“Economic recovery is all about confidence.”
Alex Denner, Ph.D., is the Founder & Chief Investment Officer of Sarissa Capital Management, an activist firm investing in opportunities crated by the unique dynamics of the healthcare sector. Alex has a background in biomedical engineering.
“Vaccines are a hard business.” At the time of this interview, there were 160 companies working on vaccines, the most promising of which was a mRNA vaccine produced by Moderna. The production timeline is unprecedented and, while results are showing signs of early efficacy, there isn’t enough data to ward off concerns of side effects.
As it relates to the economy, the recovery will be less about the technical virus protection and more about confidence in not suffering from severe level of COVID-19 disease. One question is put to bed: COVID-19 is worse than the seasonal flu.
LISTEN AND SUBSCRIBE
SPEAKER
Alex Denner
Chief Investment Officer
Sarissa Capital Management
MODERATOR
Anthony Scaramucci
Founder & Managing Partner
SkyBridge
EPISODE TRANSCRIPT
John Darsie (00:07):
Hello everyone and welcome back to SALT Talks. My name is John Darsie. I'm the Managing Director of SALT, which is a global thought leadership forum at the intersection of finance, technology, and geopolitics. SALT Talks are a series of digital interviews we've been doing in lieu our in-person conference that do deep dives in the topics that we think are relevant to the investment management community and our global community.
John Darsie (00:31):
Today we're very excited to dive into a topic that's especially relevant given what's going on with the global pandemic with Alex Denner who is the ... that focuses, I'll read a little bit more about Alex's bio. He is a PhD, as well as the founder and CEO of Sarissa as I mentioned. He's been investing in healthcare companies for the past two decades. In 2013, he founded Sarissa to capitalize on the compelling opportunities for positive shareholder activism created by the unique dynamics of the healthcare sector.
John Darsie (01:05):
Dr. Denner has led Sarissa's involvement some of biopharma's most successful strategic transactions and activist campaigns. Prior to founding Sarissa, he was the healthcare portfolio manager for Icahn Capital and at Icahn he developed Icahn's activist strategy in the healthcare sector and was responsible for some of the firm's most successful investments. Prior to joining Icahn, he was a health care portfolio manager at Morgan Stanley, as well as at Viking Global. Today, Alex serves on the board of Biogen as a director, and he's the chairman of the Medicines Company. He received his bachelor's degree from MIT and his master's and PhD degrees from Yale University.
John Darsie (01:46):
If you have any questions for Dr. Denner on today's chat, please use the Q&A box at the bottom of your video screen, and I'm going to turn it over to host the interview to Anthony Scaramucci who is the Founder and Managing Partner of SkyBridge Capital, as well as the chairman of SALT. So Anthony, you go ahead and take it away.
Anthony Scaramucci (02:04):
I appreciate it John. Alex, it's great to be with you. You got a fascinating story. John's bio of you was great, but I want to hear more. Tell us more about your background, tell us how you got to where you are because I want people to understand the significance of your credentials before I start asking these questions.
Alex Denner (02:25):
Thank you Anthony. Thank you for having me speak with you. So yeah, my background basically I have a ... My academic background is in essentially biomedical engineering. And from there I went to Morgan Stanley, had always been interested in investing, and basically became also interested in activism. The idea that for many companies, they're not well managed. There are a lot of principal-agent issues and the companies are often run more for the management teams than the companies themselves. And it's a very interesting intersection there between healthcare and activism.
Alex Denner (03:07):
So having a background in biomedical engineering, I did a thesis on identifying people susceptible to certain types of ventricular arrhythmias, certain types of heart attacks. Basically we approached the situation with the philosophy that in healthcare companies are very ... because they have very high margins and very high barriers to entry, the opportunity for a company to sort of be under managed and still kind of get away with it, if you will, is higher.
Alex Denner (03:51):
I actually approached Carl Icahn with this kind of philosophy and sort of started doing investing in that. And I've been involved in a whole bunch of transactions and investments in the healthcare industry over time. And really what we do is we get in and we try to fix companies. So we've been involved in, as Jonathan said, Biogen, Medicines Company, ARIAD, ImClone, Genzyme, MedImmune. There's a whole bunch of companies that we've been involved with, and really try to make better and often through that process end up in an M&A situation.
Anthony Scaramucci (04:32):
But you know a lot about science and you know a lot about research into vaccines and you know a lot about this disease that the entire world is now struggling with. So I want to go right there, and tell us a little bit about your opinion of the various organizations that are working on a vaccine and working on therapies to help people that have COVID-19.
Alex Denner (04:59):
Yeah, sure. I think there are approximately 160 people out there working on vaccines, and countless, more than a thousand efforts that are on therapies. I think that at this point vaccines are a very hard business, and I think we should sort of take a step back in terms of thinking about it from a societal point of view. It's very hard to develop vaccines, and there are viruses for which we haven't, HIV being a classic example, that people have been working on for decades and we don't have vaccines that work. And there are also viruses, Dengue Fever being probably the most highest profile example where vaccines have been developed that can actually make an infection, a subsequent infection from the disease worse. So a person can be vaccinated, in certain circumstances get worse because they had been vaccinated when they get an infection of Dengue.
Alex Denner (06:09):
So the development is very complicated, and we have to sort of look at things in that light. I am optimistic that we're going to have a vaccine relatively soon. In fact, I think we'll have a number of them. There's a bunch of different technologies that people are working on. The ones that are sort of the highest profile and certainly in the US probably the mRNA vaccines where Moderna is kind of the leader there, Pfizer is also, has a bunch candidates, there's no ... That particular technology has never been successfully implemented in an approved vaccine.
Alex Denner (06:50):
On the other hand, the data that has come out so far has been very promising. And one of the most exciting parts about that approach is that it's relatively quick. You can design the molecule that could produce the immune response and test it quickly and also scale it quickly. So if one of these RNA or DNA vaccines works, it's pretty easy to make, relatively easy to make, hundreds of millions and billions of doses.
Alex Denner (07:25):
The sort of more traditional technologies of using vaccines where the virus has been, like the actual virus it's a killed version of the virus or a more sophisticated technology called live attenuated vaccine, we basically take the virus and don't kill it but damage it in a way that it can't cause a serious infection. Those types of vaccines generally have very good immune responses, like our bodies react well to them and create robust responses, but the timelines to develop them are much longer. So it's-
Anthony Scaramucci (08:07):
So Alex, what timeframe are we talking about though when you say relatively early? When do you think we'll see the vaccine?
Alex Denner (08:18):
A lot of people work on them, and I think that given the day that's come out heretofore, I think it is possible that we'll have multiple vaccines that are showing efficacy this year. Now, that doesn't mean that they're going ... I don't think there'll be a widely available vaccine this year. I think that it'll take some time to scale it up. Moderna has been highlighting that they think at the beginning of the year they may be able to scale to a large number of doses to treat a significant percentage of the US population, but they might be able to treat so high-risk people earlier than that.
Alex Denner (09:01):
There are many risks to that though, and I think that it's not ... I'm more hopeful than I was two or three months ago in terms of a vaccine being developed in the next few months. But I think it's important to note that we may not have a vaccine at all for the next couple of years. It is possible. We have to think about kind of how society will adapt if that is the case.
Anthony Scaramucci (09:27):
But you're optimistic. And just one more question on this because I think our audience is actually interested in this stuff. What can we learn from the prior pandemics? The Spanish flu pandemic is an example, no vaccine, yet the society did go on to progress and we created the roaring '20s shortly after that pandemic ended. So what can we learn from that?
Alex Denner (09:50):
Exactly. No, that's a very interesting area. Look, there have been many pandemics in history as you know Anthony. In the Bible, they mention the plagues and smallpox and cholera and the Black Death in Europe. And these things that have occurred many, many times. And there are many kind of historical lessons that we can learn. They generally, without mitigation kind of most viral pandemics last a few months and they have a few waves. So think of a few months long wave and there's usually maybe three waves. In this case we have ... This is the first time the whole world is really coordinated to do social distancing to slow down the vaccine. So it'll change the dynamics somewhat, but I think we can sort of look to history and say, "Well, this has happened many times before. We've got through that."
Alex Denner (10:53):
Almost all respiratory viruses have a seasonal component. So I think that's an important part here that although we're seeing like in Texas and Florida an increase in the number of cases, and that's very troubling. I think that's something that we should all be focused on, I do expect, I think the sort of the best guess is that there'll be a re-acceleration of viral infections in the fall that just most respiratory viruses behave that way. And that occurred with the Spanish influenza. That occurred with lots of influenza pandemics.
Alex Denner (11:33):
From a societal point of view, in the US, we're learning a lot about how to manage the disease medically. We just saw the recent news on dexamethasone being used and basically kind of in the later stages of the disease it helps, which is very important to know.
Anthony Scaramucci (11:49):
But let's explain how it helps. So what's happening is you're getting an overreaction from your immune system, right, and it's flooding your cells in a way that's causing a breakdown. So it's an immunosuppressant drug to knock that down. Is that a fair characterization?
Alex Denner (12:08):
That's exactly correct. This virus has an acute phase that typically kind of lasts say a week or two, and most people clear the virus. Some people don't, the ones who get more severe disease, and they tend to have an overreaction of their immune system. And steroids can be used to dampen that down also. Tocilizumab is also used in that regard.
Alex Denner (12:40):
It's important that we understand that steroids can actually reduce our body's ability to fight an infection. So you generally don't want to give them early in this stage of an infection. But when someone's in that state where their body is overreacting to the infection, the steroid is going to be very useful. And that's an example, is one of the things that we're learning kind of as the world gets experienced with this in terms of medical management, managing people who have severe disease. And I think even in the absence of a vaccine and in the absence of any new therapies, and I do think we'll have things beyond Remdesivir, in the absence of those, doctors will better understand how to manage patients and improve outcomes.
Alex Denner (13:32):
One of the things that's interesting is that the disease appears to be a disease of endothelial dysfunction. So it's a disease related to clotting of the blood. It's not just a lung infection. It's doing other things systemically. And I think that, the recognition of that is becoming sort of ... Most people would say that generally that's probably what the virus is, and that medical management of that, like reducing oxidative stress, that type of thing can help improve outcomes.
Anthony Scaramucci (14:09):
So I'm going to ask you three questions in rapid-fire succession and so you can give me a yes or no, your opinion of course. COVID-19, is it worse than the flu?
Alex Denner (14:22):
Yes.
Anthony Scaramucci (14:24):
The mortality rate is worse than the flu?
Alex Denner (14:26):
Yes.
Anthony Scaramucci (14:28):
At this stage in the pandemic, would you take your kids out to a restaurant?
Alex Denner (14:38):
I think probably a qualified yes to that, but I think you have to do that very carefully. I actually went to a restaurant today. It's the first time I've done that. It was a restaurant by the sea. We were 10 feet away from everyone else-
Anthony Scaramucci (14:56):
Alex, did you have a martini or something? Hopefully yeah. What did you drink at the restaurant? Don't tell me iced tea. I'm going to cut the internet.
Alex Denner (15:03):
Unfortunately that is what we had, is iced tea.
Anthony Scaramucci (15:03):
Yeah, iced tea, all right.
Alex Denner (15:07):
I think that during the daytime, when there's kind of a breeze, if you will, when people are not close together, I think it's very important who you're having, choosing to have a meal with, if you go to a restaurant, it's a very important thing if you're [crosstalk 00:15:25]
Anthony Scaramucci (15:26):
You were out. Let me just stipulate for everybody. You were outdoors. You were eating at fresco.
Alex Denner (15:31):
I was outdoors and 12 to ... It's 10 to 15 feet away from anyone else. Look, I think that was a calculated risk doing that. I don't think we should be doing that a lot. I do think that in ... Like I live in Connecticut. In this area, the virus was very bad a few months ago. It was horrible. It was really, really bad, and it's come down a lot. So I think it depends a lot of where you are geographically too. But during the summer I think it's important to kind of get out a little bit, not to ...
Anthony Scaramucci (16:10):
What about flying in an airplane Alex? Would you fly in an airplane?
Alex Denner (16:14):
No.
Anthony Scaramucci (16:15):
Okay. Tell us why not.
Alex Denner (16:17):
I think that the ... Look, obviously there's always a risk benefit analysis with that, and sometimes is you need to fly for some important reason I would do it I guess, but the whole process of commercial airline flight is very ... it has lots of opportunities for introducing infection. So the actual being on the plane, you're in an enclosed can, sitting next to people who you don't have any idea of sort of their viral status for an extended period of time. You're touching lots of things. You're interfacing with lots of people. You got to go through an airport to get to the plane. You got to go through security. You got to go to the gate. And when you get out of the plane, you got to go through an airport. You have to think about transportation to wherever you're going. Those types of things are, for me, I don't plan on going on a commercial flight for a vacation kind of purpose in the near term.
Anthony Scaramucci (17:21):
There are people that think if you've gotten the disease and you have the antibodies, you can still get the disease. So can you still get the disease after you've gotten the disease? And what's the difference between synthetic and natural antibodies?
Alex Denner (17:35):
So once the person has had the disease, it's very unlikely that they can get it again. I mean, almost, almost impossible. I don't want to say impossible because there can be ... It'll be very, very hard, for a period of time. I think the question that we don't really know is how long does immunity last for this particular infection.
Alex Denner (17:59):
When somebody gets the chickenpox, they get essentially lifelong immunity to that virus. In the case of corona viruses, the immunity that most people get lasts kind of months or a short number of years. So I think that, again, we don't know, but based on sort of an educated guess on similar viruses it's probably the case that a person can get reinfected in a year and a half but not two months later.
Alex Denner (18:33):
With respect to antibodies. Our bodies when a person gets infected, our immune system kind of kicks in and there's a whole bunch of things that happen. And one of the things that happen is that there's a part of the body that makes antibodies which are substances that go and find things that look like the virus and latch on to it and essentially kill it. Once we've had the infection and our body has created the antibodies, the virus usually goes away or almost all that goes away very quickly. You can take ...
Alex Denner (19:16):
So somebody that's had the virus and then recovered will have antibodies in their blood. So you can do so-called convalescent plasma where you take the blood out of a person who has recovered from the infection, isolate the antibodies, the plasma in the blood, and then inject that into a person who's suffering from an acute infection. That usually helps people. It's not 100% clear that that's efficacious, but it's very, very likely to be efficacious.
Alex Denner (19:50):
Then the next step is let's make those antibodies synthetically. So what I just described is taking an antibody from somebody that has an infection. It's obviously kind of hard to scale and it's a lot of complication with that. It'd be great if you can design the antibody and manufacture it at scale and give it to people so they would have ... It's kind of like a mini vaccine in a way.
Alex Denner (20:13):
That is a very exciting approach. I think the technical probably of that working is quite high. There's a bunch of companies working on that. I'm involved with a company that has a role in that. Probably the leader is Regeneron. They've been working really hard and have some very exciting ideas and they're pursuing that very quickly. That's not something that can be ...
Alex Denner (20:38):
Making the antibodies is a complex process. So it's not something that can be scaled to sort of giving them to everybody in the world. But when we have data that those, that synthetically created antibodies work, they probably would work prophylactically and therapeutically. So in other words, they would probably work to prevent an infection if you gave it to a person who is at high risk for an infection, as well as if you gave it to a person in the early stage of infection and it probably would make the disease go away more quickly.
Anthony Scaramucci (21:15):
In listening to you speak about this, and obviously we know a lot about you and your firm, you're cautiously, can I frame it this way, you're cautiously optimistic about a therapy and a vaccine, and let's call it over the next year, that those things will unfold.
Alex Denner (21:33):
Yes. Even more than ... Hopefully sooner than that even.
Anthony Scaramucci (21:38):
Okay. In your mind you've been an investor for your whole career. So what does that mean for the US economy? What does that mean for the stock market? And what does that mean for the industries and the sectors that you're involved?
Alex Denner (21:51):
Okay. In terms of the societal and the investing impacts, I mean I think, first of all, we have to think of all the different possibilities. So it is possible that we have no vaccine for five years. It's important for as an investor have that in the frame of possible outcomes.
Anthony Scaramucci (22:13):
If that happens Alex, I'm going to stick half of my SkyBridge employees in that beautiful office of yours, okay? We're going to be living rent-free in your house, okay?
Alex Denner (22:21):
There you go. [inaudible 00:22:24]
Anthony Scaramucci (22:24):
Keep going.
Alex Denner (22:29):
That said, I do think it's very likely we'll kind of have some therapies. Economic recovery is all about confidence. So I think it's less about the sort of the technical level of virus protection in the population and whether it's 69% or 73%, but it's people feeling confident that if they go out, they have a low chance of getting a serious disease from doing that. And that can come from a vaccine, that can come from sort of better treatment so that the disease much more rarely become serious.
Alex Denner (23:11):
I do think that that will occur sort of a relatively soon, certainly not this year but kind of probably the beginning of next year. And I think that that will allow us to get back to sort of a something quasi normal. There are industries like that are very ...restaurants and things will probably take longer to kind of get back to full normal, and there are industries that where work from home is working well that are unaffected now or relatively affected there.
Anthony Scaramucci (23:56):
You don't have to give specific stocks but just give us generically the sectors that you're the most bullish on. And if you want to give specific stocks or even are allowed to, I don't know what the regulations are around your firm, but where are you, what do you long, what do you like, what don't you like?
Alex Denner (24:15):
So invest in healthcare stocks. I think one of the most ... So one of the things that's going on here is that in healthcare appropriately everyone is focused on the coronavirus. The companies that are working on that are sort of at the highlight of everybody's thinking. In fact, when you look at the healthcare index performance, it's been largely driven by a few names that have benefited, that the stocks have gone up a lot because they offer promise to sort of have a vaccine or treatment for the coronavirus.
Alex Denner (25:00):
As a healthcare investor, I think that there are promising investments there and we're pursuing them, but I think the bigger opportunity is actually in the sort of non-coronavirus related healthcare therapeutic side. Those companies are being not ignored but they're getting less attention than they normally would. Cancer is still unfortunately just as serious of disease as it was six months ago. Heart disease is still unfortunately just as serious. There have been changes in the industry like the FDA has had to adapt very rapidly to the coronavirus and regulations that were well intentioned but were really kind of slowing the industry down have been bulldozed away.
Alex Denner (25:52):
Kind of one of the best examples of that is in the telehealth area where before, six months ago very few people talked to their physicians over the internet. It was done but it was a very small part of the healthcare ecosystem and the government didn't pay for it by and large and it was very difficult. That has changed completely now as everyone knows, and I think that that frankly is good for everyone, that society will be better off having that trend having accelerated.
Alex Denner (26:31):
There are many, many regulations in healthcare that have been disintermediated by this coronavirus, and basically that whether it's CMS or HHS or the FDA have issued emergency guidance, there's a technical matter is limited to the time during the coronavirus emergency, but I think would permanently changed how we do drug development and deliver healthcare-
Anthony Scaramucci (26:59):
But permanently changed but in your mind better, right? I mean, a little bit less [crosstalk 00:27:02]. We both know the thalidomide story from the '50s which really stunted the FDA. And for those, people that are so young that they don't know that story, they blocked that drug. It was a morning sickness drug. They blocked it in the US. They allowed it in Europe. The side effects of it was it caused limb deformities and so the FDA celebrated that, that they slowed it down, and that made it a lot harder to get drugs through as a result of things like thalidomide.
Anthony Scaramucci (27:31):
So you're saying they've opened this up a little bit. But we also know that they have more scientific data now than they did in the 1950s, and they're able to do broader testing. So that whole process makes those drugs safer. Would that be safe to say?
Alex Denner (27:48):
Yes. I think that ... Look, thalidomide is a great example to bring up. I mean, the FDA has a very important role to play in evaluating drugs, and they're going to demand and rightfully they're going to continue to demand safety data, especially in the tragedy of thalidomide where a drug, a morning sickness drug actually caused birth defects, right? That kind of thing will still be done and should be done. But allowing some ... Like using technology in clinical trials. Not all things have to be done in person. Just many of those sort of bureaucratic rules that have existed because there was no other way to do them when they were implemented have been swept away. And I think frankly it's going to accelerate drug development, it's going to accelerate the value that the healthcare system delivers.
Alex Denner (28:48):
We all know the healthcare system, I think the drug development system in the US is fantastic and works really. The healthcare delivery system doesn't. I don't think anyone thinks that that's kind of extremely well functioning. And I think we're going to come out of this with a better healthcare system. I think that many of the over-regulation and the Balkanization of the healthcare system, people have been forced to work together because the coronavirus, and it works better and we're going to end ... When we get past this, the healthcare delivery I think will be better for it.
Alex Denner (29:31):
I mean, the whole experience of going to a hospital will be easier for patients, will be better for the healthcare providers. Doctors will be better able to treat patients. I think it's really going to be ... There's a silver lining in all of this.
Anthony Scaramucci (29:46):
And I think that's an important segue Alex because in the crisis, a lot of opportunity gets born. In the 2008 crisis, we actually started the SALT conference as a response to that crisis. So I'm very optimistic as you are that things will change for the better. I want to turn it over to our viewers and listeners. John Darsie is going to ask you some questions that are coming in over the transom here, and we've got a ton of audience participation. So go ahead John.
John Darsie (30:18):
Yeah, the first question relates to your process as an activist in the healthcare space. When you're identifying potential targets for an activist campaign, how do you dive into that business and differentiate in terms of measuring why their performance suffered? How do you differentiate between a company that was mismanaged that actually has good drugs but was just fundamentally mismanaged and between companies that either have drugs that are flawed and aren't performing well because the quality of the drug?
Alex Denner (30:49):
Okay, so that's a good question. We do a lot of work on that. Basically it's just, it's gumshoe research. I think that we have a very ... We have a great team, MDs, PhDs, people that are really expert in healthcare. And we dig deep into the pipelines in the currently marketed products of each of the investments that we make.
Alex Denner (31:21):
What we look for, we basically, our process is basically, we look at companies and we sort of look at, we say, "Okay, we know the products, the pipeline, the technologies that they have," and then we ... Because we have a lot of experience in the space, we know the space very well, we can sort of put a cost structure around that. So we can sort of say, "Okay, if the company has three drugs in certain therapeutic areas, we know how much it will take to sell those drugs."
Alex Denner (31:50):
And to first order, we don't take account of what the company is, whether they have ... what their cost structure looks like. We just sort of build what it should be in our model, and we DCF that. And we look at that, that DCF compared to the market price. Was a huge difference like 2x, we sort of get interested, and then we say, "If there's a way that we can put a leverage on the company, can we push the company to change their strategy such that it's better run for investors, the owners, then we'll get involved." And we typically will take a position and typically seek to join the board and kind of often that involves a management change, although not always.
Alex Denner (32:36):
In doing that analysis, we really look for products because it's a long term strategy that we get involved in the company, we're investing, we plan to be investors for years that we look for things that are innovative, that truly add, that benefit patients, that ameliorate a disease in a real way. And those are the types of companies we get involved with. But less interested in a company that has a me-too thing, that's just sort of maybe slightly better than somebody else, because we need to have a very big difference between the value when the company's run properly and the current market price.
Alex Denner (33:28):
The other thing to note is that people ... In the sector we interface with a lot of investors and we get a lot of feedback. So a lot of institutional shareholders will call us and we may hear from five or six institutional shareholders over the course of whatever, some year or whatever, that they're unhappy with the way a particular company is being run. And that's usually not something that it's news to us, but it helps us understand the psychology, the shareholder base that they're ready to implement changes, they're ready to push the company to be run better.
John Darsie (34:12):
Thanks for that Alex. The next question is about the telehealth space. What's your general view on telehealth and do you have any favorite names in the space?
Alex Denner (34:24):
I like telehealth a lot as I mentioned earlier. I think that it's going to become a bigger part of healthcare. I don't have any particular favorite names. I think that one should think about telehealth as the specific part that, is the visible part where the patient interacts with the physician. But also there's a lot of things that can be done with even clinical trial work where you can do remote monitoring of patients, the types of things like we were talking earlier. The FDA's been very forward-thinking in many things, but it's been taking some time to get to kind of incorporate some of these technologies. And I think by necessity, if a company is developing a drug where they can't ... It's not easy to have a patient come in every month to the doctor. The solution maybe a tele solution. So I think it's very important for our healthcare now. It's going to become more important over time and it's going to make the system more efficient.
John Darsie (35:47):
Thank you for that Alex. The next question is you talked a little about a timeline for a vaccine. What would you put in terms of your degree of confidence in percentage terms of a vaccine coming out before the end of 2020?
Alex Denner (36:01):
First of all, let's define what this means. I think to have data that shows that one or more vaccines have some level of efficacy, let's say they reduce severity of the disease in a large fraction of patients or maybe they provide sterilizing immunity in 50% or 70% of patients. I would say that the probability of that occurring by the end of the year is more than 50%. I would have said less than ... I would have been a much lower number three months ago or two months ago, but I think we've seen some data that's been published that has been very exciting from a number of different groups.
Alex Denner (36:47):
Now, there's a different question though which is when is a vaccine going to be broadly available say to Americans or globally around the world? And I think that's something that's unlikely to occur for a broad availability of vaccines, unlikely to occur this calendar year. And if everything goes right, in the US we may have access to that, say, in the first quarter of next year. But that sort of requires everything kind of going right. So I would say there's, maybe to have a vaccine widely available, a 50% chance of it widely available probably would be by the first quarter of next year, at 50%. And I would say 75% by the end of next year.
John Darsie (37:42):
Thank you. In terms of geographically, do you focus on US-based companies or what do you view as the opportunity within healthcare in emerging markets like India and China?
Alex Denner (37:53):
We look at all companies around the world. We do everything in healthcare. That said, we sort of focus on therapeutics. And a lot of the innovation in therapeutics is happening in the US. So we tend to be sort of US focused. There's a lot of opportunity in the US for what we do. Healthcare companies, it's really hard to develop drugs, but when they do it, it's a very high barrier to entry, very high margin business generally, and it's easy for companies to sort of get lackadaisical with respect to capital allocations. So there's an opportunity for us to get involved. So if it's a US company, just most of the companies end up being US. But we look globally.
Alex Denner (38:41):
In China and India, look, I think one of the things that's coming from the coronavirus is India for instance has a fantastically sophisticated generic drug business. There's a bunch of companies that have brought a lot of innovation and brought pills, generic pills available at very low costs to a lot of the world.
Alex Denner (39:07):
But what I think a lot of people come to realize it's having to domestic capabilities, especially as a matter of national security for the US is very important. So I think that you're going to see grow, an increase in the amount of basic provider generic manufacturing, if you will, in the US, so-called API manufacturing, active pharmaceutical. I don't think that will come into the detriment of India and China, but it probably will reduce their growth rates compared to what was projected before the pandemic.
John Darsie (39:43):
Thank you. We have one final question, another one about your investment process as an activist in the healthcare space. A lot of times activism within healthcare is focused on going into mature companies and trying to identify ways to improve their financial performance. How do you look at activism in the therapeutic space for companies with pre-approval drugs or that are earlier on in the drug development process?
Alex Denner (40:09):
First of all, our type of activism is a little bit different than sort of the classical activism in that we look to fix the businesses. And that's a very hands-on thing where we get involved with the companies in terms of the way the operations are being run and sort of make capital allocation more efficient. We hopefully do allocate R&D better, that type of thing. And that can be done in the late stage and early stage the same way.
Alex Denner (40:52):
That said, we tend to be focused on later stage companies because we like companies where there's multiple drivers of cash flow. But there are many early stage companies that have frankly because the index, the market's been up a lot recently, there have been a lot of companies perceive their cost of capital to be essentially zero and they've been spending less judiciously than they should be. So that I think there's an opportunity for activism there. But that is not the sort of classic activism of the financial type thing which we tend not to do anyway.
John Darsie (41:37):
All right. Well, we want to thank Alex Denner for joining us today on SALT Talks. Anthony, I don't know if you have any additional final thoughts?
Anthony Scaramucci (41:44):
No, I mean, I think he wins Room Reader so far. I mean, I'm impressed with all the paneling behind you there Alex. God bless you. Wish you health and safety, and hopefully we'll get some real medical progress on this. But I think it was really terrific today Alex. You put it in historical context what we're all going through and how we're all going to come out of it and hopefully be just fine.
Anthony Scaramucci (42:11):
But in the meantime, I wish everybody great personal safety, health and happiness, and Alex, we'll hopefully see you soon. And I promise you, I'll be buying you martinis. You won't be drinking iced tea with me Alex, okay? That's my promise.
Alex Denner (42:23):
That sounds great Anthony. Thank you very much and thank you John and health and happiness to both you guys and stay safe and appreciate that you're there.