Innovative Health Care Portfolio, Series 5
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 the U.S. Food & Drug Administration (FDA), in 2019, the FDA approved 48 new drugs.
Together, over the past three years, drug approvals represent drug companies’ most productive
period in more than two decades.1In addition, in the first five months of 2020, the FDA approved
22 new drugs, none of which were COVID-19-related. Statistics show a need for more efficiency in
the health care system to prioritize early diagnoses and prevention of diseases:
Aging population – In 2019, there were 703 million persons aged 65 years or over globally.
This number is anticipated to double to 1.5 billion by 2050, according to the United Nations
Department of Economic and Social Affairs.
Prevalence of chronic disease – Cancer, heart disease and diabetes are the leading causes of
death and disability 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 13%, from 2019-2027, according to Transparency
Rare Disease | According to the World Economic Forum, approximately 7,000 rare diseases have
been identified and affect approximately 475 million people worldwide2, 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. In 2020, the FDA has stated that it has more than 900 active investigational new drug
applications on file and anticipates many more approvals in the coming years.
Electronic Health Care | The electronic health records (EHR) market is anticipated to grow from
$30 billion in 2020 to $40 billion by 2025, according to Research And Markets. 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.
Infectious Disease | Infectious diseases are caused by pathogenic microorganisms, such as
bacteria, viruses, parasites or fungi; the diseases can be spread, directly or indirectly, from
one person to another. Worldwide, the leading infectious disease is tuberculosis (TB) which is
estimated to kill someone approximately every 21 seconds – about 1.5 million in 2018 alone.3
Investment in infectious disease has the potential to prevent needless deaths, dramatically
reduce health care costs and improve the quality of life for millions.
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.
1 Chemical & Engineering News
2 World Economic Forum
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 professional
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.
Large capitalization companies may grow at a slower rate than the overall market.
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.
The recent outbreak of a respiratory disease designated as COVID-19 was first detected in China in December 2019. The global economic impact of the COVID-19 outbreak is impossible to predict but is expected to disrupt manufacturing, supply chains and sales in affected areas and negatively impact global economic growth prospects. The COVID-19 outbreak has also caused significant volatility and declines in global financial markets, which have caused losses for investors. The impact of the COVID-19 outbreak may be short term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession.
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.