Signals from our Health Care Experts

Important Information

This material is provided for informational purposes only and is not intended to be investment advice or a recommendation to take any particular investment action.

The views contained herein are those of the authors as of April 2020 and are subject to change without notice; these views may differ from those of other T. Rowe Price associates.

This information is not intended to reflect a current or past recommendation, investment advice of any kind, or a solicitation of an offer to buy or sell any securities or investment services. The opinions and commentary provided do not take into account the investment objectives or financial situation of any particular investor or class of investor. Investors will need to consider their own circumstances before making an investment decision.

Information contained herein is based upon sources we consider to be reliable; we do not, however, guarantee its accuracy. There is no guarantee that any forecasts made will come to pass.

Past performance is not a reliable indicator of future performance. All investments are subject to market risk, including the possible loss of principal. International investments can be riskier than U.S. investments due to the adverse effects of currency exchange rates, differences in market structure and liquidity, as well as specific country, regional, and economic developments. Stocks of health sciences companies may be more volatile than more diversified investments. Further, these firms are often dependent on government funding and regulation and are vulnerable to product liability lawsuits and competition from low-cost generic products. All charts and tables are shown for illustrative purposes only.

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As of 4/16/20

Partner with us for insights during these uncertain times

Masks SocialDistancing

RemoteWorking

Testing ContactTracing

Testing companies will scale Today, we can do 200,000 tests, by summer it will be 2 million

Pet ownership continues to increase and companies focusing on animal health stand to benefit

A biopharma vaccine could end the pandemic, potentially improving sentiment around drug pricing

Subcutaneous drug delivery will eclipse intravenous methodsBiopharma market will probably shift in favor of drugs that can be given in home settings

Health care will see a substantial increase in telemedicine and virtual assessments due to viability and cost-savings

$

The New Normal

Firms involved in making COVID-19 treatments may already be fully valued.

Opportunities

Valuations based on hope rather than success

Companies that have the best chance of dominating their space in large and well-characterized markets

Biopharma

Managed Care

Medical Products and Devices

Headwind: the delay of elective procedures and highly leveraged hospitals. Look for innovative products that improve the standard of care, like robotic surgery

Headwind: Fully valued sector, premiums for innovative drug platforms. Look for highly innovative companies developing game-changing therapeutics that can materially improve the standard of care and serve severe, unmet medical needs

Headwind: increased costs from virus-related hospitalizations. Look for opportunities to arise from reduction in elective procedure volumes and improving political landscape

Sectors

Investing in improved standard of care,access and affordability

Companies with platform value that can replicate success over and over again

Potential Secular Winners

Treatment ParadigmsTreatment Paradigms

Direct acting antivirals that block the virus replication; works best in early stages

Antibodies from survivors given to patients, developing scalable treatments for health care workers, high-risk groups first

Treatments that dampen severe immune response later in the disease

1

2

3Timeline of widely available vaccine could exceed 12-18 months

Target spike proteinDNA vaccinesmRNA vaccines

6Months 12

Vaccine VersionsSometimes this takes years

This is a very aggressive timeline given the requirements to safely procure the billions of doses needed

18

As Europe and North America movepast their peaks

Europe Peaking and governments set for reopening markets

Markets are Reacting Favorably

COVID-19 Insights

China and South Korea Experienced in pandemics and employed bold, effective lockdowns

MAY

JULY

But regions are still facing some difficulty controlling the outbreak

MAY

JULY

AUG

SEPT

Graduallifting of mitigation measures

Difficult monthin the U.S. and UK

Fall cases will depend on current lockdown length and testing rates

Minimal new cases

US Suppression and social distancing is working and outcomes will vary by geography

APR

IL

2020

Virus may turn out to be seasonal

Assuming we don’t get it globally under control, which I don’t think we will, there’s a good chance that the virus will become seasonal. —Ziad Bakri, CFA®, M.D.

Potential reappearance in winter months. Respiratory viruses spread best in cold, dry conditions due to people being indoors and virus’ sensitivity to high temperatures

Partial respite in the summer in the U.S. and northern hemsphere

May see infections surge in the southern hemisphere during their winter months

The Good News is that all of biopharma is focused on this. Never bet against human ingenuity.

—Ziad Bakri, CFA®, M.D.

As the market collapsed we took advantage of dislocations and inefficiencies created by liquidations, and panic selling.

—Anne Daub, Investment Analyst

Imagine smaller class sizes, flexible work hours to prevent crowded subways, combined work-from-home and in-the-office schedules with widespread and regular testing, and potentially immunity certification based on antibody testing... and reduced activity in crowded spaces, like movie theaters, airports, stadiums. —Ziad Bakri, CFA®, M.D.

Our backgrounds in medicine, our links to the medical community, and our ability to understand what exponential growth looks like, all put us in a great place to generate insights.

—Ziad Bakri, CFA®, M.D.