Opportunities in the Health Care Sector


Because of what has gone on in the last few years with the fear of Washington and drug pricing, actually pharmaceutical and biotech stocks actually came into the year at a very attractively valued in terms of looking at their P/E multiples relative to history. They'd underperformed for several years because of the fear of what Washington might do. There have been an extremely large number of new products. Last year or the year before the FDA approved a record number of in products and actually record times, so you have a very accommodative regulatory side and now that the political fear is certainly dissipated, after coronavirus, I think these stocks would be doing even better than they are now. I really liked that just because of the innovation. The equipment and supplies box, these are your steady Eddie companies. Your people who make pacemakers and things for your heart and hips and knees. As the population ages, we use more of these and we'll come back to using them again. We're not going to get younger, so we're all going to need these still. I've been a little light on the services, the managed care in the hospitals because for the last few years has been actually on the pricey side relative to historical levels. And I'm not exactly sure what's going to happen. I do believe there'll be ultimately some changes in Washington and I'm not sure these stocks are fully priced for that, although they're getting close to that. Our Heath Sciences strategy is a broad-based, diversified strategy. We invest in all caps. We invest in everything from therapeutics to services. I try to go to where I think the best innovation is because at the end of the day, the way you make excess returns in health care is you innovate. Innovation is all up front. There's lots of failures. But once you have a successful product, you have the right of being the first inventor, you have patents and everyone always wants the best health care that they can have.

Speaker Question : I see Biogen is potentially in your portfolio and there's a lot of speculation about their Alzheimer's drug. I was just curious your opinion on that. Teresa McRoberts : Yes. Biogen is definitely a risk reward on their Alzheimer's products. It is due to be filed any old time now, and once we know whether or not the FDA has accepted the filing and off, that will give us the first clue as to how the FDA feels about it. Alzheimer’s is difficult. We have very little to treat it. The trials were not perfect, but there's certainly some signal there. And this is one of these where you look at an FDA who's tried to be very accommodative, who's tried to go where the science takes you and certainly as a risk reward, there's much more reward for it being accepted and approved than there is downside. So as a risk reward, I think it's positive, but I fully understand that there is an extremely large bar around the stock in terms of where it could go both on the upside and the downside. As we get more data, I may change my view. Often in health care you have to go on a little bit of data and then as time comes along you get more and more data to either affirm your thesis or tell you that you were wrong. And when I'm wrong, I'm wrong and I'll deal with it. And if it affirms my thesis, it affirms my thesis. And this is what health care is, and so the way I try to deal with these kinds of things is I try to manage risk potential. I have a position that if I own something like this, I understand how much money I can move and I think very carefully about that. But I also think about what the risk award is in which ways skewed. And so, right now, Biogen is still skewed positively on a score wide basis.

Speaker Question : How much are you looking at as far as investments in companies who are trying to do the cure for this COVID virus?

Dennis Hearns : Great. Let’s open up the line to questions.

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