YouSaid · the spoken record

Andy Acker

lines on the record: 49
first: 2022-10-06
most recent: 2022-10-06
sittings or episodes: 1
sources: podcast

Every line below is reproduced as it was said and linked to the record it came from. Nothing here is summarised or generated. Directory · Search · Corrections

“Well, I'd have to say, you know, don't sweat the small stuff, and it's something I still work on, but that 80-20 rule, I think, applies for so many things in life. I always struggle with it because I'm very detail-oriented, but when you can apply it, it's incredibly helpful to save a lot of time.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, again, I would say my father always talked about the world is full of brilliant failures. And he said, you really have to put an effort behind it and you have to do your best and everything. And that's really stuck with me.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, I think sometimes the best ideas are the ones that seem the most painful at the time. And often, for example, in drug development, it's not a straight line to success. You often have setbacks along the way. What we find is when a company has, for example, a failed phase two study, the stock can get absolutely crushed and the market sometimes treats that company as if the product were dead. And not only that product, but the entire pipeline was worthless. And just one good example recently Sereptotherapeutics, the company developing a gene therapy for muscular dystrophy, that gene therapy had a failed phase two study in January of 2021. The stock was down 50% in a day. If you can come back and then ultimately be successful, those are often the best investments. So it's really buying when a company is”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd say the first one was my father who actually introduced me to investing at the tender age of eight. He was a physician, but also was an investor on the side. And so he got me into biotech investing way back in 1980. And so he had a big impact on me. And then the second one would be Tom Malley, who brought me to Janice Henderson back in 99 and taught me how to be an analyst and a portfolio manager in the healthcare sector.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“I'd have to say when management teams overpromise and under deliver. And also I guess when management teams lie to you, that's incredibly frustrating.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Of their revenue. And so in order to replace that, they're going to need to do business development to add new innovative products. And at the same time, you have the market that has traded down and lost 70% of its value. You have these companies that by the end of 2022 are estimated to have 500 billion in cash on their balance sheets. And even just Pfizer alone has said that they need to make acquisitions to acquire $25 billion of revenue by the end of 2030. So one of the things we were looking for is a pickup an M&A activity, and we actually have seen that just in the last few months, we've had multiple multi-billion dollar deals.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we put out a newsletter recently that we called Green Shoots for our biotech strategy. And we have seen signs that the market for biotech stocks may have bottomed in June. And what did we look for? So one is good clinical data being rewarded by the market. And we've seen that. So we've had companies reporting positive data and the stocks going up. And then importantly, they've been able to finance on that. Some of them have been raising hundreds of millions of dollars overnight. And then in many cases, the stocks would go up after they raised money. So that is a very healthy sign of innovation being rewarded. The second factor that we thought would pick up is M&A activity. And why do we say that? Because if you think about the top 20 major biopharmaceutical companies, many of them are facing substantial patent expirations later this decade. In some cases, they're going to be losing, you know, up to half.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“For a life saving medicine, and you know, that should never happen. So we think was a positive aspect. Another aspect is it would limit medicinal for Medicare patients to no more than inflation. We think that was a pretty reasonable approach. And the third and most controversial element was essentially what was called drug price negotiation. And so the initial proposals we thought would have been very harmful for the industry. And we think that's actually a fair approach. Because what you want to avoid is the outliers, you know, the drugs that stay on the market for 20 years and that the government and commercial payers are paying billions of dollars a year for very old innovation. That should be avoided.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so one of the risks that I think investors generally worry about when you think about healthcare and especially therapeutics and medicine is the price of medicine. And that's become more and more of an issue, especially in the United States. Today, about a third of patients don't fill their prescriptions because of the copays that they can't afford. And so that's become a more and more sensitive political issue. And just recently, we had passage of what was called the IRA or the Inflation Reduction Act. And that was for the first time in more than 25 years of trying something was passed to try to address drug pricing. And it had several elements to it that we thought were actually quite positive. You know, one, for example, is it limits the amount of out-of-pocket spending for seniors to no more than $2,000 per year. In some cases, seniors were having to pay $5,000 to $10,000 out of pocket.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Percent type of weight loss that's on par with what you get with bariatric surgery, which we know can dramatically improve outcomes. And so we're starting to get these therapies now that have dramatically more weight loss. And this could represent a huge market opportunity if they can improve outcomes.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Is another huge unmet medical need affects 100 million people in the US, 500 million people worldwide, and the old therapies that we used to use were only moderately effective. They could give you maybe mid single digit weight loss, and some of them had toxicity, they could cause heart damage. So those never really did that well, but it remains a huge unmet need. And when you have obesity, it leads to an increased rate of virtually every other disease, from cardiovascular disease to cancer to kidney disease to liver disease. So huge problem. We're now getting new therapies that are called incridin-based therapies. These are gut hormones that actually signal satiety. You know, they basically say stop eating because you're full. The problem is those only happen when you eat and they only last for minutes. But now we're developing extended release versions of those hormones that in some cases are leading to 15 to 20.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“US whose livers are getting partially replaced with fat. And then that fat leads to inflammation, which eventually can lead to fibrosis and cirrhosis where you have a failed liver. And then that leads to either liver transplant or liver cancer or death. This is becoming the leading cause of liver failure in the United States. And companies have been trying for years and years to develop a therapy that could actually have an impact on this disease. And it's been very difficult. But just recently, we had a company that developed a therapy that after six months of a once weekly injection, they were able to resolve this NASH in 77% of patients. So this is a dramatic benefit. So we're starting to get therapies for the first time that actually can be effective for this disease, that can actually reverse fibrosis in the liver. So we think this could be a big market.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Problems. Sometimes it's missing, but we have new ways now of doing everything from replacing a defective or missing protein so you could think about factor eight for hemophilia or replacing dystrophin for patients with muscular dystrophy. We think this is incredibly exciting. And these therapies, they're here now. So we have a gene therapy for hemophilia approved in Europe in 2023. We could have the first gene therapy for muscular dystrophy. They're also working on gene therapies essentially for sickle cell disease. We have other diseases that affect tens of millions of people that we have no treatment for. Another one that we're excited about is called NASH, which actually stands for non-alcoholic stiatohepatitis, which is definitely a mouthful. But what that means is these patients have fatty liver disease. And this affects tens of millions of people in the”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“As I mentioned earlier, we're seeing incredible innovation in the sector. And so we're focused on these companies that can address high unmet medical needs. And one of those areas we're really excited about is new gene-based therapies. So historically, we would give a small molecule, maybe try to block a protein. But when you give a gene therapy, you have the potential with a single treatment to address an underlying genetic defect. You know, there are 7,000 genetic diseases and 95% of them have no available treatment today. So we're aware of these devastating genetic diseases that can have a dramatic impact on quality of life and survival. And yet there's nothing we can do about them. But now we know exactly which gene is defective. We know a gene gets translated into RNA, which then becomes a protein. Sometimes that protein is defective and the defective protein is caused.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Get visibility into the potential disruptors because they can have an impact on your large public companies. They might be a competitive product that could be superior to the current standard of care. So getting that visibility from an early stage is extremely helpful to the entire process and having a holistic view of the whole sector. We've made money more than two-thirds of the time in those private investments.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we've actually been investing in private companies as part of our healthcare strategy for more than 18 years now. And we think it gives us a big advantage because we consider ourselves crossover investors. A crossover investment is one where you're investing in a private company generally within a year of when you think it can go public. And so the advantage there is a lot of the innovation in the sector comes from private companies. And we want to get an early look into those companies because some of them may be very exciting investments on their own. And as an example, BioNTech, which is the company that made the first mRNA vaccine along with Pfizer, we invest in that company when it was still a private company back in 2017 when most people had never heard of mRNA. So we got a very early look into companies like that. And back then, the company had a 2 billion market cap in 2021. It got to 100 billion market cap. But on the other hand, you also want to.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“where we're trying to maximize the risk adjusted return potential at any time. The volatility in the market we try to use to our advantage to add to the ones that are weak that we still like and trim the ones that are really strong that we think are starting to approach fair value.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that's a good question. So I have a spreadsheet with every stock in our portfolio. And it has what is the current price and what do we think the company is worth? And as you know, these stocks are volatile and biotech stocks are the most volatile. And so they're constantly trading up and down for often insignificant reasons. And so what we look at is how much upside is there to our estimate of intrinsic value. And so if you have a stock that's pulling back and we think it's not for a valid reason that actually changes the value of the company, then we would be adding to that position. And similarly, sometimes your stocks become in favor and the market loves them.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Across those four subsectors. In biotech, it's probably closer to 50 or 60 stocks just within biotech where the higher risk names are going to be lower in the portfolio.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so we typically, if you think about the portfolio, we're much more concentrated at the top of the portfolio. So generally the top 10 stocks are going to be 30, 35% of the portfolio. We typically don't take enormous positions in one stock. We've never taken a 10% position in one company. You know, we want to diversify the risk throughout the portfolio. In the healthcare strategy, we're going to have a balance of the different subsectors within healthcare. So we have investments in pharmaceuticals, biotechnology, healthcare services, and medical technology. In the biotech strategy, we don't want to put all our eggs in one basket. So again, our biggest positions might be 5% or 6% of the portfolio. Then we end up with a fairly long tail of higher risk companies, but those might be in the healthcare strategy, maybe 30 basis point positions. So in healthcare, we probably have about 100 stocks in our portfolio.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Slowing environment and with rising interest rates. And so I think those companies, at least so far through 2022, have held up much better than much of the rest of the market. On the other side, for 23 years, we've been overweight to biotech in our healthcare strategy. And the reason is it says, you know, Willie Sutton said, why do you rob banks? Because that's where the money is. We invest in these small and mid-cap biotech companies because that's where the innovation is. Over 60% of the new medicines that reach the market today were developed by small and mid-cap biotech companies. And if you have a team that can help you identify more of the winners and avoid or mitigate the impact from the losers, you can generate outperformance over many years. That's really how we think about it.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“The market doesn't appreciate and where the risk is really balanced. So that will determine whether it goes in and then how big in the portfolio. If we think about the structure of our healthcare strategy, it's really a barbell approach. So at the top of the portfolio, and especially going into 2022, we were fairly cautious on the market. We could see that inflation was at 40-year highs. We could see that the Fed was behind the eight ball and really was going to need to increase interest rates rapidly. We thought that would be bad for high multiple stocks, longer duration, companies where their free cash flow is further out in the future. And so we got very defensive at the top of the portfolio. We own a lot of, for example, large cap pharmaceutical companies, large cap managed care companies or tools companies. These are companies that are generating tremendous free cash flow that we thought would be relatively insulated in an economic.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Maximum downside if we're wrong. And in the extreme case, we use a value at risk approach. And so we talked earlier about binary events. So we try to invest sometimes in these binary events where we think the probability of success is much higher than the market appreciates, but we always have to make sure we manage the downside in case we're wrong. We sometimes have had stocks that could be down 80% in a day. And so the way you manage that is through position size. So for our healthcare strategy, we're never willing to risk more than 1% of the portfolio or 100 basis points on any one event. For our biotech strategy, we give ourselves a little bit more room, but still we're not willing to risk more than 2% or 200 basis points on any one event. And so we really have to think about that in terms of positioning. And then the ones that get into the portfolio, again, are the ones that are trading at a big discount to intrinsic value, where we think that we've developed investment insight about the company's prospects.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“So our team, we're all located, by the way, in Denver, Colorado, and where we were founded more than 40 years ago. And our team is all together. We meet with each other formally at least once a week, but all of our offices are next to each other. We're in and out of each other's offices every day, multiple times a day. We're on chats constantly. If we think about the portfolio construction, it's really dependent on two key factors. The first is our conviction. So do we believe we have developed investment insight that the market doesn't appreciate? And that's really measured by the discount to intrinsic value. So is this a company that our view is so different than consensus that we have a much higher estimate of intrinsic value than the market? Or it could be the sustainability of the company's free cash flows. It could be a number of different factors that would make a trade at a discount. But then, of course, that's balanced by the risk. So what is the”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Comes to mind because it was fairly recent global blood therapeutics. This is a company developing novel therapies for the treatment of sickle cell disease and this is a huge unmet medical need, affects about 100,000 people in the US. And this company had developed a therapy called Oxbrita, which is on the market today. It's analyzing around 300 million in sales. And this drug actually impacts directly the underlying cause of the disease. It's actually hemoglobin that ends up polymerizing and then forming these sickles and it destroys your red blood cells. And so you end up getting anemia. So you get loss of red blood cells, but then you also get a ischemia because sometimes you get clots. And these patients end up in the hospital with pain crises. It's just a terrible disease. And so the company came out with this product. And I would say the product is good.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, it's a great question. Probably the biggest mistake that I've made in my careers, underappreciating how important a good management team is. Because if you have a great molecule and it meets a bad management team, you can destroy a tremendous amount of value just by making bad decisions. You don't dose that drug adequately. You put it in the wrong patients. You don't do the appropriate studies or you just take way too long and other companies pass you by. So a bad management team can destroy a lot of value. On the other hand, a great management team can add a lot of value because they may figure out early that this molecule isn't good enough and then they can actually go out and do something about it. They can develop a new therapy that's much better than the one that they had been developing before or they could go out and acquire one. They can do business development. So a great management team can actually add a tremendous value, right? I'll just give you one example.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“And is it getting close to market? Is it very early? What's the quality of the management team? And so we spent a lot of time interviewing the management team. We analyzed the financials. We build our own detailed financial models. And ultimately what we try to do is we're projecting out the future. So what are the earnings, what are the key revenue drivers for the company? And then how is that going to translate to earnings and ultimately free cash flow? And then we use a discounted cash flow approach to estimate the intrinsic value of that company. So then what we look to do is invest in the companies that trade at a substantial discount to that estimate of intrinsic value. So generally we're going to be looking for companies that trade at at least a 25% discount to what we think is the intrinsic value. And the earlier and riskier the company is, the more discount we're going to need to invest in that company.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Who are the companies that are developing therapies that can address those unmet needs? That's sort of part of it on the therapeutic side. And then on the other side, it's really, what are the companies that can make the healthcare system more efficient? Because as we get older, we all spend more on medicine. The elderly spend three times as much on healthcare and four times as much on medicine as the rest of the population. And so the aging demographics is going to drive higher healthcare spending, but there's always a demand for how can we do things more efficiently? How can we save money in the system? What are the new treatments or new devices or new diagnostics? that can actually improve the quality and length of human life, but do so in a cost effective way. So that's what we're always focused on. And then when we find those companies, when we find a product that we're excited about, we really dig in and try to understand the company. We try to understand, first of all, what stages is this product.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“In each of these fields, what are their go to therapies? And then what are the unmet medical needs? What are the areas where a new therapy could be beneficial? Whether it's a disease where there's nothing available or one where there are treatments available, but you could do much better for these patients. And so we spent a lot of time talking to these key opinion leaders. We've developed relationships with some of them over decades. And we're always canvassing essentially all of the therapeutic areas to figure out what are the new products coming that we think can change the practice of medicine. And we focus on these companies that are addressing high unmet medical needs with novel products because it's our view that regardless of the economic situation, the reimbursement situation around the world, if you truly address an unmet medical need, there is always demand for that. And there's always reimbursement for that. So we start with that. What is the unmet medical need?”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so I'm fortunate to lead a team of analysts that I think is really just incredible. You know, in total now, we have nine senior investment professionals at the firm with more than 125 years of experience. And when you think about the therapeutic side, I studied biochemistry as an undergrad at Harvard, and I'm the least educated member of our therapeutics team. So we have three PhDs and an MD on the team. And really the goal is to really dig in and understand the science. So we spent a lot of time, for example, reading clinical literature, attending medical conferences around the world. In the age of Zoom, that's gotten a little bit easier. We used to travel all around the world, but we're meeting with key opinion leaders in every therapeutic area, from cancer to heart disease to diabetes. And we want to understand, you know, first of all, what is the current standard of care? How do the doctors practice medicine?”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“We've never seen anything like that. On average, these stocks decline about 30%, and it happens in about three months. In this case, it was 65%, and it happened over a year and a half. And if you think about the development stage biotech industry, it lost 70% of its value over that 18-month period. Now, after that, you get to a point where actually 200 different companies were trading below the levels of cash on their balance sheet. That's highly unusual. We've never seen that before. Even going back to the global financial crisis and the bear market, the dot-com crash, we never saw that many companies trading below cash. And not only were they trading below cash, in some cases they were trading, you know, 50 to 80 percent below cash. So essentially the market was saying these companies are worth more dead than alive and the value of their R&D is negative. Now, we thought”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“As it was a few years ago. But when we made that progress, that created a lot of excitement about the biotech sector. And so you had a lot of investors coming into the sector who maybe didn't really fully appreciate the volatility and the risks of investing in the sector. And so first we got a big run-up. We got a lot of companies going public at valuations that were higher than they had been historically. And then because it's an industry where 90% of drugs fail, you started getting a lot of things that didn't work out as people had hoped. And so there was a lot of disappointment. And then you had a big rundown. And in fact, between February of 2021 and June of 2022, we had one of the worst bear markets in biotech sector in history. So on an absolute basis, these stocks declined 64% and relative to the healthcare sector, they traded down about 75%.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“And that's actually what creates the opportunity, I think, because these stocks are so volatile, but if you have a team that can really dig in and understand the science and the business and identify the products that have underappreciated clinical and commercial potential, then the pullbacks in the market actually give you the opportunity to buy into those companies at much lower valuations. And so let's address the recent one. So first we had the pandemic hit and we talked about the amazing progress that this industry created in addressing the pandemic. COVID-19 didn't even exist three years ago, but in 2021, the industry sold 75 billion dollars of products addressing COVID-19, either vaccines or treatments. So that's pretty remarkable. We went from zero to $75 billion. And then probably heading much lower because the pandemic isn't as much of a problem.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“So, if we think about, I would say, healthcare and especially biotech, biotech is one of the most volatile sectors out there. So back when the S&P select biotech index and the XBI, which is an ETF that tracks that broad biotech index, that was created back in 2006, so about 16 years ago. Since that time, before the recent bear market, and we'll get to that, but there were 11 effectively bear markets in that 16-year period where these stocks declined at least 20%. And obviously, we don't think the value of these companies are changing as dramatically as the stocks, but it is a sector that's highly prone to psychology, market psychology, and whether investors are optimistic or pessimistic. So it's a very volatile sector, but the value of the companies don't change merely as fast as the stocks often do.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“For the one out of ten drugs that actually makes it all the way to market, then you have the commercial risk of a new product launch. And what we've found, again, in more than 23 years of investing in healthcare is that the consensus estimates from Wall Street are wrong about 90% of the time. And those estimates can be either way too high, in which case that's a stock that you want to avoid or potentially short, or they can be way too low. So you might say, well, you have all these smart analysts on Wall Street analyzing these companies. How can they be wrong 90% of the time? And I think it's a couple factors, really. You know, one, it's actually very difficult to estimate what these new product launches are going to do.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“You're not getting sufficient quantities to the right place, so you can't dose it high enough because of side effects. So if any of those are off, then you have a trial that's highly likely to fail. So with our global life sciences strategy, we're primarily looking for long ideas. So we're trying to own the ones that we think are going to work. And there we just try to avoid the ones that we think are going to fail. We also can go both long and short and invest in public and private opportunities. And there we can actually try to short those stocks that we think are unlikely to work.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“And similarly, identify ones that are 70, 80, or more likely to fail. And if you can do that, you don't have to be perfect, but if you can do that better than the market, then you can generate consistent outperformance over many, many years. And so if you think about it, how do we try to identify the ones that are likely going to work? When you think about it, that trial in order for it to work, you have to get the right drug to the right place at the right time in sufficient quantities and in the correct patients and in a properly powered clinical trial. If all of those are lined up, then you actually have a very good chance of success. We would say 70, maybe 80% odds of success if everything is lined up the right way. On the other hand, if anything is off, so you could have the right molecule, but maybe you're testing the wrong patients, or maybe your clinical trial wasn't adequately powered, or maybe”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“So I'm going to apply 50% probability of success, and that's how I'm going to value this company before that key event. We call these events binary events because there's really only two outcomes. A drug either works and it proves to be safe and effective or it doesn't. And when you have a success, you can have a stock that could be up 50, 100% or more in one day. And then on the other hand, you can have one that fails and you could have a stock that could be down 50, 70, 80, 90% in a day. So it goes both ways. But our approach, so if you think about a pivotal study, our view is that not every drug is average. And in fact, you can do deep fundamental research and really focus on trying to understand the science and the business to figure out which ones are more likely to work. So we think we can identify some that might be 70, 80% likely to work.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“In healthy volunteers and a small number of patients trying to establish initial safety. In phase two, that would be a somewhat larger study, maybe hundreds of patients where you're actually trying to figure out the dose response and what would be the optimal dose. And then in phase three, which is the final stage of testing called the pivotal trial, you're generally testing it in larger number of patients, maybe hundreds or even thousands of patients trying to prove safety and efficacy. And if you think about the industry statistics for a phase three study, the average success rate of the industry is about 50%. So if you think about that, that means you're spending hundreds of millions of dollars to run this trial and the outcome you could say is a coin toss. And that is the way that the market views, you know, the way that we see is the market views every drug as average. They just say, I don't know if this drug's going to work or not.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, that's definitely a big part of what we do. Our framework for how we invest in the space is something we call the 90-90 rule. And what this refers to is the clinical and commercial risks of developing a new therapy. And so if you think about a product that begins human clinical testing, if you look at the industry over the last multiple decades, 90% of the products that begin human clinical testing never make it all the way to market. And so this is a very challenging industry. Costs about a billion dollars to develop a new therapy. And the main reason for that is because 90% of them will fail. So if you think about it as an investor, especially as a long investor, then you're really trying to find the needle in the haystack. The one out of 10 drugs that can make it all the way to approval. And these drugs go through the different clinical stages of testing. So phase one, you're generally testing it.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Familiar now with mRNA, with the vaccines, so we can actually put in mRNA that will make a protein, but then we can also knock down RNA in a way that will stop a harmful protein from harming a patient or potentially that could be curative for a disease.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Months. And that, we think, again, saved millions of lives around the world. But that's again just one example, you know, of all new modalities of treating human disease that are emerging today. And if you think about the development of, for example, cancer treatments, we've been treating cancer for more than 120 years. Initially using radiation therapy and surgery for about 70 years we've been using chemotherapy. But if you think about the way chemotherapy works, it's basically a chemical that destroys all dividing cells. And so that's good to try to kill cancer cells because they're rapidly dividing. But unfortunately, some of our healthy cells are also dividing. And so when you give chemotherapy systemically, it causes a lot of toxicity. What's happening now is we're getting much more targeted therapy. So we can, for example, target specific genetic defects. This is called precision oncology.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“For it to be really helpful. Since then, we have made dramatic progress to the point where now we can sequence a human genome literally in hours and we can do it for hundreds of dollars. And what that means is scientists now have a much better understanding of the genetic causes of disease and they can develop new therapies that directly target those underlying genetic defects. And so that has been a major advance. That's just really one example of the improvements in productivity that we've seen in the industry. If you think about just a few years ago when the COVID-19 pandemic hit, historically it took 10 years to develop a new vaccine and the fastest ever was four years. Had that been the case, we would have had millions of more people die because instead of 10 years, we were able to develop two highly effective vaccines in only 10 months.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, so when I think about investing, so I started as a biotech analyst, biotech and pharma. And then in 2003, I became the assistant manager on our healthcare fund, 2007 became the lead manager. And when I think about what we were investing in back in the late 90s, early 2000s, you think about the human genome project. That was the global collaboration to sequence the first human genome. That was completed back in 2000. And it created a lot of excitement. We can now sequence the human genome for the first time. The problem was that took 13 years to complete and cost $3 billion, just for one genome. So when you think about that, although it generated a lot of excitement, and when I first started biotech stocks, we're very in vogue and people were excited about them. But when you think about the practical applications, there really weren't that many back then. Just took too long, it was too expensive.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“So almost a quarter century in this space and would love to hear your perspective on maybe where we are today in terms of the opportunity, both about the underlying business and the market for these stocks. But why don't we start with the science and the business?”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Firms coming out of school really trying to exactly focus in on what I wanted to do. And really when I interviewed at what was Janice then, now Janice Henderson, I just fell in love with the place. They were investing the same way that I was. It was really a focus on long-term investments and identifying companies that were undervalued. And that was really exciting to me. I actually recommended a few stocks during my interviews that a few of them ended up buying. And they turned out pretty well. So they made me an offer and I joined the firm here in 99 and have been here now 23 years.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Yeah, sure. So I studied biochemistry as an undergrad at Harvard, and I actually studied biochemistry and economics. And after I withdrew my applications from medical school, I actually went to Morgan Stanley for the first three years of my career. This was back in 94 to 97. And so worked initially in capital markets and then in venture capital. I really got a chance to invest professionally for the first time, which was really exciting for me to do all the analysis and try to pick the stocks that are undervalued. After that, I went to business school with you. And in business school, you know what I found is I was coming home from class every day and I couldn't wait to get on my computer and just start researching stocks. And I was spending more and more of my time doing that, investing in my personal portfolio. And then when I was interviewing, I probably interviewed at 100 different”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“Sure. Well, I actually come from a long line of physicians, so my mother, my father, my grandmother, and grandfather are all physicians. So you could say that medicine runs in my blood. I got as far as applying to medical school before I realized that my true interests were really more on the investing side. I also felt that I could have a bigger impact as an investor than I could as a practicing physician. And then what's been really gratifying is that's turned out to be true. The other less well-known factor is that I really don't like the sight of blood, which makes me sometimes pass out. So I think I chose the right career path.”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source
“On today's show, we'll discuss another empty room, an opportunity ignored by most investors because they either don't want to or can't participate. My guest is Andy Acker, a portfolio manager at our anchor sponsor, Janice Henderson Investors, where he manages the firm's healthcare strategies. Janice Henderson is a global asset manager with $300 billion in assets under management, and Andy oversees the firm's global life sciences strategy and its biotechnology strategy. making it a proverbial empty room with only specialists and contrarians left standing. Scientific innovation over his time at Janice Henderson, translation of science into commercial success for businesses, and the 99”
2022-10-06 · Capital Allocators · Andy Acker - Empty Rooms: Investing in Biotech at Janus Henderson (Capital Allocators, EP.274) · IDENTIFIED FROM THE TRANSCRIPT · source