Health Care Sector Update and Outlook


Teresa McRoberts (continued): I do think it's something that has to be watched and we have to try to figure out how to address it. But I keep coming back to the good news of this is while infections are trending up, hospitalizations thus far are manageable. Death rates seem to be lower than they were in the New York Metro area. A good thing. If the health care system starts getting overwhelmed, that's where we run into an issue and that's one of the things that's troubling the markets today, specifically there's a lot of concern that certain geographic areas may ban elective procedures again or not let them happen. And some of these hospitals just have been open for a few weeks or a little bit over a month. So that’s an area of concern. Again, I don't know, we'll have to see if, again, the infections curtail or not. And I don't know if you have any other thoughts on that, CJ. impacted by the flu season. And we do have some early reads right now because in the southern hemisphere it's the winter, and it doesn't appear at least initially that there is a huge surge in flu illness. And so I think we'll have to keep a close eye on what's going on with the southern hemisphere. It may give us a better feel as to what could happen in the fall and winter in the United States. If flu is kind of taking a backseat to COVID for whatever reason, that could dramatically change the burden on the health care system. Teresa McRoberts: And less than half the people in the U.S. get a flu shot, even though they're widely available. They may rethink that decision not to get a flu shot. And we may see more people get a flu shot, which while not 100% effective against the flu in any year, I don't think we have an idea yet of how effective this flu vaccine is. It's certainly better than not getting one. So that may also help by keeping it down. But I think we're just going to have to watch and wait and see how maybe somebody has. New York just reopened. We'll see if in a month New York has a spike in cases; that'll tell us a lot. Dennis Hearns: Yeah. Well, early on in the pandemic, there seemed to be a real issue with the supply chain of medical supplies. Has the U.S. medical supply industry sufficiently pivoted to address the need by now, or are we still highly dependent on foreign suppliers? CJ Sylvester: I do think one of the fears that needs to be dealt with is whether or not the COVID second wave, ongoing infections, call it what you want, will be

Teresa McRoberts: We are still highly dependent on foreign suppliers. It's going to be a long time before there can be, if ever, a total U.S. solution. One of the reasons we're dependent on foreign suppliers is those products are made much more cheaply outside the U.S. I'll also say that most of the personal protective equipment, et cetera, medical grade stuff always has a higher standard in terms of manufacturing and something that–a mask for somebody who works at a construction site, even though it is a mask, it's not medical grade and that extra medical grade quality costs more. So that's part of the reason we are dependent upon outside suppliers. With the bills in Congress to try to bring all this stuff back, that's not an easy thing to do. So yes, we still need the foreign suppliers and I think it would be some years before we could supply all our needs, especially if they're as expensive as they were in the first wave in the New York City area where people use multiple masks and gowns and needed them in a day. Dennis Hearns: On our last call, you talked quite a bit about innovation within the health care sector being a major theme. Two questions come to mind. First, is innovation outside of the coronavirus suffering as a result of the race to a vaccine? And second, have companies in general increased their R&D spending or cut it in some fashion? reallocated resources. They have pushed some other things aside. It's not like you had a bunch of bench scientists sitting around twiddling their thumbs. You obviously had to pull them off of something else to ask, to have them work on Coronavirus. Most people have been very happy to do this. It's a very sort of personal thing for a lot of people. So yeah, there's definitely been shifting. Presumably they, those people were reallocated to something that was deemed to be less important. And the other thing on the regulatory side, certainly the FDA has also shifted their resources. They've put out a huge amount of emergency use authorizations, all of which required their time and attention to get these products approved within days. Teresa McRoberts: So for people who have expertise or want to try to help with the Coronavirus and their expertise allows them to be helpful, there's just

Conference Call 3/8

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