International Healthcare – A Generational Opportunity?
International healthcare may be one of the most overlooked long-term opportunities in global markets and the reasons why may surprise investors.
As visibility improves and the sector transitions out of a period of dislocation, Investment Principal Daniel Windoff sees a compelling setup for select companies poised to benefit from renewed momentum. In alignment with this view, the Cambiar International Equity ADR portfolio is purposefully positioned to harness these tailwinds through targeted exposure to high‑quality healthcare franchises.
Dislocation Creates a Favorable Setup
In mid-year 2025, we discussed a “generational opportunity” in the international healthcare sector. Healthcare stocks in general had encountered a perfect storm – funding challenges for biotech, a post-Covid sales/earnings hangover, and stressed supply chains and inventory challenges (most relevant for life science tools businesses). External factors, such as the newly appointed U.S. administration’s Most Favored Nation (MFN) pricing on medicines and tariffs, placed additional pressure on drug producers and the sector at large. The result was aggregate sector valuations at the lowest level vs. the overall market in over a decade. This tumultuous time of decreased visibility delayed corporate decision-making and put new initiatives on hold. It also challenged the investment narrative in the sector, prompting investors to seek opportunities elsewhere.While not dismissive of the more challenging operating environment, we viewed the sector weakness to be an opportunity.
A lot has happened since summer 2025. Sixteen of the largest pharmaceutical companies made price concessions with the U.S. administration, including lower prices in government and self-pay channels. Most important are likely the commitments by pharma to expand their manufacturing footprint in the U.S. in return for pricing and tariff relief.
The latter half of 2025 saw the healthcare sector partially re-rate, but the aforementioned uncertainties result in valuations that remain at a deep discount vs. historical peak-to-trough ranges (as illustrated in below chart). Looking ahead into 2026 and beyond, we believe that U.S. pressure has peaked and uncertainty in the business environment is receding. Selectivity remains paramount, yet we see attractive risk/reward opportunities in healthcare, and the prospect of a re-rating relative to the general benchmark is compelling.
Areas of Opportunity
Pharmaceuticals: We favor companies with structural growth, durable margins, and the ability to strengthen their competitive advantages in an improving business environment.
In the large pharma segment of healthcare, we hold AstraZeneca, Roche, and UCB. AstraZeneca delivered on its 2026 pipeline, and we believe the company’s 2030 sales targets are well within reach. Roche had a challenging 2025, but positive updates in both oncology and immunology result in an improved outlook. UCB had an impressive launch of its best-in-class medicine, Bimzelx. We also have a favorable view of the company’s central nervous system (CNS) franchise and potent pipeline.
Life Science Tools: The Life Science tools industry has faced restocking pressures, and we believe providers are now better positioned to return to stronger growth, with signs that biotech funding pressures are starting to decrease. Bioprocessing players should enjoy a better business environment in the coming year. We also believe the clinical research organization (CRO) players are well-positioned as trial volumes normalize and cancellations abate. The International Equity portfolio currently has exposure to this vertical of the healthcare sector via a position in ICON, where we see the company poised to benefit from a double-positive in the form of higher earnings and multiple expansion.
Medtech: The subsector underperformed in 2025, driven by consumer-exposed names, reimbursement pressures, tariffs, and the ongoing Section 232 investigation. However, we expect select opportunities to emerge in 2026, as policy visibility improves and yields become more supportive. We have recently taken positions in the chronic care company Coloplast and the vision care leader Alcon.
Ongoing Reasons for Optimism?
We were encouraged by the improved price performance within healthcare in the fourth quarter, and believe the positive momentum in the sector can continue in 2026. Given the sector’s lagging return vs. the broader equity market in recent years, any combination of improving investor sentiment and/or a stumble in the tech/AI trade could healthcare stocks up for an extended period of outperformance. In addition to attractive valuations, Cambiar’s healthcare positions are supported by improved revenue/earnings visibility, compelling yields, and structural growth opportunities. We also find the AI angle quite interesting for the long-term prospect of drug development.
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