almost like a sport. After all, it can be extremely beneficial to be the first to spot any kind of excess. The allure of being the next Jeremy Grantham, who is frequently credited with foreseeing the tech bubble of 1999, or Michael Burry, who gained notoriety in books and movies for his housing bubble prediction in 2007, is immense. However, their precise forecasts stand out as distinct anomalies in the annals of bubble speculation. We therefore approach reports that cast doubt on the existence of a generative AI bubble with a critical eye as they become increasingly prevalent.
Looking beyond current performance and excitement, we must examine a sector’s foundation when assessing it for possible excess in the market. One of the reasons we believe this isn’t a bubble is because data and the infrastructure needed to exploit it form the basis of AI. It’s a long-term growth opportunity that’s growing along a technological value chain that might be revolutionary.
The growth story of AI is still in its early stages. We recently brought together a network of chief technology executives at LGMCORP to talk about the potential and impact of artificial intelligence, among other things. These CTEs frequently observe that many businesses are still in the research stage of artificial intelligence and have not yet fully utilized its potential for increased efficiency. Though there is still much to learn, we believe these conversations demonstrate beyond a shadow of a doubt that generative AI will bring about profound changes.
Yes, this year has seen a notable increase in equities linked to AI. However, if this is the trajectory of AI companies with only 50% public knowledge, as Deutsche Bank Research Strategist Jim Reid jokingly pointed out in his “Flippant Friday” piece, where would these stocks end up when everyone is aware of AI?
Right now, businesses and the broader economy are just starting to incorporate AI. Since there are now as many questions as there are answers, our best course of action is to try to pinpoint the dynamics that are crucial to the application of AI and its future development.
Greater data requires greater storage. Generative AI is similar to the early stages of the expansion of e-commerce in several ways. Investors began looking for the infrastructure needed for Amazon to succeed because it was obvious that the company would drastically disrupt the retail sector. The role that warehouses would play in Amazon’s ascent was first less apparent. Amazon needed last-mile distribution in order to live up to its promise, and this meant building enormous amounts of warehouse space close to major cities. Urban infill warehouses underwent renovations.
Data centers and artificial intelligence can be viewed similarly nowadays. Strong data processing and large storage capacities are essential for generative AI models, which should increase demand for physical data centers capable of supporting the demanding computational needs of generative AI applications. Data centers facilitate the efficient coordination of tasks across several machines or data centers by enabling distributed training and inference. As more and more processing and storage needs are being met by the cloud, the need for data centers has skyrocketed in recent years. Since 2016, the inventory of data centers has almost tripled, according to VRTD estimates displayed in Figure 1.
Figure 1: Total Market Inventory (MW) for Data Centers
With the amount of data that is produced on a daily basis, this growth in data centers really shouldn’t be surprising. Incredible statistics are displayed in Figure 2, such as the fact that over 230 million emails and 16 million SMS are transmitted every minute of the day. In addition, there are 347,000 Tweets shared on Twitter, 1.7 million Facebook content shares, and 5.9 million Google searches made every minute.
Figure 2: Tons of Data Produced Every Minute of the Day
Opportunities for physical presence of generative AI Now incorporate AI into the mix. It is common to view artificial intelligence (AI) as a mysterious, abstract concept—a type of software that exists only in the ether. In the real world, AI is anchored by data centers, just like cloud-based apps and data storage are by physical servers. Data centers designed specifically for artificial intelligence (AI) may be developed as a result of the physical requirements of the technology deviating in some areas from those of current applications. For instance, Meta recently disclosed information about its intentions to rework data center initiatives in order to assist with the development of artificial intelligence.
Data demand multiplier: The several rival forces striving to create generative AI models that are both broad and limited are motivated by the same motivation. They are all very dependent on large amounts of computing power, strong data processing skills, and large amounts of storage. It is anticipated that each of these would lead to a rise in the need for data centers, which are essential for managing the demanding needs required to run generative AI systems. Furthermore, distributed training and inference are made possible by data centers, which effectively coordinate processes across several machines or data centers.
Though its advantages and disadvantages may not yet be fully understood, We believe that generative AI is here to stay and will spur significant investment in the industry. In our opinion, data centers are ideally positioned to prosper in the current and emerging AI-driven environment, even as tech companies compete over applications and development potential.
MARKET OUTLOOK
Opportunities in Healthcare Sectors
Healthcare temperature monitoring
The year 2023 proved to be difficult for the healthcare industry as investors realigned their portfolios to take advantage of rising interest rates. The return of more dispersion within the healthcare sector continues to offer the possibility for significant alpha opportunities, even though the sector underperformed other equities market segments (particularly technology and communication services).
The pharmaceutical subsector has exhibited a bifurcating performance. The introduction of GLP-1 medications as weight loss therapies was one of the year’s greatest news stories, with top developers Novo Nordisk (NVO) and Eli Lilly (LLY) performing noticeably better than peers. However, many firms experienced a strong COVID-19 hangover as their income from vaccines and pharmaceuticals almost reached $100 billion (USD) in 2022, making year-over-year comparisons challenging.
By August 1st, the medical equipment and supplies sub-sector had posted 7% returns, making it the only one with positive returns up to that time. This was due to the relaxation of supply constraints and the normalization of elective treatments. When NVO revealed on August 8th that their GLP-1 SELECT trial had shown significant cardiovascular benefits, the subsector saw an indiscriminate sell-off that wiped out gains and sent it into negative returns for the year.
Biotechnology maintained its declining trend as rates increased, with some indicators getting close to multi-year lows.
The COVID-19 pandemic had a lasting impact on providers and services as well, given the continued emphasis on rising medical expenses and utilization trends. Distributors saw diminishing opioid lawsuit overhangs and strengthening fundamentals elsewhere.
Looking forward to 2024
We anticipate a positive risk-reward climate for the industry in 2024. From a value standpoint, the unique events of 2023 have produced a compelling entry position, with the MSCI World Healthcare index’s weighted average price to earnings trading at a 5% discount to the overall market.
Figure 1 illustrates how, in 2023, technology returns have outpaced all other industries, primarily due to confidence surrounding technical advancements like artificial intelligence. Looking ahead to 2024, though, things appear more promising for the healthcare industry. Notably, year over year sales growth is only forecast to lag behind consumer discretionary and information technology, with healthcare’s 12-month ahead earnings growth predicted to top all other sectors. This is a positive configuration, and we would expect the market’s valuation gap to close by the end of 2024.
Figure 1: 12-month forward earnings are predicted to surpass all other sectors in 2024, notwithstanding the healthcare industry’s relative underperformance in 2023.
The displayed numbers are based on previous results. Previous performance is not a good predictor of present or future outcomes.
No management fees, transaction charges, or other expenses are included in the returns on index performance. It is not possible to invest directly in an index since they are unmanaged.
Any predictions or opinions are based on an evaluation of the market conditions at a certain point in time and do not guarantee future outcomes. The reader should not rely on this information as recommendation, research, or advice on investments.
Pharmaceutical: Important Topics for 2024 and Beyond
The development of GLP-1 drugs
Figure 2: Diabetes Diagnosis and Prevalence in the United States (Data in Thousands)
Any predictions or opinions are based on an evaluation of the market conditions at a certain point in time and do not guarantee future outcomes. The reader should not rely on this information as recommendation, research, or advice on investments.
Any predictions made are not guaranteed to come true.
In recent years, one of the most important and cutting-edge therapeutic trends affecting the healthcare industry has been the rise of obesity drugs. While LLY and NVO continue to have an early mover advantage, different compounds are being pursued by big and small pharmaceutical companies in both early and late-stage trials. Recent developments in glucagon-like Peptide-1 agonists (GLP-1s) have affected weight loss as well as A1C levels, which are a measure of average blood glucose levels. GLP-1s were first created to treat Type 2 diabetes (T2D).
GLP-1 improvements in recent times have demonstrated significant reductions in body mass, ranging from 15% to 25%. Between 2019 and August 2023, the volume of GLP-1 prescriptions increased at a CAGR of 45%, mostly due to medications like Ozempic and Mounjaro. These medications have only reached 12–17% of T2D patients, despite the disease’s very high prevalence and the latest version of GLP-1’s noticeably better results. Some businesses, like Pfizer, believe this number may quadruple by 2030. Interestingly, anti-obesity medications could benefit a population that is almost three times greater than that of those with type 2 diabetes. In the US, the market for GLP-1 in the treatment of diabetes and obesity may grow to $90 billion (USD).
Few important criteria will determine the increasing trajectory of GLP-1s in obesity in the medium and long run, since only 2% of obese persons receive prescription medication therapies.
Merely 25% of newly registered patients could obtain prescriptions for Wegovy even though the medication had been on the market for a year. Drugs used to lose weight are currently not covered by several payors. However, given the company’s latest trials’ favorable outcomes in relation to Major Adverse Cardiovascular Events (MACE) and Chronic Kidney Disease (CKD), Payors may be under pressure to evaluate NVO as a legitimate medical market.
Given that Wegovy and Zepbound, which are presently licensed for the treatment of type 2 diabetes, need weekly injections, oral modalities will also be crucial to acceptance. We predict more innovation in 2024 with more than 40 companies working on nearly 100 different weight reduction agents or combinations. We anticipate that price won’t be a major competing element in the near future. Instead, the creation of novel compounds for the next generation that address recognized side effects and therapy length will determine market share. Furthermore, with established players like LLY having already made significant investments in manufacturing capacity, the ability to deliver supply will be essential.
Overall, the pharmaceutical companies’ capacity to spur innovation continues to give us hope. Nonetheless, we believe that the sub-sector’s selectivity will continue to be crucial in determining alpha. Patent cliffs and generic and biosimilar price competitiveness are not brand-new issues. These dynamics, as we can see below, will probably continue to influence research and development (R&D) and strategic decisions within the subsector.
Figure 4: Global Sales at Risk Due to Patent Expiration
Any predictions or opinions are based on an evaluation of the market conditions at a certain point in time and do not guarantee future outcomes. The reader should not rely on this information as recommendation, research, or advice on investments.
Any predictions made are not guaranteed to come true.
Medical Supplies and Devices: Important Topics for 2024 and Beyond
The real versus perceived impact of GLP-1
The medical equipment and supply subsector had strong selling pressure after NVO’s SELECT trial data revealed favorable cardiovascular outcomes. Investors considered the potential decline in patient populations resulting from sharp declines in weight loss and associated comorbidities like cardiovascular disease.
However, we would anticipate that any measurable effects on the subsector in the short to medium term would be limited and product-specific.
Aging demographics are a major structural tailwind to our investment thesis in the subsector. The percentage of Americans 65 and older is expected to rise to 20% by 2023, a considerable increase from the 12% recorded in 1985.
We believe that the innovation and demographic shift are most important for propelling the development of novel medical techniques. Companies that provide injectable components for GLP-1 medicine delivery are among the downstream benefactors of GLP-1 growth, even if some companies may still be negatively impacted.
Robotics
Technological developments in minimally invasive surgery are offering appealing investment prospects and improving patient outcomes. One major advantage of this theme is surgical robotics.
Hospital and procedure volume penetration is still low despite notable improvements over the last 10 years. For example, Intuitive Surgical (ISRG) led the way in robotic assisted surgery for more than 20 years, but in 2022, it performed fewer than 10% of the 20 million soft tissue procedures performed worldwide. This was the year that procedure volumes and installation grew at a 15% and 12% GDPR, respectively, worldwide since 2019.
These challenges have highlighted persistent operational shortcomings. Faced with new restrictions, there is now increasing urgency for the sector to embrace technology to improve procedures, manage costs and enhance patient care.
We continue to look into investment opportunities even though we believe that the labor shortage has peaked and will gradually improve over the next few years as healthcare providers innovate to become more efficient.
Significantly, ISRG and other companies keep releasing new robots with improved features and capabilities. By increasing the total addressable market, penetration can be kept low while still spurring further growth.
Figure 5: Procedure and Installation Expansion in ISRG’s da Vinci Surgical System
Any predictions or opinions are based on an evaluation of the market conditions at a certain point in time and do not guarantee future outcomes. The reader should not rely on this information as recommendation, research, or advice on investments.
Any predictions made are not guaranteed to come true.
We also value the inherent resilience of the companies’ fundamental business models in this market. The enterprises that have a high degree of recurring revenue from instruments, accessories, and services can be more convincingly justified in between capital expenditure cycles. There are also significant hurdles in gaining entry and high switching costs. A network of surgeons trained on the apparatus and a wide spectrum of expertise from radiology, engineering, surgery, and medical imaging are needed to develop a surgical robot.
Biotechnology: Important topics for 2024 and beyond
Antibody Drug Conjugates (ADC’s)
One of the groups of cancer medications with the quickest rate of growth is ADCs. 15 antibody drug conjugates covering a variety of hematological malignancies and solid tumors, as well as 12 distinct targets, have been approved since 2000. The capacity of ADCs to impede the advancement of cancer while posing fewer side effects than conventional chemotherapy is what is driving their increasing popularity and development. ADCs are targeted medications that deliver chemotherapy molecules directly to cancer cells, in contrast to traditional chemotherapy therapies that may harm healthy cells.
Figure 6: By 2030, Approved ADCs Are Expected to Generate $22 billion (USD).
Any predictions or opinions are based on an evaluation of the market conditions at a certain point in time and do not guarantee future outcomes. The reader should not rely on this information as recommendation, research, or advice on investments.
Any predictions made are not guaranteed to come true.
Large pharmaceutical corporations made major strategic purchases and formed collaborations in 2023, making it a busy year for the industry. The two biggest healthcare purchases of the year were Pfizer’s (PFE) $43 billion (USD) acquisition of Seagen, a pioneer in ADCs, and AbbVie’s (ABBV) $11 billion (USD) acquisition of ImmunoGen. In 2024, we anticipate significant notable advancements and clinal trial results particularly in lung cancer and breast cancer studies. Next-generation ADCs are being investigated in new cancer indications as well as in first-line settings (first treatment) with the goal of potentially replacing conventional therapies and combinations, which could significantly change the paradigm for cancer treatment. This is being done with increased innovation and R&D efforts.
Neurodegenerative diseases
Innovation in neurodegenerative diseases is experiencing a surge, with large patient populations being the focus.
The search for Alzheimer’s treatments has been packed with difficulties and countless clinical setbacks, including 244 trial program cancellations since 1990, all while the disease’s prevalence rises as a result of the world’s aging population. On the other hand, 2023 saw major advancements with Biogen (BIIB) and Eisai’s (ESALY) Leqembi, a novel antibody treatment that aims to eliminate amyloid that exacerbates brain damage. The medicine received FDA approval in July following data demonstrating a 27% reduction in the rate of cognitive deterioration.
Figure 7: Eisai predicts that by 2032, 243 million people worldwide will have Early Onset Alzheimer’s Disease (AD).
Forecasts and opinions are assessments of the market conditions at a particular point in time and do not imply future performance. The reader should not rely on this information as research, financial advice, or a recommendation. Any predictions made are not guaranteed to come true.
Prominent firms BIIB and ESALY predict that by 2030, the global market is expected to generate close to $8 billion (USD) in sales, with 100,000 patients in the US being able to get Leqembi within three years. In 2024, Eisai intends to submit an application for FDA approval of a subcutaneous version of Leqembi, which could lead to additional development in the business. If authorized, subcutaneous delivery might promote faster adoption. Subcutaneous delivery would enable patients to receive an injection in the comfort of their own homes or at a doctor’s office, as opposed to IV administration, which necessitates infusion center visits.
The growing drive for innovation in biotechnology and the larger biopharmaceutical subsectors, especially in the fields of genetic illnesses, oncology, immunology, neurology, and metabolic diseases, continues to give us hope. We would expect the sub-sector’s performance to continue to be dispersed. This will highlight the significance of selectivity with a preference for robust pipelines and commercial platforms and a thorough comprehension of scientific measurements.
Figure 8: Increase in Non-COVID Trial Starts from 2012 – 2013
Forecasts and opinions are assessments of the market conditions at a particular point in time and do not imply future performance. The reader should not rely on this information as research, financial advice, or a recommendation. Any predictions made are not guaranteed to come true.
Providers and services: Important topics for 2024 and beyond
Medicare Advantage (MA)
Private companies offer Medicare-approved insurance, known as Medicare advantage plans. Specifically, MA has been a significant structural growth engine for managed care companies in recent years, with enrollment reaching roughly 31 million and membership penetration pushing above 50% of Medicare-eligible individuals.
Notably, in 2024, the Centers for Medicare and Medicaid Services (CMS) will no longer reimburse plans; therefore, we will be examining whether businesses can develop a strong book without sacrificing profitability. In the long run, managed care’s exposure to the secular trend of rising healthcare costs due to demographic changes continues to be encouraging.
Figure 9: The increase in Medicare Advantage enrollment (millions)
Forecasts and opinions are assessments of the market conditions at a particular point in time and do not imply future performance. The reader should not rely on this information as research, financial advice, or a recommendation. Any predictions made are not guaranteed to come true.
