The healthcare sector has been an interesting one to watch in 2020. Almost all ASX shares have been defined by how they have been affected, and perhaps reacted to, the coronavirus pandemic in 2020. But healthcare, especially so, for obvious reasons.
So let’s have a look at which ASX healthcare shares have been the best performers of the year so far. As a benchmark, the S&P/ASX 200 Index (ASX: XJO) is currently down 0.5% for the year to date – not exactly a hard benchmark to beat, but it puts things into perspective for healthcare shares. So, here are 8 top performers of the sector:
|ASX Healthcare Share||YTD share price gain
(as of 14 December)
|Mesoblast Limited (ASX: MSB)||121.46%||$2.67 billion|
|Polynovo Ltd (ASX: PNV)||106.45%||$2.54 billion|
|Healius Ltd (ASX: HLS)||40.94%||$2.42 billion|
|Pro Medicus Limited (ASX: PME)||37.28%||$3.19 billion|
|Resmed Inc (ASX: RMD)||23.52%||$39.79 billion|
|Ansell Limited (ASX: ANN)||18.36%||$4.44 billion|
|Nanosonics Ltd (ASX: NAN)||12.74%||$2.16 billion|
|CSL Limited (ASX: CSL)||4.17%||$130.35 billion|
Evidently, some ASX healthcare shares have done better than others. This is for various reasons that we shall dive into momentarily.
COVID brings opportunities
So, the overarching theme here is how companies that have been able to adapt their products or services towards fighting the pandemic have been rewarded.
Take top performer Mesoblast for instance. It recently signed a deal with Swiss giant Novartis to use its ‘remestemcel-L’ product for the treatment of respiratory difficulties experienced by COVID-19 patients. Remestemcel-L has also recently managed to get a tick of approval from the notoriously-strict US Food and Drug Administration (FDA). Optimism over potential FDA approval has been boosting this company all year.
Similarly, Helius saw rising revenues and cash flow for FY2020, which was supplemented by revenue growth of 17.5% in the first quarter of FY2021. The company told investors that its pathology division, which assists with COVID testing, was keeping the business strong.
We also see it through raw medical supplies that some of these companies have been providing. Ancell, for example, develops, manufactures, and sells medical gloves and other protective personal equipment. Last month, this company reported a 7.6% increase in sales for FY2020, including a 13.4% increase in its healthcare unit.
It was a similar story with sleep device manufacturer ResMed. ResMed pivoted to manufacturing ventilators and masks early in the year in response to the pandemic, as well as acute ventilator shortages around the world. As a result, this company was able to report revenue growth of 15% for FY2020 back in August, which was supplemented by a strong quarterly update in October.
Other ASX healthcare shares simply saw strong gains because they were able to weather the ‘COVID storm’ without taking a hit to the bottom lines.
ASX healthcare shares show resilience
For example, the second-best performer, Polynovo, has received endorsement after endorsement for its flagship ‘Novosorb’ product, which assists burn victims in recovering skin damage and loss. Last month, Polynovo informed the markets that it was expanding this product into countries like Belgium, Luxemburg and Sweden. That came after it was given the green light by the FDA for a trial in the US.
We see a similar trajectory with Pro Medicus and Nanosonics. Pro Medicus announced a $10 million contract win last month with LMU Klinikum, which will see its Visage 7 technology across Europe. That came after the company reported revenue growth of 23.9% for FY2020 and a 20.7% increase in profits over FY2019 back in August.
Turning to Nanosonics, we can see this is another company that isn’t letting 2020 drag it down. Last month, the company reported that, after an initial dip, installation of its flagship Trophon disinfectant machines was up 16% in the first four months of FY2021 (July-October) compared to the last four months of FY2020 (March-June). All that came on top of FY2020 revenue of $100.1 million, up 195 from FY2019.
So, it’s worth noting first up that a few of the ASX’s more well-known healthcare shares aren’t actually doing too well this year. The ‘big dog’ is of course CSL, the ASX’s second-largest company overall behind Commonwealth Bank of Australia (ASX: CBA).
CSL does make this list, but only just. Far from the recent performance investors are used to, this healthcare giant is ‘only’ up 4.48% for the year. In 2019, CSL managed to grow almost 50% in value, coming after 2018’s increase of around 30%.
The year 2020 has delivered a reality check here for CSL shareholders. In 2020, disruptions to the company’s plasma business, as well as the recent failure of the vaccine candidate CSL was working on with the University of Queensland, have dampened investor enthusiasm with this giant.
Further, the ASX’s third-largest healthcare share, private hospital operator Ramsay Health Care Limited (ASX: RHC), remains down almost 12% year to date. This company was affected by global hospitals pivoting to prioritise coronavirus cases, and in doing so suspending elective surgeries.
As you can see, 2020 has brought challenges and opportunities to the ASX healthcare sector. While there have been some clear winners and losers here, it’s a great reminder of the ‘evergreen’ nature of this sector, and the benefits it can bring to us all.
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As of 2.11.2020
Sebastian Bowen owns shares of Ramsay Health Care Limited. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of CSL Ltd., Nanosonics Limited, and POLYNOVO FPO. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Pro Medicus Ltd. The Motley Fool Australia owns shares of and has recommended Pro Medicus Ltd. The Motley Fool Australia has recommended Ansell Ltd., Nanosonics Limited, Ramsay Health Care Limited, and ResMed Inc. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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