On February 10, 2022, FCLTGlobal brought together leaders in the healthcare and healthcare investment community to discuss long-horizon innovation in light of the COVID-19 pandemic.

The webinar featured expert insights from across the investment value chain, including:

• Fidah Alsagoff, Head of Life Sciences and Joint Head of Enterprise Development Group, Temasek
• Roger Connor, President, Vaccines & Global Health, GSK
• Rebecca Sykes, Senior Managing Director & Global Industry Analyst, Wellington

Financing healthcare advancements and vaccine development became the priority with the onset of the COVID-19 pandemic, yet the scale and the importance of such developments are not new. Successful innovation depends on a wide array of decisions, including capital allocation, risk management, communication with investors, and with other stakeholders – each involving tradeoffs between short and long-term focus.

Key Takeaways

There is a perception that the pandemic accelerated what was traditionally long-horizon investing in vaccine development.

But COVID-19 vaccines were ultimately a result of a decades-long effort. Healthcare companies and investors had been allocating resources towards transformational platforms and technologies, like mRNA, that laid the foundation for this unprecedented timeline. The pandemic only reinforced the way corporations and investors think about traditionally long-term investments like vaccines. While short-term projects or allocations may be easier to commit to, it’s the long-tail, riskier innovations that have both a greater impact on society and a longer payoff horizon with more durable cash flows.

Capital allocation decisions shifted in the wake of the pandemic, especially around efficiency and leveraging strategic partnerships.

The rapid development of the vaccine required companies to think critically about human capital resources like talent, labor, and innovation. Financial capital was not the only constraint. Investors had to take social capital considerations posed by pandemics more seriously.

“Diversity, in every angle, fundamentally will create better innovation in a company… whether it be culturally, gender, disability, whatever that [factor] is. So, when we do that pipelining, we have to make sure we do it from a diversity lens,” said Connor.

This pandemic underscored that paying attention to financial returns alone is an inadequate approach, preventing both companies and investors from providing the essential capital needed to fund new technologies.

“If we want to truly be involved in groundbreaking innovation, to push the agenda along, we have to be prepared to take a very long-term view and right the cycle… To evolve the way healthcare is given, we have to take a determined early, view. We like the term catalytic capital, both for returns and patient impact,” said Alsagoff. Above all, a long-term strategy must come first.

Vaccine access was a key issue for stakeholders in 2020 and 2021, and healthcare companies worked collaboratively across the industry and with governments to benefit multiple stakeholders.

Companies can think about how to balance their role in delivering global healthcare services – while maintaining their competitive position – by constructing a portfolio of commercial and impact projects. Competition and the rate of innovative change are reinforcing factors.

“One area where short term and long-term horizons conflict is in drug pricing. It seems at first blush, companies should have profit maximization in mind… and we do see empirically higher prices in many countries. Ignoring political pressures, the industry needs to seek change from within and think in potentially disruptive ways about how to solve the problem,” said Sykes.

Collaboration contributes to more rapid solution development, improving stakeholder outcomes while also increasing competition for the next breakthrough. Long-term investors consider the balance of profits and access to vaccines. Investors may deprioritize profits in the short-term in favor of healthcare access and other ESG considerations when those elements contribute to mitigating future risks. This leads to maximizing returns over the long term by creating more resilient businesses and societies along the way.

The group felt systematic, long-term preparation is paramount to preventing the fallout we saw in the COVID-19 pandemic and bracing for the next. Preventing the upending of our entire system will require the collaboration of investors, companies, and global governments.