It may please certain doctors practising today to learn how they have been spared some of the early diagnostic tests undertaken by their professional forebears. In ancient Greece, the diagnosis of Diabetes Mellitus (which in essence means ‘copious urination sweetened with honey’) required the physician to test the urine in a manner reminiscent of a sommelier trying the wine at a fine restaurant. In the middle ages, this act of uroscopy became so widespread in European medicine that a physician could be exposed to public beatings if he failed to use it.
Unpleasant as this may seem, it does demonstrate the lengths doctors needed to go to attempt to diagnose illness in the past. Unfortunately it didn’t necessarily end well for the patients. In his book ‘Range’, the writer David Epstein mentions the story of a famous New York physician renowned for his skill as a diagnostician, whose particular specialty was typhoid fever. He examined patients for the disease by feeling around their tongues with his hands. Again and again, his testing yielded a positive diagnosis even if it took place before the patient displayed a single symptom. And over and over, his diagnosis turned out to be correct. As another physician later pointed out, ‘He was a more productive carrier, using only his hands, than Typhoid Mary.’
Throughout the history of medical development, diagnosis has played an essential part in discovering infectious diseases and improving public health. One milestone was the invention of the microscope in the late 16th century which introduced us to the invisible world, just as telescopes did to the heavens. Scientists then understood not only the cellular level of the human structure but also the organisms that caused diseases.
As new discoveries were made in microbiology, the 19th century marked a relative zenith of public health. John Snow’s tracing of the source of the Great London cholera outbreak in 1854 was an early application of laboratory methods to facilitate public health. By the end of the 19th century, specific chemical and bacterial tests for diseases began emerging rapidly. Such successful applications were made possible by the progress of basic science and set the foundation of modern-day clinical laboratory testing.
Modern-day medical diagnostics
From manipulation and urine tasting, to microscopes and molecular testing, the sophistication of medical diagnostic methods has – for both patients and doctors – thankfully come a long way. From an investment standpoint, the proliferation of technological advancements, as well as relatively stable cash-flow generation leading to R&D, has led to an often enticing investment environment in which to stock pick.
One such company is DiaSorin which specialises in molecular and immunodiagnostics. After 20 years of continuous focus on developing its Chemiluminescence (CLIA) technology, it now owns the broadest menu of specialty immunoassay tests that no one else offers1. These tests are an integral component of detecting certain molecules, such as hormones or pathogen biomarkers, and are used across swathes of healthcare research and treatment.
One of DiaSorin’s latest innovations includes inflammatory bowel disease sample testing. This is a more comfortable improvement to the traditional colonoscopy method that is expensive, invasive, generally requires repeat testing throughout the treatment cycle, and still accounts for 90% of the cases2. The company says its next research focus is to develop rapid tests that give results within 15 minutes in a single patient visit and in a decentralised manner, such as at clinics and pharmacies. Once successful, it believes its investments will result in greater efficiency in patient care and offer new growth opportunities.
Our current technologies enable a vast volume of routine tests to be done at a low cost in large and efficient labs. Some are made using simple and rapid solutions, such as pregnancy tests or glucose monitors that are widely available to end users.
Notwithstanding this, healthcare spending on diagnostics is expected to increase due to demographic changes, broader access to healthcare, and more costly new technologies. From disease management to patient care, the field of diagnostics influences over 60% of clinical decision-making, while accounting for only 2% of total healthcare spending3.
Innovative technologies drive growth
While incumbents compete to provide larger testing menus to improve efficiency and expand capacity to improve access, emerging technologies can compete with greater speed and accuracy. One example is molecular diagnostics which can detect infectious pathogens at a DNA or RNA level in a matter of minutes while providing antibiotic sensitivity results. This creates extraordinary value by providing an actionable result for patient treatments, improving survival rates, and shortening hospitalisation in cases of diseases such as sepsis. Both are driving forces of growth in the diagnostics market, the former by expanding the existing market and the latter by improving detection processes and hence clinical decisions.
Unsurprisingly given the global pandemic, another area that has been receiving a renewed focus from companies, and is likely to see increasing expenditure in the future, is infectious disease. Such diseases are a leading cause of deaths worldwide, with three ranked in the top ten causes of death by the WHO. However, they are not limited to existing diseases: at least 12% of all human pathogens are newly-identified microbes or are a result of the spread of diseases to new geographies or populations in the last 20 years4. Mounting evidence also points to a strong association between infectious disease and chronic diseases, including cancers.
Corporations remain vital in both diagnosing and treating infectious diseases. For investors, businesses in this area can prove to be excellent investments, with fast growth and high, protectable returns. Companies that stand out are those that are able to generate high and sustainable returns on investments and that create new markets by revolutionising testing solutions. It is this base of good governance and solid balance sheets that also allowed these companies to adapt and expand so nimbly and successfully during the early stages of the pandemic. Some may suggest that stability and revolution are oxymoronic, but therein lies some of the appeal of this sector from an investment standpoint. Vitally, their work has proven – and continues to be – successful and invaluable to human health, an increasingly-structural tailwind both from a demographically-driven perspective, as well as through the lens of ESG investing, where the broader social benefit to society is demonstrable.
In an attempt to shine some light on the extraordinary progress made, it is worth considering that if one were to look back at England and Wales in 1850, 44% of deaths were attributable to infectious disease, with an average life expectancy of 43 years. In 2017, the numbers were 7% and 81 years5. We must now look to those companies that can improve these numbers even further.