Aging Demographics Boosting Healthcare and Biotech Demand

The thesis that aging demographics will boost healthcare and biotech demand is strongly supported by structural data. The global population aged 65+ is projected to grow from 761 million in 2021 to 1.6 billion by 2050, with OECD countries already seeing their 65+ share double to 18% since 1960 and projected to reach 30% by 2060. In the U.S., the 65+ population surged 38.6% between 2010 and 2020 — the fastest growth since the 1880s — and will reach 80 million by 2040. This cohort accounts for 36% of all health spending despite being only 18% of the population, with per capita expenditures 8-12x higher than the 50-64 reference group. CMS projects national health spending will grow 5.8% annually through 2033, reaching $8.6 trillion (20.3% of GDP), led by a 7.8% annual increase in Medicare spending as the last baby boomers enroll in 2029. Approximately 90% of older adults experience at least one chronic condition, creating sustained demand for pharmaceuticals, medical devices, and senior care services. From an equity perspective, the healthcare sector is emerging from a period of relative underperformance with some of the lowest relative P/E ratios in its history, creating a compelling entry point. The GLP-1/obesity drug market alone is projected to exceed $100 billion in annual sales by 2030, with Eli Lilly posting 54% year-over-year revenue growth in Q3 2025 and a projected 17% revenue CAGR through 2029. Biotech M&A has surged, with $228B+ in announced deals in 2025-2026 and $1.3 trillion in pharma acquisition firepower — driven urgently by a patent cliff that will see 9 key drugs lose protection in 2026 alone, with affected product sales expected to decline from $33.6 billion to $14.0 billion by 2029. The XBI (small/mid-cap biotech ETF) rallied 55% from June 2025 lows, and Goldman Sachs predicts record-breaking pharma M&A in 2026. Johnson & Johnson reported Q3 2025 revenue of $24.0 billion (up 6.8% YoY), while AbbVie's neuroscience division grew over 20% YoY. The credit and fixed income backdrop is favorable for the thesis. Major pharma companies maintain strong investment-grade credit profiles — Eli Lilly carries Aa3/A+ ratings with a conservative debt-to-EBITDA ratio of 0.6-1.0x and interest coverage exceeding 23:1. The sector has committed massive U.S. capital investments: AbbVie ($100B), Merck ($70B), Pfizer ($70B), J&J ($55B), and Lilly ($50B). Declining interest rates (Fed funds at 3.50-3.75% with 2-3 more cuts expected in 2026) support both biotech valuations (longer-duration assets benefit from lower discount rates) and M&A financing. However, key risks include regulatory headwinds from the Inflation Reduction Act's Medicare drug pricing reforms, potential Medicaid cuts of $911 billion over a decade under the OBBBA, and Medicare Part D cost projections surging 42% in 2025 and 35% in 2026 — which could create political pressure for cost containment. On balance, the demographic tailwind is structural and multi-decade, valuations are discounted, and the innovation pipeline (GLP-1s, ADCs, AI-powered drug discovery) is the strongest in years.