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Pasquale Sansone
Senior Biotechnology Analyst
As we enter the month of October, investors are faced with an obvious question: is the time right for new investments in the oncology sector?
Why does the healthcare sector move in cycles?
Subject to scientific advances and regulatory decisions, the healthcare sector is subject to cycles of capital inflows and outflows. These fluctuations regularly lead to strong pressure on company valuations.
During periods of capital outflows, investors express skepticism about the chances of clinical or commercial success. We call this the ‘show-me’ stage. Conversely, when the probability of success increases and business prospects brighten, investments flow back into the sector. The growth stage marks the transition from laboratory innovation to the creation of tangible clinical assets that generate economic and financial value.
The role of Candriam's analysis is to attempt to identify these pivotal moments in order to capture the best-positioned companies, those whose scientific innovation meets tangible market potential, coupled with a favorable risk/benefit ratio. In other words, we select and invest in strategies and/or companies where biotech innovation, clinical research and market needs are strongly aligned.
In addition, rigorous risk analysis enables us to build more balanced and resilient portfolios.
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”Oncology is currently undergoing a major transformation. The convergence of precision diagnostics and targeted therapies not only creates value for patients, but also rare investment opportunities for investors
Why has the healthcare market suffered so much in recent years?
Since 2021, the healthcare sector has experienced a prolonged period of difficulties, from a combination of factors:
- Readjustment of valuations. Following the IPO boom of 2020 and the Covid vaccine euphoria, biotech valuations reached levels that were difficult to sustain. The rebalancing observed over the last three years is akin to a ‘physiological reset’ for the sector, which now seems to be stabilising.
- Slowdown in public sector acquisitions. Mergers and acquisitions, an historical growth driver for biotech, have stalled in the public markets. At the same time, the private sector, particularly in China, has seen a boom in acquisitions of innovative bio-pharmaceutical technologies. To better navigate this environment, Candriam has strengthened our benchmarking of Chinese assets, to identify the true innovations -- those expected to emerge as best-in-class, with little or no competition.
- Increased macroeconomic and political volatility. Since late 2024, the arrival of the second Trump administration in the US has increased uncertainties, particularly about future FDA regulations and a stated desire to reduce the cost of drugs. These signals led many ‘generalist’ investors to withdraw from the sector, putting further pressure on healthcare shares. It's important to note, however, that the US government is working closely with key agencies such as the FDA to establish more agile drug development and approval protocols. This process concerns all therapeutic areas, including oncology, and could ultimately support innovation and the development of reference drugs.The US administration is also looking to reduce the cost of drugs. Although there are still few details, we believe that this objective will be difficult to achieve. In anticipation of this risk, we have increased our exposure to oncology diagnostics and technologies, and reduced our exposure to oncology therapies -- in particular for those drugs most exposed to potential US government budget cuts, which mainly impact the big pharma groups.
In addition, external pressures which are not specific to the sector, such as inflation, trade tensions and the geopolitical context, are adding to the near-term climate of uncertainty. As part of our long-term investment strategy, we apply rigorous analytical methods to take these risks and underlying volatility into account.
How can investors tap into the profound changes in oncology today?
Health remains a fundamental pillar of society. In this vast field, oncology occupies a special place, as it lies at the crossroads of two essential dynamics: on the one hand, constantly growing demographic and clinical needs; on the other, major biotechnological advances. This alignment gives the sector significant development potential.
Oncology is a perfect illustration of the cyclical dynamics described above. Today, it is at the heart of a scientific revolution driven by precision medicine, which combines sophisticated diagnostics and targeted therapies.
We believe that this transformation generates value that can be captured through rigorous and selective investment analysis and strategies.
As in other sectors, a number of factors can trigger the transition from a ‘show me stage’ to a ‘growth stage’:
- An advanced inflection point in the maturity of technologies under development: the more advanced the clinical development phase, the higher the probability of success.
- More approvals for new therapeutic and diagnostic tools.
- Attractive valuation of products in the advanced stage of clinical and commercial development.
This phenomenon remains rare in oncology: today, many companies are in phase 3 or close to obtaining approval for new drugs, with valuations comparable to those of companies in the early/preclinical phase. In our view, this is the strongest sign that these investment strategies are likely to succeed.
These signals suggest two dynamics:
- More opportunities to invest in value-creating companies with solid data and advanced development projects;
- A return to acquisitions of publicly-traded companies.
The trend is already emerging: in the first half of 2025, three listed oncology companies were acquired by major pharmaceutical companies, and our strategy was invested in two of the three target companies.
How will Candriam attempt to capitalize on this new dynamic?
Our approach combines rigor and pragmatism. We remain opportunistic in biotech, targeting best-in-class technologies with advanced clinical and commercial phases, including drugs close to approval or marketing.
For mid- and large-cap companies, weseek companies with solid growth prospects in oncology, and we cover the entire value chain: from instrumental and molecular diagnostics to precision therapies. For the latter, we have put together a basket of companies developing ‘breakthrough‘ drugs, ie innovative treatments capable of changing the clinical paradigm, and targeting cancers with a very high epidemiological incidence -- such as pancreatic, lung or bladder cancers -- where the clinical and commercial stakes are fully aligned.
Why emphasise oncology?
Despite the recent turbulence, our conviction remains intact: healthcare, and particularly oncology, remain essential areas for long-term investment. The innovations underway open up considerable potential for value creation.
For the moment, we keep a close eye n macroeconomic uncertainties, particularly in the US, the world's largest pharmaceutical market. This is also where the largest number of innovative companies are concentrated, and where the most significant technological and commercial advances are made.
Our ambition is to support you in this transformation cycle, by identifying the companies best positioned to transform scientific research into clinical benefits and sustainable financial performance.
Our expertise
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Dive deeper into our oncology expertise on our dedicated webpage
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