Why Healthcare Stands Strong When Markets Falter—And Where to Invest Next

As economic tides shift and markets fluctuate, certain sectors reveal unexpected opportunities for growth and investment. One such bastion of resilience and innovation is healthcare. Despite the challenging economic climate and industry-specific hurdles, healthcare continues to present compelling prospects for investors. This article delves into the nuances of investing in healthcare during a bear market, spotlighting the resilience of the sector and emphasising the unique advantages offered by Australia and New Zealand.

Investors often quail at the thought of recession, fearing the downturns that gripe many sectors. However, healthcare often does not succumb to the same downward pressures. As Hashan de Silva, Founder & Managing Partner at KP Rx, points out in his keynote presentation at Emergence 2025: “Unlike other industries, if you use tech as an example, healthcare you don’t actually take very much business model risk.” In healthcare, the demand for services and products remains largely unaffected by economic conditions due to the essential nature of the treatments offered.

By examining historical data, the sector’s robustness becomes evident. Insurance rates, for instance, typically remain stable even when employment fluctuates, ensuring accessibility to critical medications. Companies such as CSL witnessed flat sales growth during economic downturns, validating the theory that healthcare’s demand is driven by necessity rather than luxury. Furthermore, Hashan highlights that “the unit economics of a drug [are known] maybe a decade before it goes onto the market,” allowing for strategic forecasting and planning. This endurance and predictability safeguard healthcare as an attractive investment, regardless of prevailing market conditions.

When considering the global landscape for healthcare innovation, the Southern Hemisphere shines brightly. Australia and New Zealand offer distinct advantages for conducting early-stage clinical research, crafting an appealing environment for investment. A significant factor driving this appeal is the Australian government’s R&D incentive, which provides a hefty rebate: “43.5 cents on the dollar back in cash.” This incentivises not only domestic but also international companies to establish themselves within our shores.

The cost-effectiveness and efficiency of conducting clinical trials in Australia add another layer to its appeal. Hashan elaborates, “a CT scan in Australia is about $100, $200, it’s about $2,000 in the US.” This cost differential means that Australian companies can achieve a comparable level of research with significantly less capital outlay. Consequently, companies can “stay in Australia, raise money in Australia, do all their work in Australia all the way up to the end of phase two.” The robust infrastructure, coupled with diverse recruitment capabilities, ensures that Australia remains a formidable force in healthcare innovation.

While regulatory challenges and market closures exist, they mask a landscape teeming with promise for mergers and acquisitions (M&A). Historically, big pharma has relied on smaller firms for innovation and pipeline replenishment, purchasing innovations developed externally. Hashan reflects, “Big pharma need to acquire… [and] have more capacity, cash, and available debt to acquire every single medium and small cap pharma in the world.” This necessity propels the M&A engine, driving opportunity.

Despite a temporary pause due to recent regulatory uncertainties, the M&A outlook remains strong. As healthcare companies grapple with the potential relocation of innovation hubs, possibly shifting towards China, the focus on sustaining innovation within secure environments becomes more prescient. All of this sets the stage for a future where the location of innovation might shift but the momentum does not cease. Hashan’s sentiment underlines this dynamic: “unless you believe that people are never going to get sick again, there’s going to be a healthcare market.”

The convergence of these elements ensures that potential investors have ample reason to remain optimistic about the sector’s trajectory. As pharmaceutical giants continue their search for dynamic growth through acquisitions, intertwined with the global shifts in innovation landscapes, healthcare remains poised for evolution and resurgence.

Peering into the horizon, the healthcare industry reflects a tapestry of opportunity and resilience. Erasing the barriers that the global market downturn presents, the healthcare sector offers a mosaic of chances for innovative growth and revenue generation. Mutual respect between investment agility and regulatory navigation may yield fruitful results despite any economic storm.

The journey of transformative healthcare does not rest solely with titanic companies such as CSL but rather leans into the dynamic and diverse landscape expanding across companies both large and small in Australia. Through strategic positioning in Australia and judicious capital infusion, healthcare persists as an illustrious architect of future readiness and prosperity.

Navigating the corridors of uncertainty and regulation unveils a steady pace forward, a commitment and belief in the inherent demand and advancement seeking to redefine what healthcare signifies in our modern era. As the gates of innovation creak open further in regions like Australia, the thematic echoes voiced throughout this discussion invite stakeholders to explore, invest, and cultivate a future where healthcare’s promise persists unhampered by the fluctuations and unpredictabilities of superficial economics.