What factors influence the Healthcare/Pharma Sector?
Hello,
Looking to learn more about what influences the healthcare/pharma sector as I'm interested in investing in this space.
Is the healthcare sector sensitive to interest rates? My understanding is that most hospital systems are some version of a public private partnership. I'm not totally clear on how capital is structured to fund a hospital system. Is it a combination of municipal bonds and private equity?
I imagine that pharma companies are very sensitive to interest rates as they would utilize corporate bonds to raise capital for RD. I guess regulatory frameworks/government stance on drug approval timelines would also influence pharma?
If you know of any publications online related to this sector that would be helpful as well.
Some big trends in healthcare are an aging population, changing regulatory/reimbursement landscape, and greater use of technology across the spectrum from drug development to delivery models.
Regarding your interest rate questions, I think you are really asking about cost of capital. A high dividend paying large cap pharma company may be able to fund an acquisition with relatively cheap investment grade debt; whereas a pre-revenue biotech company may be reliant on expensive/dilutive equity financing to fund operating losses. However, healthcare is so big that you will see a wide spectrum of financing used for different business models including muni bonds to build non-profit hospitals, HY debt / private credit for healthcare services roll-ups, and convertible debt or royalty deals in lieu of straight equity for biotech.
CMS regulations
Thanks a lot
Under healthcare sector there are subsectors pharma, biotech, medical devices, hospitals and insurance.
Healthcare Finance Journal is edited by an veteran investment banker focused on hospitals.
For an engineer I feel medical device subsector might be more relevant.
I agree with the comments made earlier especially the one about reimburesment issues. Awhile ago I shared a post with few articles on factors such as economic evaluation discussing their recent impact on biotech and pharma subsectors, one from the aformentioned journal but it did not get any comments.
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