AI Research, GLP-1 Drugs, Mental Health Apps
Illustration: Chris Harnan
Five experts point to investment opportunities related to advancements being made in physical and mental health.
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Money might not be able to buy good health, but it can definitely invest in it.
There are huge breakthroughs being made in the science around physical and mental health, revolutionizing the way we think about our bodies and minds. To get a sense of the best investment opportunities, Bloomberg News spoke with five investment managers whose suggestions ranged from weight-loss drugs and neurological disease treatments to AI-fueled research and mental health apps.
Some of the ideas involved private companies, which are not the easiest for a retail investor to access. So Andre Yapp, Bloomberg Intelligence ETF research associate, has provided exchange-traded funds that can act as rough proxies.
Additionally, each expert has included a personal health recommendation — something they do in their own lives to feel better or stay in shape. These responses involved intermittent fasting, upper-body strength training and good sleep hygiene.
Treatments for Neurological Diseases
The vision:
We’re at the beginning of the next wave of innovation in neurology. When you think about waves of innovation over the years, there are a couple of things that need to happen for a wave of innovation to work well. You need the science to be advancing enough to create therapeutics to address underlying conditions and you need an environment where insurance companies or individuals are willing to pay for that innovation. Our understanding of neurology — in terms of diseases like Parkinson’s and Alzheimer’s — is improving dramatically, but it’s just at the beginning and that’s when you want to invest.
The opportunities:
A company like Biogen Inc. is a great way to invest in neurology. It’s one of the first firms with an Alzheimer’s drug and it has a lot in the pipeline. It has Leqembi — a drug that slows the pace of cognitive decline in Alzheimer’s patients — and also a drug for Parkinson’s disease and an ALS drug. If they work and the science gets better, it’s very likely they will be very important drugs, and there’s nothing else out there really to treat these neurological diseases. Biogen is ahead of its competitive peer set and it has a first mover advantage in a lot of areas. It’s also funding these drugs at a much higher level than competitors and spending more on research and development. It currently has sales of just over $10 billion a year, and an Alzheimer’s drug could add another $7 billion a year.
How to invest:
The Tema Neuroscience and Mental Health ETF (MNTL) and the iShares Neuroscience and Healthcare ETF (IBRN), at an expense ratio of 0.75% and 0.47% respectively, are options, writes Andre Yapp, Bloomberg Intelligence ETF research associate. However, their thematic nature makes them very niche, which sometimes increases the risk of them closing should they prove to not find a sizable enough audience. Investors concerned about these factors could look toward ETFs like the iShares Biotechnology ETF (IBB) and the SPDR S&P Biotech ETF (XBI), which deliver broader exposure to the biotech industry as a whole.
Mental Health Solutions
The vision:
The mental health crisis in our country is at the top of the headlines, everything from anxiety and depression to eating disorders and substance abuse. Coming out of the pandemic we continue to see a downstream impact from a mental health perspective. That’s compounded by the fact that we have a significant shortage of clinicians in the market. The younger generation is way more comfortable talking about their mental health, so utilization is way up. This tsunami has really raised the stakes for both the supply and demand side.
The opportunities:
A lot of new digital health companies are providing a much easier way for people to access services in the privacy of their own home. Some of the more interesting digital health companies include Spring Health and NOCD. Other companies like Centerstone are focused on building out the supply of clinicians. Centerstone has been building its own education and residency programs with the idea of helping to train lower level clinicians. Meanwhile, Modern Health offers programs that leverage a broader supply of mental health professionals as well, realizing that everybody doesn’t have to see a provider with an M.D. or Ph.D. — they can see an MSW (master’s in social work) or a certified coach. Another interesting company is Brightline, which recently closed a contract with the state of California to deliver pediatric health services. I think we’re going to see a lot of these companies going public as they get larger.
How to invest:
Products like the Health Care Select Sector SPDR Fund (XLV) or Invesco S&P SmallCap Health Care ETF (PSCH) can grant investors board exposure to large-cap or small-cap publicly listed companies operating in the health care sector for just 0.09% or 0.29%, respectively, write BI’s Yapp. Alternatively, investors with a larger risk appetite might appreciate the BlackRock Future Health ETF (BMED), which seeks to invest in innovative and emerging companies in the health care sector. However, if the goal is to invest like a venture capitalist or a private equity firm, the Invesco Global Listed Private Equity ETF (PSP) is an option. This fund invests in private equity companies and venture capital firms whose primary business activities are to invest in, lend capital to or provide services to privately held companies.
Weight-Loss Drugs
The vision:
For a long time, even up until five years ago, most venture capital firms were ignoring the weight-loss space. But that has completely changed with the advent of GLP-1 drugs. Now everyone is looking at these treatments and looking for options that have more tolerable side effects since many induce nausea and diarrhea. Also, when patients get off weight-loss drugs, they tend to rebound, so people are now thinking of ways to transition off them and not regain the weight.
The opportunities:
As an investor, we’re looking at solutions that can be transformative. Every pharma company has a strategy around obesity, so there’s an over-saturation to some extent. On the big pharma side, Novo Nordisk A/S and Eli Lilly & Co. have been pioneers in this space and have stated they want to own this category of treatments. We invest in biotech company Glyscend, which is developing a weight-loss drug with a better tolerability profile. This is an oral medication that seems to have better side effects. We also invest in a company called Endogenex, which is funding a clinical study for a device-driven approach to metabolic disease. This is targeting the metabolic pathways by applying non-thermal pulsed electric fields to tissue in the small intestine with the goal of improving metabolic function.
How to invest:
BI’s Yapp writes the Amplify Weight Loss Drug & Treatment ETF (THNR) and Roundhill GLP-1 & Weight Loss ETF (OZEM) deliver exactly the type of exposure McWilliams describes. THNR and OZEM offer stakes in companies involved in the development of drugs designed for weight loss and anti-obesity, with their largest holdings being Eli Lilly and Novo Nordisk.
Research Lab Space
The vision:
The big advancement in the past 20 years has been to really understand the aging process, the cellular changes that take place and the accompanying physical decline in function. On the back of that, you’ve had a whole industry of bio hacking and DIY health care, which has really taken off, like intermittent fasting and blood transfusions. A lot of those methods have been shown to have an impact on mice, but one of the big learnings from doing research on this project is that if a treatment works on mice, it’s not a given it would work on humans. Stem cell research and telomerase reactivation — which involves switching back on an enzyme to promote cell division — shows a lot of promise, but there’s a gap between scientific discoveries and the delivery in mainstream, in terms of when people actually receive the treatment. That has implications for investment ideas.
The opportunities:
When you think of life sciences, you can think of biotech of course, but also more research means the need for more labs. Real estate investment trusts with a focus on life science is an interesting one. Companies that do research like to have offices and labs right next to each other. In terms of REITs, those that focus on this sort of real estate are an area of growth. A lot of this research is happening in the US — there are a lot of billionaires that have everything but youth and they are happy to fund research efforts.
How to invest:
There aren’t many REITs that specialize in this niche segment, but the Global X SuperDividend REIT ETF (SRET), with an expense ratio of 0.59%, may be a good way to play Carrier’s strategy, according to BI’s Yapp. This ETF offers good exposure to the health care industry — particularly medical research and medical office buildings — since five of its top 10 holdings have such exposure, making up 20% of the fund’s portfolio.
AI-Fueled Research
The vision:
Artificial intelligence is changing the world, and the pace of this change is only going to accelerate. One area where we believe AI is going to have a significant impact is on the $12 trillion health-care industry. Global health-care systems are buckling under the pressure of demographic changes that are leading to higher demand for health care and budgets that are failing to keep pace with requirements. We believe that AI can play a significant role in improving health-care outcomes. AI is already helping to speed up the drug discovery process by identifying chemicals and proteins that can be used to target a specific disease. AI can also help with the screening of drugs by testing for effectiveness in a far quicker manner than conventional methods. Personalized treatment is also likely to improve patient outcomes with analysis of genetic data leading to a greater ability to predict, diagnose and treat disease. Finally, there’s an administrative burden, with simple tasks such as appointment scheduling and data input taking up time and resources. These tasks can be automated with the effective use of AI, allowing staff to spend more time with more patients.
The opportunities:
Many of the large technology companies that investors will already have exposure to, such as Amazon, Microsoft and Alphabet, are working with the health-care industry. Other companies such as IBM have specific products such as Watson for Oncology and Watson for Genomics that are improving health-care systems. We invest in the Bellevue Healthcare Trust, which provides exposure to some of the most promising companies in a range of different health-care subsectors. We also have a favorable view of the closed-end trust Syncona, which invests in a number of exciting life sciences companies and trades at a substantial discount to the value of its assets. We believe that the underlying companies in both of these investment trusts will be beneficiaries of AI improving the health-care system and delivering better patient outcomes.
How to invest:
BI’s Yapp says the Global X Funds Global X Artificial Intelligence & Technology ETF (AIQ) is an indirect way of playing Boardman’s strategy. Though lacking exposure to health care, AIQ tracks an index comprised of companies in developed markets, which are poised to benefit from the adoption of artificial intelligence technologies in their products and services.
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