YouSaid · the spoken record

David Blumenthal

lines on the record: 34
first: 2018-06-21
most recent: 2018-06-21
sittings or episodes: 1
sources: podcast

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“As a banker, you're more of an advisor. You can advise on deals and you stay with companies. But I think it allows you to get more deeply involved in companies and strategies. There's a longer term nature to being an investor that I really like. And from a global perspective, often we get kind of sucked into what our individual clients are doing as a banker, but being able to sit and think about the industry from a global perspective, especially now with all the changes going on just seems really interesting. Interesting time”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“So you're moving away, as we mentioned, from banking to a merchant bank, which means you'll be an investor in the space. How are you thinking about that change and what are you most excited about as you get a chance to pull in capital in the space?”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“Anyway, surprising. Look, I think why I've always loved healthcare and got into banking in the first place was to be in the healthcare industry is just how the industry really responds to outside change. It's remarkable when I started 20 years ago the idea of CVS and Etna would have just been so remote. But that's how the industry deals with these external forces. And so just how they think about adapting themselves has been absolutely fascinating. And we talked about the technology. It's really exciting to see how all these technologies are going to influence healthcare. This is like real stuff. So that's always been really fascinating to me.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“So, Joe, you've been a healthcare banker for a long time now, for a young person anyway. Thanks for not saying my age. What surprised you most about the industry's evolution since you started doing this?”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“Under any scenario, Healthcare is here to stay as a policy discussion if you kind of distill it down. It's going to be a government mandate or is it market forces? And there's variations around how you implement it.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“I don't think it was a surprise, which is probably why there was a little bit of a relief rally on Friday after his speech. He's been focused on pricing. He's been focused on getting the middlemen out, negotiating, all those points biogenerics. All those points kind of came out in a speech. It's going to be hard to get through. And the sense after the speech was the real change isn't going to come through executive action. It's got to go through Congress, which, as we've talked about, is not going to be the easiest thing to get done.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“So we're talking here right in the middle of the month of May. President Trump just revealed last week his administration's plan to lower drug pricing. Market seemed to think mostly pretty good news for the industry. What are we to make of it?”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“I think it's the uncertainty there's always in healthcare ways to have a real business that makes money. Healthcare is not going anywhere, but it's the uncertainty of how it all plays out that's really spooking the market. And so whether you're for Obamacare or against Obamacare, one thing that it has done is made it real policy, policy to be debated. There's different approaches to that. There's a Republican administration approach. There's midterms change. Maybe some of that. And that's part of it. If in the midterms we see a Democratic majority, then maybe some of the policies that we thought were in place change. Issue for healthcare companies is it's not an industry that changes on the dime. And so that uncertainty needs to be adjusted to, and that's probably what's causing the issue more than anything else.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“Come back to government policy. There's obviously a lot of political back and forth, and that's one of the issues that's sort of not plagued the sector, but there's been a lot of back and forth around what's going on with the Affordable Care Act, the Trump administration tried to repeal it unsuccessfully. Are investors and companies wary about the changes that might still be to come?”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“Like any industry anywhere, China is viewed as a huge opportunity for growth. And on the healthcare side, Western devices, medicine is valued at a premium in China. That area of the world continues to grow. It's been a measured growth relative to some of the competitive concerns there. But China as a whole, from a healthcare, they're investing. And I would say some of the bigger changes we've seen over the last couple of years is how far China is moving up the technology curve. One piece of evidence of that is when you look at China ASCO, which is the big oncology conference that happens here as well, it's the same size now as the US ASCO. There's now a whole group of innovative gene editing IO oncology companies that are Chinese that are kind of trading on its own valuation hurdles. So it'll be interesting how it all transforms, but definitely seeing the move up to the...”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“How should we think about China in this space? China's transformed a lot of other industries, certainly more demand in China for higher quality healthcare over time. How is it transforming the industry or has it transformed the industry yet?”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“Yeah, Nemetek is a little tougher. You think there should be a good thesis around consolidation for medtech? But when you dig into the industry, it's not a direct overlap. It's a very specialized sort of sale. The Salesforce spends a lot of time with physicians walking them through procedures, how to use the device, and that doesn't lend itself to a lot of scale or a lot of products. A limit to the bag, I guess, is the way to think about it. And so some of the consolidation that's happened has been in areas where there's less of that call point issue, like in hospital supply. It's easier to consolidate.”
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“There have been some big transactions in this space, but by and large, they're just a handful of them, and there's a pretty large universe of these smaller and medium-sized companies. Will it stay that way? Or do you see some changes?”
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“It depends on the type of company. On the small side, you're definitely seeing more innovation, real innovation. On the larger side, that value-based care is interesting because what it's done on the R&D side is instead of focusing on physician preference. What's the coolest, sexiest device that I can come up with that'll get the doctor to use it? It's really how can I help the system? How do I reduce readmissions? How can I follow the patient home? Putting intelligence on some of these devices, those sorts of things have been a little bit more of the forefront. Taken to the extreme, I think when you think about a company like Intuitive Surgical and the Surgical Robotics side of the world, that has taken off because of value-based medicine. You know, you can replicate procedures with an accuracy and an efficiency that surgeons just can't do. And so that business is just unvalue-based, even though it's tech and really innovative.”
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“We all anticipated investors, bankers, pharma companies even publicly said they were pretty focused on M&A post-tax reform. I think what's happened is there's a scarcity of assets out there that really move the needle. If you think about the market caps of global Big Pharma, anything less than $15 billion, it's a tuck-in for these guys really doesn't move the needle. And some of these acquisitions, larger ones haven't worked out for pharma. The other piece to this is the uncertainty around drug pricing. So when you think about where they want to deploy capital, and this is just more of an M&A issue, but there's so much uncertainty, it's really hard to predict with the fair degree of accuracy where drug pricing is going to end up on any particular product, especially pre-launch.”
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“Exactly. So if you look at market caps of biotech companies that are like north of that target acquisition kind of north of 500 to 20 billion, That's about a little over 300 billion right now. We bought every single company of that size. Post tax reform, and this is where it gets really interesting, the amount of cash in that industry that they can actually utilize and generate by 2020 will be $700 billion. And so there's real questions on how they're going to deploy that capital. They can't buy enough. The dividend can't be high enough. They can't repurchase enough of their shares. So it'll be interesting to see how the farm industry reacts to that much cash and how much investors will let them get away with holding it.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“No one's coming back on RD. And if you look at any of the proxy industries like the CRO space or the life sciences research tool space, all of those businesses are growing really well organically, which is a proxy of how pharma is spending its dollars. On the inorganic side, one interesting analysis we did on the banking side was to take a look at cash in pharma. And so it's interesting. Last year, if you look at global pharma and you looked at with a little bit of leverage what they could do from an acquisition standpoint, the top global pharma could do about 400 billion of M&A. Big number”
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“Obviously, this has been a big source, though, of growth for major pharma. They haven't been able to develop their own pipelines, at least some of them haven't been. Are they cutting back on R&D and just allocating more to smart acquisitions? Or are we going to see a little bit of both from the big companies”
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“I think it all goes back down to the access of capital in this market and that M&A dynamic that we talked about, it's hard to predict with certainty that these companies are going to get taken out. Like 50% of these companies or one buyer approaches one seller, no auction, and most of these companies sell to the first seller. So it's hard to predict if you're going to get bought or not. And with the access of capital in the market, most of these companies can fund through a standalone plan. And so that's what we're seeing. It wasn't the case 10 years ago from 2002 for almost a decade, there was almost no funding. And so companies had to really reorient themselves to partnerships and sales, I think with the cash it were just in a different market right now.”
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“Might be a little bit of name, but blockchain, a lot of buzz around blockchain in the financial industry. I actually think there's a lot of applications in healthcare. When you think about the need for security, the need to get disparate sources of information, blockchain, I think you could make patient data patient-centric that can follow the patient around, whether you move jobs, whether you switch insurance plans, whether you go to different pharmacies. There's an interoperability to that data that doesn't exist with current systems today. Do you think genetics is at the beginning? This is like at the tippy top of the beginning. This year, I think it was a couple months ago where Humana United and Quest and multi-plan basically these testing businesses that have a lot of data combined to see if there's something they could do with blockchain. We'll see how that all evolves, but it could be very promising solving some of the IT issues.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“Trying to identify how tumors change and what the best therapeutic is. It's just really at the early stages and it's going to be pretty impressive when we start to see the gene therapy drugs and the gene editing and all those waves of innovation around therapies to almost cure diseases that were deadly.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“This is a really exciting space. We're really at the tip of what we're going to figure out. In the industry in 2003, I think, when the genome was first sequenced, that cost $100 million, one human genome to sequence. Two years ago, the technology got to a place where you could sequence a human genome for a thousand bucks. A couple more years, it'll be $100. The insight into trying to figure out our genetics and the cause of disease and the therapies, we're just really at the beginning of that. If you even look basically at what's happened the last 10 years and you think about even breast cancer as an example, BRCA, that's probably the easiest genetic test that's been out there. It's one gene pretty good indicator of breast cancer, ovarian cancer for women. Huge change in terms of how women seek diagnosis and think about breast cancer. There's tests around chemosensitivity. Should you be taking this drug? Should you not be taking this drug? If tumors change, there's a whole industry around”
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“It's really behind. Like you said, the healthcare industry is really, for the past 50 plus years in this country, focus more on innovation, which has been wonderful. The issue now is we have an infrastructure in this country that from an information patient data standpoint, it's very diffuse and there's no connectivity and people are trying to figure out ways to make it all work together. But the power of information is amazing. If you could have a database that looked at treatment of patients and their outcomes and what you did and what's worked and what didn't, something as simple as that could make huge impacts the quality of care in rural areas could be comparable to what you're seeing in urban areas. That's pretty dramatic. The problem is that data is so diffuse it's hard to get.”
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“And this is my opinion, but if I were Amazon and thought about where my reach was with consumers, the data, the touch points with consumers, their ability to distribute products, I think the low-hanging fruit that could have the biggest impact is in chronic care management. Develop programs, they have the diapers.com, but maybe you can have a diabetes.com where you get your insulin, you get your testing kits, you get reminders. They can deliver that. That's a pretty low physician touch point. CNS is another area. If they really were getting ambitious thinking about obesity as something to tackle, they have whole foods, they have Alexa, they have telemedicine. That could be kind of another vertical pod where they can actually have influence without dealing with all the noise in the system.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“It's the fear of Amazon in healthcare, and it's moved stocks billions of dollars with any sort of rumor in the sector. And I think it'd be foolish to assume that they're not going to have an impact. Their reach into consumers is just too great. I do think it might be a little premature to assume that Amazon, and this is with no knowledge, but Amazon's going to try to get into a highly regulated reimbursement of environment dependent on innovation. There's a lot of life cycle change that doesn't seem like where Amazon's core competency is. But I do think like on the margin, where they touch consumers, the healthcare system is going to have to react to that. And I think it's going to manifest in different ways over time.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“Exactly. And, you know, you see that in other areas. When you think about who employs physicians, united in the last two years has been the largest acquirer of physicians in this country. And if you think about that, it used to be the large hospital chains who are recruiting all the docs. It's an insurance company. And part of the reason is owning and controlling the provider channel allows them to direct traffic. Networks are becoming more narrow, and so these insurers can actually direct traffic now within their own pod. They're also acquiring some of the low-cost areas, so a palliative care, home care, areas that are lower cost, but theoretically could provide as good of a service. And so controlling that network, that influence, if you think about that as the theme, that's where we're seeing a lot of the activity.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“There's just a lot of uncertainty right now. And the one thing that is certain is you need to consolidate influence. And when you look at all the M&A that's happened, that's largely been the thesis behind it. When you think about CVS and Etna, for Etna, maybe diabetes is a great example. Spheri diabetic, you will see your physician two times a year. You'll see your pharmacist 20 times a year. Diabetes is a chronic condition where noncompliance is incredibly expensive to the healthcare system. So, how can ETNA manage outcomes by leveraging that pharmacy relationship potentially and driving compliance?”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“So between the rise of consumerism and value-based care, you're seeing a little bit of a push towards vertical consolidation in the industry and industry that's still hugely fractured in a lot of ways. Talk us through what that might mean for the future of the industry.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“If you look at where patients are getting their care, high-cost hospital provider area, or more lower cost outsourcing, that volume in the high-cost centers is not recovered. The volume in the lower cost settings has recovered. So some of the stuff is working. And so we'll have to see how it all plays out. But it's going to be nibbles around the margin and the whole system. And everybody's focused on it. And even the product companies are focused on it”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“I think it's no longer a shift. I think it's here to stay. Couple of different reasons with this rising cost, and we just talked about how consumers are going to push back. The system has to do something. And it's going to play out in different ways. The government's focused on a lot of different ways to implement value-based care. There was a methodology that was more government-mandated with the Democratic administration, this administration is trying to use market forces to really get to the same place, which I think is providers are going to take a little bit more risk on outcomes. We're starting to see that on the margin. If you just look at where care is taking place. So after the recession,”
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“One of the other big things we're seeing, and this was part of the Affordable Care Act, which is this shift from volume-based pricing to value-based care, what does that mean and how are we seeing that play out in the industry?”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“Because of the big out-of-pocket cost. And so the system of rising health care costs for the past decade that's been pushed to consumers, and now consumers are going to push back. And the issue with noncompliance of healthcare, I mean, this has been proven time and time again, it's just more expensive to the healthcare system. You're just kicking the can down the road. And so this balance has to be achieved where consumers are taking their medications, getting treatment for their conditions, yet costs are managed. And so that voice of consumers is just going to be increasingly important, that influence.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“It's pretty simple when you cut through it. Consumers are going to have more influence in healthcare. And you kind of measure it in any stat that you can look at. 25% of consumers have high deductible insurance. If you look at that stat over history, I think the average deductible for patients right now is over 2,000. A decade ago, it was $1,000 deductible. That's more money coming out of consumers' pockets. The other interesting stat is 25% of consumers are delaying serious medical care. That was more like 12% in 2000.”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT
“So let's talk a little bit more about one of the biggest trends in healthcare, which is the increasing consumerism or whatever you want to call it's pending acquisition of CVS is a good example of this. Why are companies focused on reaching retail investors directly?”
2018-06-21 · Goldman Sachs Exchanges · Why Healthcare is (Finally) Chasing Consumers · IDENTIFIED FROM THE TRANSCRIPT