This is part of a four-part series exploring the four facets of the ProShares MSCI Transformational Changes ETF (NYSEARCA:ANEW) ETF: The Future of Work, Genomics and Telehealth, the Digital Consumer and the Food Revolution. Click on other themes where linked to read other installments. This article was updated on Jan. 27, 2021.
Healthcare has come a long way over the course of human history, but this may be one of the most exciting times in the sector — and the ProShares MSCI Transformational Changes ETF (NYSEARCA:ANEW) lets investors make their bet on those exciting developments.
Some of these changes are highly technical in nature. For instance, genomics combines our increasingly deep and complex knowledge of human biology with the sheer data-crunching power of technological advances to enable us to understand how a person’s genes work — and to use that to heal them.
Others are a lot closer to home. The Covid-19 pandemic has made traveling to the doctor’s office even more awkward and troublesome than before. As taken from ProShares’ information on the ANEW ETF, “According to an April 2020 Harris Poll, 32% of Americans have used telehealth services, doubling since before the outbreak. The shift to telehealth may endure. Indeed, a May 2020 McKinsey & Company study stated that up to $250 billion of current U.S. healthcare spending could potentially be virtualized post-pandemic.”
And that’s not all. From targeted therapeutics to molecular diagnostics, ANEW digs deep into the cutting edge of the healthcare sector and pulls some of its best prospects together into one fund for investors.
The fund charges an 0.45% expense ratio, or $45 per $10,000 invested annually.
I had a chance to discuss the ANEW ETF with Scott Helfstein, Executive Director of Thematic Investing for ProShares, and talk about how ANEW is letting investors get in on cutting-edge medical advancements.
InvestorPlace: Gene editing can sound scary to some people, but it’s a market that continues to grow – gene editing is expected to grow at a CAGR of 16.6% through 2027, to reach $6.6 billion. What are some of the use cases for this therapy investors might be more familiar with?
Scott Helfstein, Executive Director of Thematic Investing for ProShares: The search for a COVID-19 vaccine is one very salient example right now. Leading vaccine candidates from Moderna (NASDAQ:MRNA) and Pfizer (NYSE:PFE)/Biontech (NASDAQ:BNTX), and other companies use genetic therapy through messenger RNA that essentially delivers “photocopied blueprints.” This is remarkable, representing a possible turning point in medicine and potentially the first time that genetic medicine is administered at mass scale. The technology could someday be adapted to teach the body to fight off a range of pathogens from cancer to HIV.
The COVID gene-based vaccines are specific sections or strands of genetic code manipulated to include instructions for the human body to produce antibodies capable of fighting off the virus. The vaccine does not edit people’s DNA, an individual’s unique code, but uses genetic material as a delivery mechanism. Teaching the body to fight off disease directly by offering instructions at a genetic level is different than using medicine that directly attacks the pathogen or exposes the body to produce an immune response. Companies in ANEW such as Moderna and Novavax (NASDAQ:NVAX) have been exploring mRNA treatment for other areas as well.
There are few examples where treatment focuses on editing underlying human DNA or an individual’s core genetic code, but this is still early in development. In 2019, a doctor in China introduced a genetic treatment to human embryos aiming to make twin girls immune to HIV. While this may sound like science fiction, there is a strong possibility that doctors will be able to actually cut out genetic code associated with diseases, perhaps even degenerative diseases like Alzheimers, and replace those genes with healthy code. This type of direct manipulation could play an important role in preventative treatment with companies like CRISPR (NASDAQ:CRSP), Invitae (NYSE:NVTA), and Editas (NASDAQ:EDIT) leading the way.
InvestorPlace: Telehealth has become a vital component of the current healthcare landscape. Obviously the Covid-19 pandemic impacted that transition, but what do you see as the future of this space? What are the companies that stand to particularly benefit?
ProShares: The adoption of Telemedicine is an excellent example of a transformational change in motion before the pandemic that has been accelerated by COVID-19. Can you imagine people actually heading back to their doctors to sit in crowded waiting rooms in future flu seasons? McKinsey reports that in 2019, 11% of U.S. consumers reported use of Telemedicine or Virtual Care services. More recently, 76% of respondents say they are moderately or highly likely to use telehealth going forward
The interesting part is that technology to support telehealth has been in place for years. There were two impediments prior to the pandemic, and COVID appears to have mowed them over. The first is related to policies around reimbursement, as both government and private insurance were not sure how to treat telemedicine. The second was doctor and patient behavior, with both hesitant to take the relationship online. Both of those impediments are may be a thing of the past.
With widespread adoption of video conference for activities from work to family holidays and happy hours, much of the U.S. population has gotten comfortable with communication technology. Telehealth can improve efficiency in healthcare. Teladoc (NYSE:TDOC) has been one beneficiary of the shift to telehealth. The company recently raised its guidance to project 2020 earnings of almost $100 million—more than triple 2019’s results. Medical device makers, such as Abbott Laboratories (NYSE:ABT), that provide instruments continuously monitoring patients are integral to meeting the demand for remote care, as well.
InvestorPlace: Data is vital to healthcare, and big data advances are helping grow the world of genomics. What are some of the leaders in the space, and what does the growth ramp for that area look like?
ProShares: Advances in biotechnology and genomics are in large part due to innovations in data analysis as well as biology. That cannot be overstated. The human genome consists of 20,000 pairs of amino acids, which would amount to a stack of 8.5” x 11” paper that was 200 feet tall. That is a twenty-story building. Biological science plays an important part, but analyzing these massive datasets is critical as well. That is just one example of data in medicine, and not even the low-hanging fruit.
Improving data access, quality, and analytics could help build a more efficient healthcare system from hospitals to individual medical practices. The healthcare industry is estimated to produce 5% of world data, but sector remains one of the least digitized. There is tremendous opportunity to leverage data for supply chain management, imaging, medical alerts, predictive analytics, new therapies, and process optimization. Veeva Systems (NYSE:VEEV), for example, is a cloud-based platform that attempts to streamline data access. IBM has also focused the Watson artificial system on cancer diagnosis. The computer is capable of reading more scans than any doctor can ever see in the course of their lifetimes, and the computer can identify or infer patterns that would otherwise be impossible for humans, hopefully then increasing the diagnostic accuracy.
InvestorPlace: The growth of targeted therapeutics is allowing for better cancer treatments with fewer adverse effects, as compared to typical treatments like chemotherapy and surgery. Do you see more companies breaking into the space? And how far do you expect the sector to expand?
ProShares: Targeted therapeutics or treatments customized based on both patient and disease characteristics, as you note, are increasingly common in cancer treatment. The idea is that targeted or personalized treatment will more effectively address a harmful disease specifically as opposed to traditional therapies targeting all rapidly reproducing cells. An increased emphasis on personalized medicine, which is critically reliant on data analysis, offers the possibility of better patient outcomes delivered more efficiently at lower cost. This is another area in healthcare we believe is still in early stages with significant growth ahead.
There are two main considerations. First, the treatment can be developed to have an optimal impact on diseased tissue while limiting the impact on the rest of the body. Second, drug development should be faster and cheaper since treatments need not be effective or even safe for all people provided they are only administered to those patients most likely to respond well. That could translate to billions in drug development savings. Quark is an interesting example of a company pushing the limits in the field.
InvestorPlace: Molecular diagnostics tests have supplanted a number of traditional testing methods, and have increased accuracy and speed of diagnoses. Can you discuss that?
ProShares: Its startling to hear the term “rapid PCR” test enter the mainstream media, but this reflects the importance molecular diagnostics— which uses genomic science—to testing for an illness as challenging as COVID-19.
Several hundred diagnostics have been submitted to the World Health Organization for the identification of the novel coronavirus, but only a few dozen of these have been approved for use by major healthcare authorities. Companies like Abbott Laboratories and Roche Diagnostics have seen their tests approved for use in several countries. A smaller company like Twist Bioscience (NASDAQ:TWST) is another example of an innovator in the field.
InvestorPlace: This intersection of science, tech and healthcare is of growing interest to investors. Which subsections and companies should investors be the most excited about in the next 3-5 years?
ProShares: There is a reasonable possibility that we are at the rebirth of healthcare along the lines of Hippocrates or Galen. A decade from now, we may look back and see medicine of late 20th century as the dark ages. The combination of genomic technology, diagnostic data, and targeted therapeutics, all powered by advanced data analysis, opens the possibility of preventive medicine and minimally invasive treatment while optimizing patient outcomes. There is a lot to be excited about based on market size and the time to deployment.
Genomics is really fascinating, and maybe a little scary. Delivery of treatment through genetic material like the some of the COVID vaccines as well as human gene editing hold tremendous potential. Companies like Moderna and Novavax have already made great strides in possibly bringing genomic treatment mainstream. COVID accelerated this transition. Editing the human genome is still in early stages but offers the possibility of treating diseases once thought almost incurable. Gene editing companies CRISPR, Editas, and Invitae hold some of the most valuable patents in the field.
On the date of publication, Jessica Loder did not have (either directly or indirectly) any positions in the securities mentioned in this article.
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