Hardman & Co Healthcare Index

10 Jan 2022 / Insight

By Dr Martin Hall

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2021 – COVID-19 continued to benefit sector

The Hardman & Co Healthcare Index (HHI) has been running since 2009. Its main function is to highlight the attractions of life sciences investments over the long term. Following an exceptional performance in 2020, when investors showed greater appreciation of science as a result of the COVID-19 pandemic, 2021 was a year of reflection. The HHI still increased 12.0%, to 661.5, which was substantially better than the performance of the FTSE AIM All-Share Index (+5.2%), but was modestly below outcomes for the FTSE 100 (+14.3%) and FTSE All-Share (+14.5%) indices. After several spectacular share price performances by companies involved in the challenges posed by the pandemic in 2020, uncertainty over the longevity of COVID-19 resulted in some underperformance of those same stocks in 2021. Also, after a busy year in 2020, when 27 companies took the opportunity to raise more capital, only 10 companies in our universe raised new capital in 2021. At the time of writing, COVID-19 is rearing its ugly head again, suggesting that the life sciences industry will remain a focus of attention in 2022.

• Since inauguration, the CAGR for the HHI has been 17.2%, compared with 3.5% for the FTSE All-Share Index and 5.3% for the FTSE AIM All-Share Index, highlighting the attractiveness of the healthcare sector as a long-term investment, even though it is capital-intensive.
• Of the 53 companies included in the HHI, 32 recorded an increase in their share prices in 2021, whereas 19 saw a fall, with two companies simply marking time.
• The variance between the best- and worst-performing stocks reverted to normal levels in 2021, at 225% – Futura Medical (FUM) rising 158% and Venture Life Group (VLG) falling 68%; the median share price change was 10%.
• In relative terms, 24 stocks outperformed the index during 2021, with the other 29 underperforming.
• The response of some companies to the COVID-19 pandemic has been exceptional, and, in many cases, rewarding. Many companies really stepped up to the challenges posed by the virus, and, in just two years, there is global availability of vaccines, diagnostic tests and treatments.