I. Sector Landscape and outlook

The UK has been at the heart of some of the biggest biomedical breakthroughs of recent decades, such as the development of IVF in the 1970s. The UK was the first country which saw the first introductions of a routine universal anticancer vaccine in 2008, which was offered to young girls to protect against carcinogenic strains of HPV. In the United Kingdom, the whole population is covered by the National Health System (NHS), which is financed through general taxation and run by the Department of Health. However, constituent countries are responsible for the purchasing of health care services across the UK, e.g., Primary Care Trusts in England, local health groups in Wales, Health Boards in Scotland, and Primary Care Partnerships in Northern Ireland. Despite the government coverage, there is an increasing trend towards private care and coverage, with 12% of the population contracting additional private health insurance.

Fig 1: UK: Facts and Figure


Source: ONS

UK healthcare industry

In UK public hospitals, private non-profit hospitals and private for-profit hospitals coexist simultaneously. In the UK, hospitals are publicly owned and independently operated. These organised as hospital trusts with three levels: community hospitals, district hospitals, and regional or inter-regional hospitals, as well as a number of specialised hospitals offering advanced treatment. Primary care services are provided mainly by General Practitioners, who also act as “gatekeepers” in providing access to secondary care.

UK Private Healthcare Market

This industry provides medical, diagnostic and treatment services at general and specialised hospitals. A growing and ageing population has increased demand, but public healthcare budgets have failed to keep pace with demand. This has aided demand for private hospitals, as a greater number of patients are seeking private treatment.

Major Types of UK Private Healthcare:

1. Private Acute Care Hospitals
2.Private Patient Care Clinics
3. Private Specialist Services
4. Private Diagnostics and Imaging Centers
5. Private Urgent Care Centers
6. Others
 

UK Medical Device Industry

Medical devices represent an extraordinarily varied product group, ranging from simple disposable supplies such as face masks, catheters and syringes through to surgical implements, patient-treatment and monitoring instruments and ultimately encompassing high technology beds, laboratory equipment and capital-intensive body-scanning and radiotherapy plant.

Fig 2: Classification of medical devices


Source: Kalkine

The UK Healthcare devices markets were valued at US$ 9.5 billion in 2017 and expected to become a US$ 17.4 billion market by 2025, which reflects a CAGR of 4.7% over the forecasted period. The UK healthcare equipment market is the third-largest market in the after Germany and France in Europe. The niche of British healthcare device manufacturers lies primarily in orthopaedics products and imaging, diagnostics, and cardiovascular devices.

Fig 3. UK Healthcare Equipment Market Size, 2017-2025 (US$ Bn)


Source: MedTech Europe

The demand spurt for convenient healthcare diagnosis and treatment has led to a subsequent surge in need for healthcare equipment in the country. Further, the rise in healthcare expenditure has favourably impacted the growth of the healthcare equipment industry in recent years.

Key Trends in the UK Healthcare Facilities and Medical Device Market

Soaring demand for convenient healthcare diagnosis and treatment:The increasing demand for convenient healthcare diagnosis and treatment has led to a subsequent rise in need for home healthcare in the UK The increasing home healthcare expenditure has contributed to the growth of the market in the recent years. The increasing geriatric population has led to an increase in demand for home healthcare services. In addition to the geriatric population, high prevalence of chronic diseases has aided the growth of the UK home healthcare market.

Technology innovation at an unprecedented pace: Innovative surgical interventions like autonomous surgical robots and intelligent balloon catheters will enhance outcomes of complex surgeries and enable new forms of minimally invasive surgeries and estimated to bolster medical devices demand.

Increasing demand for easy-to-use devices:The demand for easy-to-use devices has led to several innovations in-home healthcare systems. The primary reason behind ease in functionality is the fact that home healthcare devices do not operate under the supervision of any skilled professionals or related doctors. This, in turn, has led to several technological advancements in-home healthcare market in the UK.  Advancements in products such as breast pumps, prosthetic devices, nebulisers, walkers and wheelchairs, and artificial limbs have contributed to the growth of the UK home healthcare market.

IVD devices have emerged as growth catalysts for the Healthcare Equipment Industry:In Vitro Diagnostic medical devices have emerged as solid catalysts for the industry across the world and in Britain too. IVD devices are efficient in finding diseases or other health issues and also widely used to monitor a person’s health conditions, treatment and prevention of diseases. Among the healthcare equipment market, this particular segment commands a significant share of ~ 13% globally and a significant share in the UK healthcare equipment market as well. The IVD devices market is categorised into reagents, instruments and software & services and out of these three sub-segments, reagents devices hold the highest market share and software & services is estimated to grow at the fastest rate in the next five years.

COVID-19 pandemic led demand spurt for Personal Protective Equipment (PPE):COVID-19 is a respiratory disease that is different from Ebola virus disease, which is transmitted through infected bodily fluids. Due to these differences in transmission, the PPE requirements for COVID-19 are different from other virus diseases. The current global inventory of protective equipment is inadequate, primarily for masks and respirators; the supply of gowns and goggles is soon expected to be insufficient to cater to the demand glut. 

Risk

The UK healthcare industry is exposed to a variety of risks including regulatory changes and regulatory scrutiny, disruptive business models, innovations triggered by emerging technologies, changes in the geopolitical landscape, negotiations surrounding Brexit, shifting customer preferences and demographics.

Outlook

The healthcare industry is an ever-growing ecosystem that encompasses many specialities and subspecialties. COVID-19 pandemic led demand spurt for healthcare facilities and equipment, and the trend is expected to continue in the near-term. Further, UK Home Healthcare Market is likely to expand considerably in the coming years, stoked by increasing geriatric population. The increasing demand for convenient healthcare diagnosis and treatment has led to a subsequent rise in need of home healthcare in the UK. The increasing home healthcare expenditure has contributed to the growth of the industry in recent years and expected to continue the pace in long-run.
 
II. Investment theme and stocks under discussion (SN., CTH, SPI and MDC)

After understanding the recent trends in the industry, let’s now look at the four players from the industry those are listed on the London Stock Exchange. To assess the same, companies’ stocks are evaluated based on EV to Sales.