US health care, with promising drug pipelines, looks attractively valued

While for many it seems that the pandemic is almost over and eyes have turned away from healthcare companies, the truth is that many of them remain attractively valued relative to the broader market. Examples include Bristol Myers Squibb, Merck and Roche, which are currently developing antibody-drug conjugates to combat various tumours and which present attractive opportunities, according to Capital Group's analysis below.

All eyes were on the health care industry during the early days of COVID, and drug developers thrived under the spotlight, producing vaccines and therapies in record time.

Despite the attention, many observers may have overlooked that health care companies appear attractively valued relative to the broader stock market and their own history. “Some market leaders are particularly appealing, given the prospects for growth of their pipelines,” says equity portfolio manager Alan Wilson.

Across the global health care sector, drug developers, device makers and service providers are transforming health care and improving patient outcomes.

“We’ve seen the potential of the power of personalised medicine,” adds Wilson. “Drug discovery is in a golden age that would not be possible without the combination of efficient genetic sequencing, computational power to analyse massive datasets and precise biochemical tools.”

One recent advancement is antibody-drug conjugates (ADCs) which empower the immune system to target cancer cells while leaving healthy cells alone.” The global market for such treatments is expected to grow from US$3.18 billion in 2020 to US$20.01 billion in 2028.

For example, oncology pioneers Bristol Myers Squibb, Merck and Roche are developing ADCs that combat various tumours. Of, course not every ADC will be a success, so the key for selective investors is to understand both the science and business opportunity.