Since the onset of the COVID-19 pandemic, the healthcare industry has had to evolve at breakneck speed. Multiple vaccines—some created based on novel approaches and others with more traditional methods—received emergency FDA authorizations, while many providers moved services online, popularizing telemedicine.

As worldwide vaccination rates climb and people continue to straddle in-person transactions with doing more at home, healthcare innovation remains unrelenting, an evident theme from Morgan Stanley’s 19th annual Global Healthcare Conference held virtually in early September. More than 400 companies and 9,000 investors gathered to hear corporate outlooks and learn key insights about the future of the industry.

The newest generation of innovations include healthcare technology that improves the consumer experience for receiving and paying for care and artificial intelligence-based technology platforms to revolutionize drug discovery and development. “Companies are trying to build a better consumer experience and also evolve interactions between payers and providers,” says Cheri Mowrey, Co-Head of U.S. Healthcare Investment Banking at Morgan Stanley. Adds Christine Ha, a Managing Director in Investment Banking who focuses on biotech: “As AI-based companies and their platforms continue to mature and advance, they have the potential to truly transform the overall drug discovery and development process.”

Advances in the scientific fields of cell therapy (the transfer of live cells into patients), gene therapy (in which a healthy gene is inserted) and gene editing (in which a mutated gene is revised, removed or replaced) are accelerating the development of genomic medicines.

Recent clinical validation in gene editing is just one example of early data demonstrating effectiveness and safety in patients with genetic diseases, according to Ha. That’s contributing to rapid turnover for treatments. “Earlier generation therapies are getting leapfrogged with next-gen or new technologies before even reaching late-stage trials or commercialization,” she says.

Valerie Dixon, a Managing Director in Investment Banking, calls cell therapy and gene therapy the fastest-growing area of biopharma. As these therapies gain traction, they’re requiring outsourced pharmaceutical manufacturing, driving high demand for biologics-enabling tools and services, she says. “There’s a trend in the convergence of core life sciences tools with outsourced pharma,” according to Dixon, who covers life science tools and diagnostics. “These critical areas of the pharma value chain are key to new drug development.”

Biopharma companies are also scrambling to discover how mRNA technology can be used to expand their pipelines of drugs for diseases beyond COVID-19, which investors are watching closely, according to Ha. “As companies emerge with next-gen platforms across mRNA technology, gene editing, gene therapy and cell therapy, investors are continuing to show interest and deploy capital,” she says.

Adds Jessica Chutter, Chairman of Biotechnology Investment Banking: “Biopharma companies are also driving COVID solutions across the spectrum of vaccines, anti-virals and monoclonal antibodies—both prophylactic and therapeutic approaches will be demanded as we move from pandemic to endemic reality.”

In some ways, the healthcare industry is finally catching up to other sectors, such as technology, where leading companies have gained competitive advantage by improving customer experience. Tech-enabled healthcare grew significantly during COVID-19 lockdowns, when patients required virtual appointments and online access to medical records. Now, big companies and venture-backed startups alike are racing to build more efficient and consistent experiences, especially within primary care—from which much of the industry’s revenue stems, according to Mowrey.

“There’s a proliferation of companies creating national primary-care delivery platforms,” Mowrey says. “Investors had the opportunity to play tech-enabled primary care last year, and now we have a handful—with more likely coming in the next few years—including virtual-only businesses.”

Companies and investors also view pharmacies as another area ripe for disruption. Most patients still go to brick and mortar locations to pick up their medications, while physicians’ staff members spend significant time on pharmacy-related administrative work. Though growth in online pharmacies would require a shift in adoption, some corporates are banking that added-convenience features, such as free delivery and drug-pricing transparency, could convince more consumers to switch.

Meanwhile, the value-based healthcare model that prioritizes consumers’ health outcomes and experience could more meaningfully shift the financial costs of healthcare from insurers and taxpayers to providers. Historically, providers get paid for how much care they provide, regardless of patient outcomes. Value-based care seeks to incentivize providers to improve patient outcomes, which may ultimately help reduce the costs of the care they provide.