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Hello and welcome to Pathfinders podcast series from RBC Capital Markets, where we uncover the key trends and catalysts shaping the fast moving world of biotech and pharma. I'm your host, Joe Coletti. In today's episode, we continue our live broadcast from RBC Global Healthcare Conference in New York. And we're going to share a conversation between RB, CS health care desk strategist Chris McCarthy and Ellie Coburn from Devon Capital.
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Now, over to Chris. Good morning. It's Chris McCarthy, the health care desk sector strategist at RBC Capital Markets, live at the RBC Global Health Care Conference in Midtown Manhattan. I'm with Ellie Coburn, founder of Devon Capital. Ellie, thank you so much for joining us. Please tell us about your background and anything you'd like to tell us about your fund.
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Thank you for having me. Pleasure to be here. My name is Ellie Coburn. I'm a health care dedicated investor, recently launched my own fund, started life as a as a doctor, and then transitioned over to Wall Street just in time for the global financial crisis in 2007 and recently launched. Diving Capital Partners were a fundamental long short fund focused on areas within health care where science and medicine matter for investment outcomes.
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So we primarily do therapeutics, but we do a little bit of diagnostics as well and look at some some medical devices. And, you know, I think we're unique in the sense that we we bring a lot of kind of sophistication from the fundamental long shore perspective or factor aware. But we're also able to speak that language of of science and medicine.
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And we do that all as a standalone product, which I believe is is relatively unique. What can you tell us about your investment process? What's unique about investing in health care and what do you get out of coming to sell side conferences like the RBC Global Health Care Conference? Sure. So, you know, one of the best things I think about investing in this space is just this incredible tailwind from all of the innovation and the secular growth.
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So there's always progress happening within the industry, makes it very exciting and a lot of opportunities, different opportunities present themselves to focus on from an investing perspective. You know, at a high level, I would say we just generally look for dynamic areas within the landscape. So we're really attracted to areas of the industry where things are changing, where there's innovation and in disruption.
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So where there could be a new product emerging, a new market forming, maybe a new indication for a drug, and also other types of changes that are relevant for companies as well. Maybe a policy change coming out of Washington, D.C., or perhaps some type of change that's driving a big impact on how drugs are priced in the marketplace.
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So we tend to look for those types of areas. And when we identify those those pockets of dynamism, we we just jump right in and we do a lot of deep fundamental work to figure out, you know, what we think is going on, what we think is going to happen, and how that's going to play out from a catalyst perspective, and then ultimately tie that back into a view on on valuation for an individual security and how to sell side conferences like ours, you know, fit into the process.
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Yeah. RBC is fortunate to have a fantastic relationship with you and your team. It's an excellent meeting. I talking to management teams, interacting with them is a huge part of our process and this is an excellent meeting and a great place to do that. So we love being here. Thank you for that. I spend a lot of time as a specialist focused on sentiment and positioning.
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How does that tie in to your investment process? It's a it's a huge issue to be aware of as you think about individual positions and structuring a portfolio. You know, I think that one of the best ways to deal with it is just with a portfolio approach. Within a portfolio, there's often room to have different types of investments.
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You know, you can have positions that are more in favor, more popular, and you can have positions that are less popular. And, you know, I think the diversification that a portfolio approach allows is one of the best ways to to deal with that. But I think, you know, at the end of the day, you know, one of the one of the cardinal rules is just to have ideas in your portfolio that you're excited about.
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And that's that's kind of our North Star. You know, we try to think about finding investment ideas that that are really compelling. And that's that's the most important thing. I'd like to pivot to some of the hot topics in health care, obesity, M&A, Ira, in the biotech IPO window. So what are your thoughts on obesity? Yeah, we continue to be excited about the obesity opportunity.
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It looks like it's going to be an enormous market. We expect it's going to play out over a long period of time, over years. You know, currently the leaders are supply constrained. So that's it's going to be an issue for a while, but it's definitely improving. And we're increasingly becoming really interested in the opportunity for GMP ones and related medicines beyond obesity.
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So there's a big lead stage program in Alzheimer's disease that should read out next year. We recently saw a really fascinating paper looking at the role of GOP ones in managing Parkinson's disease. Just just recently, Novo Nordisk started a new clinical trial looking at GOP ones and related medicines in alcohol related liver disease. And that's going to include some data on endpoints like alcohol consumption.
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So, you know, we we think there there could be large opportunities beyond obesity for these types of medicines that people aren't really thinking that much about yet. And how about M&A? M&A, you know, continues to be a really important dynamic in the space. Obviously, you know, structurally, the medicines in our industry have finite lives, and the larger companies always need innovation and they have fantastic balance sheets.
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And a lot of smaller companies out there are innovative. You know, with new medicines, new ways to treat diseases. So that's a it's a really powerful dynamic That's that's going to continue. You know, I would say recently things haven't been too hot from an M&A perspective, a couple of $5 billion ish deals this year. But always a very important topic in this space.
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And Ira. Yeah, Ira is another big issue. You know, we think it's a really big deal for the space. The fact that Medicare now has the ability to essentially control drug prices in certain circumstances. So that's a very big issue, especially for a lot of bigger companies that have more mature franchises that are exposed to that. You know, we're going to get more details this year on the first with pricing for the first wave of drugs, most likely over the summer.
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But even beyond that, we're going to get additional rounds of drugs entering into the IRA mechanism. So, you know, we expect this is going to be an important thing that's going to continue to play out for for a long period of time as well. Lastly, your thoughts on the IPO window for biotech. Yeah, it felt like the year started off a little bit more constructive.
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We had a, you know, DC amount of deals in January and February as the market macro backdrop was a little bit more cooperative. Things have, I think taken a little bit of a pause kind of since since February. But hopefully, you know, hopefully deal activity will will continue to pick back up. We're kind of coming out of a few years of relatively subdued IPO performance.
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And again, going back to just the secular growth tailwinds in this space from all the science and the innovation, there's great stories out there that continue to mature and develop and, you know, can make it to the public markets. So it's something that we pay we pay a lot of a lot of attention to. Ellie, thanks so much for your time.
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Congrats on Devon Capital Partners. It's been great chatting with you and I hope you enjoy the rest of the conference. Yeah, thanks for having me. And I think I would be remiss if I didn't mention that, you know, one of my earliest teachers in the business was our RBC's very own Doug Crofton. And, you know, I've known him for about 15 years now when I was a lowly cell site, junior sell side analysts I used to use to go hang out on his trading desk at another bank that we worked at together.
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And he was a fantastic teacher. So thank you, Chris. Thank you to your team, too. Pleasure to be here. Thanks for having me. That's all for our conversation today. Thanks again for listening to Pathfinders and BioPharma brought to you by RBC Capital Markets. Please remember to subscribe to get more great content and be alerted about future episodes. This episode was recorded on May 15, 2024.
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If you'd like to learn more or continue the conversation, please visit our BBC.com forward slash biopharma. See you next time. This content is based on information available at the time it was recorded and is for informational purposes only. It is not an offer to buy or sell or a solicitation, and no recommendations are implied. It is outside the scope of this communication to consider whether it is suitable for you and your financial objectives.