Understanding the Current State of Australian Healthcare
In the first part of this series, we explored what went wrong with Aussie healthcare. The answer was not simple. Macro pressures, margin compression, funding constraints and stock-specific missteps all collided at once, forcing a sector long priced for perfection into a sharp reset. Whilst resets can be violent and uncomfortable – particularly for long-term holders – they create dispersion. And dispersion creates opportunity.
The more interesting question now is not what broke, but what is still working beneath the surface and where investors should be leaning as the dust settles. Once again, we turned to four healthcare specialists for answers:
- Anna Milne (Wilson Asset Management)
- Anja Samardzic (AllianceBernstein)
- Hashan De Silva (KP Rx)
- Marc Whittaker (IML)
Their responses reveal a sector that is far from uniform. Some areas are quietly improving, others remain under pressure, and capital is being deployed far more selectively than in years past.
What is Still Working Beneath the Surface?
If there is one point of alignment across all four investors, it is that demand has not disappeared. The divergence lies in where that demand is translating into earnings, and which business models are proving resilient.
Marc Whittaker of IML starts with the most straightforward observation.
“Demand is resilient. Whether we are talking radiology, pathology or aged care, there is demand.”
He points to structural tailwinds that remain firmly intact, particularly in areas like diagnostic imaging and aged care, where demographics and preventative medicine are supporting both volume growth and, increasingly, margin recovery.
Anna Milne of Wilson Asset Management takes a more selective view, focusing less on broad subsectors and more on execution.
“In a difficult tape for the sector, improving fundamentals will be rewarded.”
She highlights Ramsay Healthcare (ASX: RHC) as a turnaround story where operational discipline is starting to translate into margin expansion, alongside Telix Pharmaceuticals (ASX: TLX), where clinical progress and strong diagnostics revenue have driven a recovery. The takeout is that the market is still willing to pay, but only when the evidence is tangible.
Anja Samardzic of AllianceBernstein sees resilience in more established, scaled operators.
“More commoditised healthcare services businesses, such as pathology, may be better placed to manage pricing and funding pressure.”
Her emphasis is on companies with the ability to absorb regulatory and funding shocks, pointing to scale advantages and recurring demand as key differentiators. She also highlights sleep health as an area of ongoing growth, supported by increased awareness and expanding diagnosis pathways.
Hashan De Silva of KP Rx looks through a different lens again, focusing on capital flows and strategic activity rather than listed market performance.
“Companies able to de-risk with high-quality clinical data still attract capital in public and private markets.”
He notes that global M&A activity remains strong, with large pharmaceutical players continuing to acquire innovation to offset patent cliffs. In his view, the bid for quality assets has not disappeared. It has simply become more discriminating.
Where They Agree and Differ
Where they agree: demand remains intact and quality still attracts capital.
Where they differ: whether resilience is best found in operational turnarounds, scaled incumbents, or innovation-led businesses with strong clinical validation.
Where Would You Be Putting Fresh Capital Today?
If the first question is about resilience, the second is about conviction. Here, the divergence becomes more pronounced, reflecting very different interpretations of risk and opportunity.
Milne is focused on businesses where fundamentals are improving but the market has yet to respond.
“Without chasing turnarounds where green shoots remain absent, we would be deploying into… Fisher and Paykel Healthcare and Medibank.”
Her preference is for a balance between growth and defensiveness.
Fisher and Paykel (ASX: FPH) offers double-digit earnings growth driven by structural changes in clinical practice, while Medibank (ASX: MPL) provides steady earnings, yield, and an underappreciated pricing tailwind.
“Tariff noise aside, Fisher and Paykel has had an outstanding year fundamentally. A recent earnings upgrade demonstrated broad underlying strength driven by changing clinical practice rather than a one-off flu season benefit” says Milne.
“Medibank offers a different but complementary proposition on a 3-5 year view. Mid-single-digit revenue and earnings growth combined with a 4% dividend yield provides a robust total return”.
Whittaker stays firmly in the small-cap camp, where he sees valuation support and improving earnings dynamics.
“The two names I like most… are Integral Diagnostics (ASX: IDX) and Australian Clinical Labs (ASX: ACL).”
His thesis is that margin pressure is beginning to ease, setting the stage for earnings recovery. Both names, in his view, are trading well below intrinsic value, with catalysts tied to operational improvement rather than macro relief.
“The medium-term outlook for both is strong. The barriers to margin expansion are starting to dissipate and the story should be more about earnings growth. Both are very cheap”, says Whittaker.
Samardzic leans back towards large-cap quality, particularly where the market may be over-discounting risks. The first stock she likes is ResMed, saying it stands out on a three-to-five-year view.
“The stock is trading at a steep discount to history, while the earnings outlook appears more resilient than the market is implying. The market seems to be over-discounting the risks from GLP-1 drugs and Philips’ re-entry, both of which are likely to be longer dated and less impactful than feared”, says Samardzic.
She also points to CSL (ASX: CSL), where near-term uncertainty has created an opportunity against a still-resilient long-term earnings base. Her approach reflects a belief that quality has been repriced, but not impaired.
“The core earnings base should be resilient, as essential medicines are less likely to be exposed to volume curtailment. Longer term, the market outlook for plasma is improving, with market growth continuing to track at high single digits and Grifols clearly flagging a stabilisation in competitive activity”.
De Silva, however, takes the most contrarian stance of the group by stepping away from listed markets altogether.
“The honest answer: in this environment, we tilt fresh capital towards private.”
For him, the disconnect between intrinsic value and public market pricing is too wide, and the risk-reward is more attractive in partially de-risked private assets, particularly in biotech and medtech with strong clinical data and clear regulatory pathways.
“We are focused on partially de-risked Series A rounds in biotech and medtech, typically post first-in-human data in biotech, and nearing regulatory approval for medtech. Those assets combine reasonable entry valuations, manageable binary risk, and real room for investor influence on long-term trajectory”, says De Silva.
Where They Agree and Differ Again
Where they agree: selectivity is critical and valuation now matters.
Where they differ: whether the best opportunities sit in large caps, small caps, turnaround stories, or outside public markets entirely.
A More Selective Opportunity Set
Taken together, the responses reinforce a clear shift in how healthcare is being approached. The easy money phase is over. Investors are no longer paying for the promise of growth alone. They are paying for delivery, visibility, and discipline.
That does not mean the opportunity has disappeared, but it has narrowed. Some will find it in recovering margins across small-cap service providers. Others will lean into proven compounders trading below historical valuations. And some will look beyond public markets altogether, where the link between clinical progress and valuation is more direct.
What unites these approaches is a common thread. Healthcare is still investable, but it is no longer forgiving.
