Innovative Health Care Portfolio, Series 2
Innovation is important to the success of any business, but may be most profound in the health care sector
with the potential to improve the quality of life and life expectancy of millions. Innovation in the health care
sector is accelerating. Advances include cutting edge gene and cell therapies, the use of artificial intelligence
(AI), machine learning tools, the application of database systems, and other innovations from outside the
industry. We believe transformative shifts within the health care sector are creating opportunities for
companies that embrace innovation in today’s new era of technological and medical advances.
As researchers and companies work to apply the latest advances in lifesaving medical drugs and devices, the
government has been working to streamline its drug and device approval process. According to Bloomberg,
in 2018, the FDA approved a record 59 new drugs, well above the 10-year average of 36. Additionally, novel
medical device approvals reached a record high of 106, surpassing the 99 approved in 2017. Statistics show
a need for more efficiency in the health care system to prioritize early diagnoses and prevention of diseases:
Aging population – In 2018, 9% of the worldwide population (684 million) were aged 65 and over and the
number is anticipated to increase to 16% (1.2 billion) by 2050, according to the Population Reference Bureau.
Prevalence of chronic disease – Cancer, heart disease and diabetes were among the leading causes of
death in 2017 in the U.S., according to the Center for Disease Control.
The health care industry is undergoing fundamental transformations as a shift toward an aging population,
prevalence of chronic diseases and advances in innovative technologies continue to increase health care
demand and expenditures. Global health care expenditures are projected to increase by 5.4% annually from
$7.7 trillion in 2017 to $10.1 trillion in 2022.
Access To Transforming Themes
The Innovative Health Care Portfolio provides access to health care companies that are
involved in areas that we believe are driving innovation:
ROBOTIC SURGERY | Surgical robots are relied upon to assist human surgeons,
aiding in procedures that require great precision. The global market for surgical robots
is expected to experience a compound annual growth rate of 10.4%, from $3.9 billion
in 2018 to $6.5 billion by 2023, according to Markets and Markets.
RARE DISEASE | Approximately 7,000 rare diseases have been identified and affect
350 million people worldwide, but the vast majority of them have no specific
treatment, according to the World Economic Forum.
GENE AND CELL THERAPY | The first gene therapy treatment was approved by
the FDA in August 2017. Since then, 15 other gene and cell therapies have been
approved and the FDA is projecting to receive more than 200 investigational new drug
applications annually by 2020.
ELECTRONIC HEALTH CARE | The electronic health records (EHR) market, valued
at $25.4 billion in 2018, is expected to grow at a compound average rate of 6.2% to
reach $36 billion in 2024, according to VynZ Research, May 2019. EHR solutions may
play a key role in providing value based personalized health care and seek to provide the
best outcome for patients by providing more effective clinical workflow, support for
clinical decision making, patient safety, and ensuring fewer medical errors.
ONCOLOGY | Global spending on therapeutic oncology drugs is anticipated to
exceed $200 billion by 2023 with a compound annual growth rate of 11-14% from
2019-2023, according to IQVIA Institute, May 2019.
ADVANCED LIFE SCIENCES | The combination of technology and health care, or life science, is
a broad and growing sector of the economy. According to a report from Cushman &
Wakefield, the life science industry is one of the fastest-growing sectors of the U.S.
economy, with many recession-proof characteristics.
This unit investment trust seeks above-average capital appreciation; however, there is
no assurance the objective will be met.
| Not FDIC Insured Not Bank Guaranteed May Lose Value
You should consider the portfolio's investment objectives, risks, and
charges and expenses carefully before investing. Contact your financial advisor
or call First Trust Portfolios L.P. at 1.800.621.1675 to request a prospectus,
which contains this and other information about the portfolio. Read it carefully
before you invest.
An investment in this unmanaged unit investment trust should be
made with an understanding of the risks involved with owning common stocks, such as an economic
recession and the possible deterioration of either the financial condition of the issuers of the equity
securities or the general condition of the stock market.
You should be aware that the portfolio is concentrated in stocks in the health care sector which
involves additional risks, including limited diversification. The companies engaged in the health
care sector are subject to fierce competition, high research and development costs, governmental
regulations, loss of patent protection, and changing consumer spending trends.
An investment in a portfolio containing equity securities of foreign issuers is subject to additional
risks, including currency fluctuations, political risks, withholding, the lack of adequate financial
information, and exchange control restrictions impacting foreign issuers.
An investment in a portfolio containing small-cap and mid-cap companies is subject to additional
risks, as the share prices of small-cap companies and certain mid-cap companies are often more
volatile than those of larger companies due to several factors, including limited trading volumes,
products, financial resources, management inexperience and less publicly available information.
The value of the securities held by the trust may be subject to steep declines or increased volatility
due to changes in performance or perception of the issuers.
Although this portfolio terminates in approximately 15 months, the strategy is long-term. Investors should consider their ability to pursue investing in successive portfolios, if available. There may be tax consequences unless units are purchased in an IRA or other qualified plan.
As the use of Internet technology has become more prevalent in the course of business, the trust has become more susceptible to potential operational risks through breaches in cybersecurity.