Optimism over global healthcare sector rises: Jefferies

Nearly three-quarters of institutional investors expect the MSCI World Health Care Index to close higher by the end of next year, Jefferies said this week, noting that it is a sharp rise from last year when slightly over half of respondents expected the same.

The findings were part of the seventh edition of Jefferies Healthcare Temperature Check, released on Tuesday in conjunction with the firm’s London Healthcare Conference.

The investment firm said the report captured views from senior leaders and investors in the global health sector.

With 54% having expected the MSCI World Health Care Index to close higher in its 2023 report, “respondents in this year’s report are indicating even higher levels of confidence in the sector,” Jefferies said, noting that 73% indicated the same level of certainty this year.

“This confidence is reaffirmed by the elevated investment activity across the market towards the end of this year, indicating that we have turned a corner,” said Tommy Erdei, Jefferies Global Joint Head of Healthcare Investment Banking.

Interest in dealmaking activity appears to have fueled the interest, as respondents, who think that M&A will increase in 2025 compared to this year, have risen to 72% from 68% last year. With only 4% indicating a decline, it is “a further sign of respondents signaling that we are over the worst of market conditions and that there is appetite to get deals done,” Jefferies said.

Other notable findings of the report include a mixed reaction to the GLP-1 class of weight loss drugs marketed by Eli Lilly (LLY) and Novo (NVO) as only 47%, compared to 33% last year, implying that the market is large and has long-term sustainability.

However, there was an increased confidence in North America for asset allocation: 74% expect that market to have the biggest opportunity, up from 69% last year.

As for subsectors, most respondents (54%) indicated mid- and small-cap pharma and biotech as having the biggest opportunity, while 15% and 13% favored large-cap pharma and tools & diagnostics, respectively.

However, Jefferies noted that the healthcare IT space, where the percentage of favorable respondents has improved to 12% from 7%, is a subsector to watch next year.