Welcome to the Fear and Greed Daily Interview, I'm Sean Aylmer. We've talked a bit about biotech and healthcare companies in recent months, but what should an investor be considering when it comes to these companies? It is now a good time to be looking at them as an investment option. Remember, this is general information only, and you should seek professional advice before making investment decisions. Victor Windeyer is the portfolio manager for the Australian Unity Future of Healthcare Fund. Vic, welcome to Fear and Greed.

Welcome to the Fear and Greed Daily Interview, I'm Sean Aylmer. We've talked a bit about biotech and healthcare companies in recent months, but what should an investor be considering when it comes to these companies? It is now a good time to be looking at them as an investment option. Remember, this is general information only, and you should seek professional advice before making investment decisions. Victor Windeyer is the portfolio manager for the Australian Unity Future of Healthcare Fund. Vic, welcome to Fear and Greed.

Thanks very much, Sean. It's great to be here.

Thanks very much, Sean. It's great to be here.

Can we start with the big picture? How has the healthcare sector performed over the past couple of years? And what's it look like going forward?

Can we start with the big picture? How has the healthcare sector performed over the past couple of years? And what's it look like going forward?

I think it is a great time to invest as we look forward. If I can just describe the last couple of years, if you go back a year and a half, say, we had governments around the world really stimulating global economies, through fiscal and monetary policy, driving rates down to basically unleash a wall of liquidity to try and prop up economies around the world. Now, that drove growth sectors generally and healthcare in particular. I think there were a lot of investors who were attracted to the sector because they were suddenly aware of it, it was having an impact on their daily life, and they saw the opportunity there. So those more generalist investors came into this and growth stocks went up. And as rates began to rise towards the end of last year, many of those investors came back out and there was a rotation from growth to value as we've all seen. And that saw a significant outperformance in the value companies over the growth companies in the last of 6 to 9 months. So in healthcare, you have the large pharmaceutical companies and health insurers and hospital groups, and they are more value type companies. And then these biotechs, MedTech, medical device companies and life sciences companies, more growth type stocks, if you like.

I think it is a great time to invest as we look forward. If I can just describe the last couple of years, if you go back a year and a half, say, we had governments around the world really stimulating global economies, through fiscal and monetary policy, driving rates down to basically unleash a wall of liquidity to try and prop up economies around the world. Now, that drove growth sectors generally and healthcare in particular. I think there were a lot of investors who were attracted to the sector because they were suddenly aware of it, it was having an impact on their daily life, and they saw the opportunity there. So those more generalist investors came into this and growth stocks went up. And as rates began to rise towards the end of last year, many of those investors came back out and there was a rotation from growth to value as we've all seen. And that saw a significant outperformance in the value companies over the growth companies in the last of 6 to 9 months. So in healthcare, you have the large pharmaceutical companies and health insurers and hospital groups, and they are more value type companies. And then these biotechs, MedTech, medical device companies and life sciences companies, more growth type stocks, if you like.

The point there being that the healthcare sector is huge. I mean, it's like you think of resources, from some perspective, minor through to BHP. In fact, it's probably even more diverse in a way with healthcare because of just the products that you're talking about.

The point there being that the healthcare sector is huge. I mean, it's like you think of resources, from some perspective, minor through to BHP. In fact, it's probably even more diverse in a way with healthcare because of just the products that you're talking about.

Yeah, absolutely. It's an incredibly diverse sector. Even within medical device companies, for instance, they're just quite different. So a Cochlear implant company, there's very little overlap between those companies in that particular healthcare niche and, say, obstructive sleep apnea companies. They're quite different in many ways. So if you take the full breadth of big pharma companies, MedTech companies, hospitals, it's an incredibly diverse set of companies. But they have one common characteristic, I think, which is that they're really about and they perform well if they enhance the health and wellbeing of people. And the ones that do that the best are the ones that outperform the most.

Yeah, absolutely. It's an incredibly diverse sector. Even within medical device companies, for instance, they're just quite different. So a Cochlear implant company, there's very little overlap between those companies in that particular healthcare niche and, say, obstructive sleep apnea companies. They're quite different in many ways. So if you take the full breadth of big pharma companies, MedTech companies, hospitals, it's an incredibly diverse set of companies. But they have one common characteristic, I think, which is that they're really about and they perform well if they enhance the health and wellbeing of people. And the ones that do that the best are the ones that outperform the most.

So in a sense, the macro background is demographics, presumably. And is that working in the right way for health companies?

So in a sense, the macro background is demographics, presumably. And is that working in the right way for health companies?

Oh, absolutely. I mean, there's quite a few key trends, I think, in the world. But the mass aging of the global population is one of the strongest underpinning dynamics. And we're at an incredible transition point, right in the middle of this five- year period in Australia, for instance, where the number of people turning 80 every year for the last two decades has been between 20,000 and 25,000. And from 2027, that's going to be between 60, 000 and 80,000 people turning 80. So I think that hasn't quite dawned on everybody, the significance of that shift, and how important that is. And that will lead to a supply and demand mismatch, and that's the sort of investment opportunity to try and close that gap, either through provision of more supply or through development of technologies and new devices, and therapies that improve people's outcomes so they don't have to use those services.

Oh, absolutely. I mean, there's quite a few key trends, I think, in the world. But the mass aging of the global population is one of the strongest underpinning dynamics. And we're at an incredible transition point, right in the middle of this five- year period in Australia, for instance, where the number of people turning 80 every year for the last two decades has been between 20,000 and 25,000. And from 2027, that's going to be between 60, 000 and 80,000 people turning 80. So I think that hasn't quite dawned on everybody, the significance of that shift, and how important that is. And that will lead to a supply and demand mismatch, and that's the sort of investment opportunity to try and close that gap, either through provision of more supply or through development of technologies and new devices, and therapies that improve people's outcomes so they don't have to use those services.

Stay with me, Vic. We'll be back in a minute. My guest this morning is Victor Windeyer, portfolio manager for the Australian Unity Future of Healthcare Fund. Okay, Vic, I've got to ask, how do you get across it all? I mean, an insurer to a Cochlear, to a biotech, how do you get across it all?

Stay with me, Vic. We'll be back in a minute. My guest this morning is Victor Windeyer, portfolio manager for the Australian Unity Future of Healthcare Fund. Okay, Vic, I've got to ask, how do you get across it all? I mean, an insurer to a Cochlear, to a biotech, how do you get across it all?

Well, I've been following this sector for a very long time, I've been in it my whole career, 25 years, and I love it. So I mean, I embed myself in it. We have a team of people working across the business on the sector. I mean, it's one of the reasons why Australian Unity's a good place to do this, is we have 8, 000 employees all predominantly working in healthcare. And so that there's a lot of insights within the group in Australia. But it's really just a fascinating space. And there are a lot of commonalities, and there's quite a lot of synergies across these companies. So I mean, we a multi- sector, a multi- asset strategy. That helps us because if we look at small unlisted company in radiopharmaceuticals, we're also looking at the large listed radiopharmaceutical company in the US. And there's a lot of learnings that can be made across those different subsectors.

Well, I've been following this sector for a very long time, I've been in it my whole career, 25 years, and I love it. So I mean, I embed myself in it. We have a team of people working across the business on the sector. I mean, it's one of the reasons why Australian Unity's a good place to do this, is we have 8, 000 employees all predominantly working in healthcare. And so that there's a lot of insights within the group in Australia. But it's really just a fascinating space. And there are a lot of commonalities, and there's quite a lot of synergies across these companies. So I mean, we a multi- sector, a multi- asset strategy. That helps us because if we look at small unlisted company in radiopharmaceuticals, we're also looking at the large listed radiopharmaceutical company in the US. And there's a lot of learnings that can be made across those different subsectors.

Okay. Now, I just want to look at a few specific companies, ASX based and also overseas. So let's start with, a great friend of mine was one of the first ever employees at Cochlear. He was an engineer. And so I've always followed that company, and that's been an incredible success story. Can it keep going?

Okay. Now, I just want to look at a few specific companies, ASX based and also overseas. So let's start with, a great friend of mine was one of the first ever employees at Cochlear. He was an engineer. And so I've always followed that company, and that's been an incredible success story. Can it keep going?

Yeah, it is. Actually, I was an engineer at Cochlear. It was my first job out of university actually, as a research and development engineer. But it is a terrific company. Look, I left Cochlear in 1998, so a long time ago, and it's continued to have growth since then. It absolutely, I think, will continue to grow. Even today, after 30 years, there's still a large unmet demand for that core device, and they continue to expand their market. So I mean, if you look historically, it started out in adults, then it went to children, prelingually deaf in children, then there was a geographical expansion that occurred, and then within developed countries, and then it expanded into less developed countries. So there's a continual source of growth. And that's one of the things about companies in this space, is that not only can they continue to grow, but they can usually do that without requiring additional capital. And they can do that because the margins are very high. So they have very high self- sustaining growth rates. And so you can get good returns on capital and drive growth consistently for many decades.

Yeah, it is. Actually, I was an engineer at Cochlear. It was my first job out of university actually, as a research and development engineer. But it is a terrific company. Look, I left Cochlear in 1998, so a long time ago, and it's continued to have growth since then. It absolutely, I think, will continue to grow. Even today, after 30 years, there's still a large unmet demand for that core device, and they continue to expand their market. So I mean, if you look historically, it started out in adults, then it went to children, prelingually deaf in children, then there was a geographical expansion that occurred, and then within developed countries, and then it expanded into less developed countries. So there's a continual source of growth. And that's one of the things about companies in this space, is that not only can they continue to grow, but they can usually do that without requiring additional capital. And they can do that because the margins are very high. So they have very high self- sustaining growth rates. And so you can get good returns on capital and drive growth consistently for many decades.

Well, I mean, when I think of Cochlear, and ResMed's another one, the sleep apnea group, you always get taught that diversify your revenue streams. And I suppose it depends how you define diversify your revenue streams, but they are pretty much focused on one area of health, aren't they? But they both, I mean, ResMed's another example, which has been another great success story, they can just keep achieving it. Is it because demand is just, it's not infinite, but it's certainly growing?

Well, I mean, when I think of Cochlear, and ResMed's another one, the sleep apnea group, you always get taught that diversify your revenue streams. And I suppose it depends how you define diversify your revenue streams, but they are pretty much focused on one area of health, aren't they? But they both, I mean, ResMed's another example, which has been another great success story, they can just keep achieving it. Is it because demand is just, it's not infinite, but it's certainly growing?

Yeah, no, that's true. I mean, they do, through improvements in the product, they do increase the size of their target market, if you'd like. So, I mean, back 20 years ago, when I was a Cochlear, it really only targeted the very profoundly deaf recipients. And then today it's moved into severe and moderately severe hearing- impaired people. And they bring on other devices. But these markets are very large, and I think that's one of the lessons that we look at. And when we're thinking about investments is, is this device or drug or biologic going to make a big difference for a lot of people? Because if it is going to make a big difference for a large number of people, then that provides a very significant or potentially multi- decade opportunity for very strong growth.

Yeah, no, that's true. I mean, they do, through improvements in the product, they do increase the size of their target market, if you'd like. So, I mean, back 20 years ago, when I was a Cochlear, it really only targeted the very profoundly deaf recipients. And then today it's moved into severe and moderately severe hearing- impaired people. And they bring on other devices. But these markets are very large, and I think that's one of the lessons that we look at. And when we're thinking about investments is, is this device or drug or biologic going to make a big difference for a lot of people? Because if it is going to make a big difference for a large number of people, then that provides a very significant or potentially multi- decade opportunity for very strong growth.

Now, another company, which I know you've spoken of is Clarity Pharmaceuticals. It's in the area of oncology, you'll have to help me out here.

Now, another company, which I know you've spoken of is Clarity Pharmaceuticals. It's in the area of oncology, you'll have to help me out here.

Yeah, no, that's true. It's a radiopharmaceutical company in oncology.

Yeah, no, that's true. It's a radiopharmaceutical company in oncology.

Right.

Right.

And so what that is that cancerous cells, they have cell receptors that they express. And basically, you can design a peptide, or you can design something that locks into that and will hunt it down and lock into that receptor. And off the back of that targeting agent, you can connect a little cage. It's called a chelator and into that, you can put a radioactive isotope. And so it's a really quite fascinating area of development and technology. There's a number of companies around the world working on it. And we have Telix here in Australia and also Clarity Pharmaceuticals, and there's a number of private companies in the space, and then some international ones. And Clarity, I think, is a very exciting company. It's got some interesting assets with using copper isotopes, which is different to many of the others, which have some advantages. And they've got an interesting targeting agent as well, which is also unique, (inaudible) , they're in clinical trials at the moment. And I quite like it, it's became very cheap and we recently bought some more of the stock. And so we find that quite an attractive place to invest. There's a few transactions that have occurred in this space. Novartis, one of the world's largest companies made an acquisition in the area and that oncology piece, that precision medicine oncology is a very exciting area of development today.

And so what that is that cancerous cells, they have cell receptors that they express. And basically, you can design a peptide, or you can design something that locks into that and will hunt it down and lock into that receptor. And off the back of that targeting agent, you can connect a little cage. It's called a chelator and into that, you can put a radioactive isotope. And so it's a really quite fascinating area of development and technology. There's a number of companies around the world working on it. And we have Telix here in Australia and also Clarity Pharmaceuticals, and there's a number of private companies in the space, and then some international ones. And Clarity, I think, is a very exciting company. It's got some interesting assets with using copper isotopes, which is different to many of the others, which have some advantages. And they've got an interesting targeting agent as well, which is also unique, (inaudible) , they're in clinical trials at the moment. And I quite like it, it's became very cheap and we recently bought some more of the stock. And so we find that quite an attractive place to invest. There's a few transactions that have occurred in this space. Novartis, one of the world's largest companies made an acquisition in the area and that oncology piece, that precision medicine oncology is a very exciting area of development today.

It is a fascinating sector. Vic, thank you for talking to Fear and Greed.

It is a fascinating sector. Vic, thank you for talking to Fear and Greed.

Thanks very much for your time.

Thanks very much for your time.

That was Vic Windeyer, portfolio manager for the Australian Unity Future of Healthcare Fund. This is the Fear and Greed Daily Interview. Remember, this information is general in nature and you should seek professional advice before making any investment decisions. Join us every morning for the full episode of Fear and Greed, Australia's most popular business podcast. I'm Sean Aylmer, enjoy your day.

That was Vic Windeyer, portfolio manager for the Australian Unity Future of Healthcare Fund. This is the Fear and Greed Daily Interview. Remember, this information is general in nature and you should seek professional advice before making any investment decisions. Join us every morning for the full episode of Fear and Greed, Australia's most popular business podcast. I'm Sean Aylmer, enjoy your day.