One of the things we do differently when we invest in the healthcare sector is that we think about businesses rather than trying to predict science.
We think many managers focus on trying to predict which drugs will work and which drugs won’t. And over time, the data has shown the ability to predict that has very low odds of success. So what we focus on are finding good businesses that are capital efficient, that can reinvest back into their business to maintain their ability to grow. What’s great when you invest in businesses rather than stocks, and you look at very specific characteristics like capital efficiency and reinvestment rates, is that you can find exciting opportunities, not only across the healthcare continuum, but around the world.
Diagnostics is one area that will be increasingly important going forward. And it’s my belief that in our lifetime, we will have a blood test to help detect cancer, which will have a profound effect, not only on patients, but on the healthcare system as well. The rise of minimally invasive surgeries will be an important trend in healthcare. So the ability to use robotics and catheter-based technologies will only increase in adoption. And more importantly, we think technology will have a greater impact on healthcare more broadly.
We’ve seen that in telehealth through the pandemic, but we think it goes beyond that. We think that we’ll have software that’ll help identify patients who are at risk of a bad outcome, which will not only obviously benefit the patient, but be really efficient for the healthcare system to utilize as well. It’s always a risk when you invest in this sector. It is an existential risk. The risk around drug pricing, the risk around healthcare reform, particularly in the US. We think the system does need to be reformed, but all of the legislative proposals that we’ve seen to date don’t really address the core root of the issue. And we don’t think that there’ll be disruptive change this year through healthcare reform.
So we’re always mindful of it. We’re always monitoring it. And one of the things we do when we construct the portfolio is to make sure that our companies operate in what we like to call a virtuous ecosystem. And what that means is they make a product that obviously benefits the patient, it’s profitable for them to produce. But more importantly, it’s efficient for the healthcare system to utilize. So it saves the system money. We think those businesses over time will be more resilient to any changes that come from healthcare reform.
We think investors should really focus on good businesses rather than trying to predict science. The way we define a good business we think is unique by looking for capital efficiency and reinvestment rates. And we spend a lot of time trying to understand the prices of these businesses in the marketplace to try and increase our odds of a long-term success.