This article was produced 4 April 2025. 

Key takeaways: 

• Healthcare innovation is currently supported by various tailwinds including an aging population, the growing uptake and sophistication of AI, and government spending. 

• The biotechnology, pharmaceutical, medical device, digital health, and AI health solutions segments feature a long list of companies that demonstrate innovative practices, with long-term growth potential. 

• Investing in individual securities from these groups carries high risk, particularly those linked to drug discovery and approval outcomes, as well as the regulatory environment. 

• There are a considerable number of ETFs across the ASX and US markets that offer either broad exposure to the healthcare sector, or targeted exposure to a diverse basket of innovative healthcare names. 

• It is important to always do your own research before making decisions to invest.  

• Past performance or trends are not an indicator of future performance of trends. 

Amid an ageing global population, technological advancements, and continual efforts towards medical breakthroughs, healthcare innovation is an area of focus that we can all relate to in one way or another. 

Accordingly, the stock market plays host to a wide range of companies that support research and development prospects. Whether it be biotechnology firms, big pharma, medical device manufacturers, or digital and AI healthcare solutions providers, both the ASX and US represent major exchanges supporting healthcare innovation.  

This extends to exchange-traded funds (ETFs), where there are many options available to investors, either on a broad or targeted basis, to achieve diversified exposure to this investment theme while also reducing risk levels. 

Biotechnology, Pharmaceutical, and Medical Device Manufacturers 

At the centre of healthcare innovation are companies pushing the boundaries of drug discovery and treatment, and broader medical research activity. This includes biotechnology firms, pharmaceutical developers, and even medical device manufacturers. 

In many cases, these companies are responsible for pioneering healthcare solutions such as vaccines, treatments for rare diseases, regenerative medicine, hearing devices, prosthetics, respiratory care items, blood plasma products, and much more. With ongoing developments and continual refinement across each of these categories, they offer exposure to innovation in varying capacities. 

Locally, the ASX has a burgeoning cohort of innovative healthcare names, including but not limited to the likes of CSL (ASX: CSL), ResMed (ASX: RMD), Telix Pharmaceuticals (ASX: TLX), Cochlear (ASX: COH), and Mesoblast (ASX: MSB). 

Abroad, the US stock market provides exposure to the largest companies from the biotech and pharma cohorts, with examples being Pfizer (NYSE: PFE), Moderna (NASDAQ: MRNA), Novartis (NYSE: NVS), Merck (NYSE: MRK), Eli Lilly (NYSE: LLY), Novo Nordisk (NYSE: NVO), Johnson & Johnson (NYSE: JNJ), and AbbVie (NYSE: ABBV).  

Even if the above companies are some of the most high-profile in this space, biotech and pharmaceutical stocks often carry elevated risk related to drug discovery, trial outcomes, and regulatory prospects given as much as 90% of clinical drug development reportedly fails. 

Digital and AI Healthcare Solutions Providers 

While advancements in technology have long played a supporting role when it comes to innovation in the healthcare industry — and even found their way into wearables that we engage with on a day-to-day basis — the pandemic arguably accelerated this cause through the development of new telehealth and digital health solutions. 

More recently, with artificial intelligence (AI) becoming increasingly sophisticated and applicable to an ever-expanding range of applications, there are now a growing number of investment opportunities that leverage next-gen technology to supplement traditional healthcare practices. 

No matter the tech theme, these practices are now transforming patient care. For example, such solutions allow practitioners to tailor treatment plans, improve diagnostics, optimise drug discovery processes, and ultimately deliver superior patient outcomes, both in terms of health and lower costs. 

There are numerous companies that provide exposure to digital and AI-optimised healthcare services. On the ASX, this includes Pro Medicus (ASX: PME) and Sonic Healthcare (ASX: SHL), both of which have embraced AI to enhance the accuracy and efficiency of findings associated with their medical imaging and diagnostics operations. 

Investors also have access to overseas opportunities courtesy of stocks like Teladoc Health (NYSE: TDOC), Medtronic (NYSE: MDT), GE HealthCare Technologies (NASDAQ: GEHC), and Intuitive Surgical (NASDAQ: ISRG), which all utilise tech at the heart of their healthcare solutions. 

Healthcare ETFs 

As touched on earlier, certain segments of the healthcare industry involve elevated risk on account of the binary nature that accompanies the likes of clinical trials, a stringent regulatory environment, significant cash flow requirements, and widespread competition.  

Investing in individual securities spanning biotechnology, pharmaceuticals, medical devices, and even med-tech can expose one’s portfolio to risk and volatility that may not always be suited to their overall investment objectives. 

However, that doesn’t mean investors need to forego exposure to this investment theme, particularly with the growth prospects that accompany said risk. One potential approach to strike a balance on this front is ETFs that offer diversification through direct exposure to a portfolio of innovative healthcare companies. 

On the ASX, some of the ETFs offering exposure to healthcare innovation include the Global X S&P Biotech ETF (ASX: CURE) and the iShares Global Healthcare ETF (ASX: IXJ). 

For investors who would prefer to consider US-listed ETFs offering exposure to this high growth investment thematic, there are numerous funds offering broad access to health stocks, but specific opportunities for healthcare innovation lie with ROBO Global Healthcare Technology & Innovation ETF (NYSE: HTEC) and the Global X HealthTech ETF (NASDAQ: HEAL), among others.  

Investing in Healthcare Innovation 

One of the central reasons why healthcare innovation has emerged as a favoured investment theme is because of the growth potential associated with breakthrough health developments. 

For investors who want to gain exposure to this theme, either in part or in full, fortunately there are broad and specific ETFs that target healthcare innovation. 

Of course, while ETFs provide diversification to this theme and reduce overall investment risk, investors with higher risk tolerances may still opt to consider individual companies for investment, which span across segments such as biotechnology, pharmaceuticals, medical devices, digital health, as well as AI healthcare solutions. 

Importantly, investors should remember that healthcare innovation stocks typically align with long-term investment horizons, as the sector is expected to continue evolving over time.