Healthcare Stocks Beyond The Covid Boom

at Bloomberg dot com slash podcast. Taylor, I've been saying, you know, you know, during this pandemic, thank goodness for the smart and hard working people in the biotechnology industry and the pharmaceutical industry that delivered these vaccines so quickly to the world. I mean, boy, they really did their job. And then of course the global supply train trying trying to get those vaccinations out across the globe. The one of the questions is, Okay, how about the biotech and

farming industry post pandemic. How do we think about that? Well, Nina Decca, she joins us. She's the senior research channels for Robo Global. Ninia, thanks so much for joining us here. Again, Boy, the biotech and the farming industry they get a lot of heat from some people. Generally spe you can hide drug prices, things like that. But boy, they really delivered during the pandemic. As an investor, how do you think about that space in a post pandemic world. Hi, Yeah,

and thanks for having me on the show today. Um you I mean you bring up some great points with Maderna. The fact that they were able to so quickly bring a therapy through UM the clinical trial process and into human beings within a year is really unprecedented. And one thing I will say upfront is that when you look at the investment opportunities, uh, it's not what Maderna did last year that makes them a strong investment. It's what they've been doing for the last decade. They built a

platform ready to go. They accumulated massive amounts of data through their technology and AI capabilities over the last decade that really enabled them to put together this therapy so quickly. What they did with the COVID vaccine is of that their technology platform works. And by by building up front this this platform, they're really creating UM something that can be used at scale to make many other therapeutics. So

several really cool things have happened. One, they proved mRNA can work in human beings and it's very safe and effective and now that the world accepts m RNA is a viable course of treatment, there are many other therapies at least fixteen other drugs that Maderna alone has in the pipeline in clinical trials as we speak. But they've been working on for a while. So now that we've got one m RNA through, it's only a matter of time before a lot of the other ones come, and

Maderna very well positioned for that trend. I want to shift here is a little bit here and think about virtual doctor visits in the post pandemic world. Am I used to seeing my doctor over zoom? Or do I want a physical checkout? I mean, the really up to the consumer. I think we're seeing more and more that the millennials and younger are open to continuing to stay at the office or or stay at home wherever they are, and just have that doctor visit online or on the

phone wherever possible. Um You're still going to have some meeds where you're going to need to go in person, but by and large, a lot of other um UH indications and specialties in the healthcare world have taken place virtually, and I think that that's here to stay and it's only going to grow, for example, or the pedic um physical therapy remote O b d Y and appointments can

even be remote. So Nina, is there any concern in the biotech or farming industry that you know, this big focus we've had over the last eighteen months on COVID has maybe taken resources away from some other areas that maybe now have been under invested or lagging a little bit. How how do investors think about that? It's it's not necessarily a concern. It's well, all right, if you think about healthcare in general, let's a concern. Think about the number of people who didn't go in for a cancer

screen like colonoscopy last year because of the pandemic. So there's definitely a backlog of um undetected illnesses if you will, that are are sort of waiting to be discovered and then treated. So it's it is a medical concern for

society in the world. But in terms of investors, if you think about the number of purchases that didn't take place last year because resources were reallocated towards dealing with the pandemic, those budgets are back and now a well positioned to buy things like the robotics, if you will, or the the lab automation instrumentation UM that people were

waiting to buy before the pandemic. So those budgets are coming back and you're seeing that UM A lot of these companies and surgical robotics and lab automation UM are are are at numbers or above and we're going to see now in Q two earnings, we're waiting to see how utilization is climbing back up to pre pandemic levels and we should expect to see some of those non

COVID related capital purchases back. Interesting. Interesting, Nina Decca, thank you so much for joining us senior research analysts at robo Global getting a sense of kind of these healthcare stocks,

healthcare and biotech stocks investing. Again, the focus has been so much on this pandemic over the last eighteen months, and uh, it'll be interesting to see with these you know, quarters earnings, how these companies, to the extent that they were really involved with the COVID vaccines kind of pivot a little bit back to perhaps some of the other business lines as well. In terms of investment. I want to talk about SPACs right now. Tom Keane's favorite topic.

Hopefully he's listening in. Uh. You know, boy, you think about the spack special purpose acquisition companies, just really the rage in terms of new issuance late one, they seem to have faded a little bit. Some folks are questioning was that kind of a mark of the top of the mark? It is a little bit passe. Where are we in this back cycle? Fortunately, we have our next guest who can help us think about that. Mark us Go. He's a chief executive officer and chief investment officer from

Morgan Creek Capital Management. Uh. Mark, thanks so much for joining us. Give us a sense. Just let's step back feet. What is your view of the spack market right now? No, I appreciate you having me on. And look, I I think we are are really just getting warmed up in the sense of you know what SPACs are, And I think part of the problem is there's just a lot of confusion about SPACs. And basically SPACs are a process of going public. Uh. Spack is raised as a blank

check company. It has an I p O. And then it basically sits in cash and treasuries during a period until the sponsor finds a company to merge with. The company then merges with the spack and then becomes a post your combined entity. And yet people conflate the terms. They talk about you know, Virgin Galactic or DraftKings as a SPAT. No, those are companies. They were SPACs. I POE was a spack and and diamond Eque Acquisition Corps

was a SPAC. But once you merge with the company or an operating company going forward and you said somethingsing we first started about spects fading, well, they faded for about six weeks in the sense of you know, last year about fifty per cent of I p O s were spects um and if you look in terms of dollars, it was actually more than that because the average SPAC is a little bit bigger than the average I p O and there's some information content in there. The larger

than is the higher the quality. If you look at the first quarter, it was kind of crazy about seventy of all I p O s or spects. That was too fast, So the SEC kind of tapped the brakes, said they were going to threatened to change the accounting rules on warrants. Actually didn't do it, but that created a six week period where spacks felt about of new issuance for I p O s. Now they're right back to I think that's where we're gonna equilibrate at about fiftyah.

You know, let me ENTERGECT quickly because you mentioned the SEC, and I am curious how you respond to critics of SPACs who say, even as recently is today we're getting headlines about SEC investigations into potential conflicts of interest. Now they're looking at bank fee conflicts. How much of that is a headwind? I think, look, um, the I p O process has been i'll say broken for a long time.

It's a bad process. It hurts the average investor. It's basically a walled garden for the wealthy clients of the underwriters. And the fact that you know, one out of every two high growth innovative companies now is migrating to a SPAC mergers as opposed to an I p O that clearly potentially hurts the incumbents. And so those incumbents have very strong lobbying groups and perhaps they put some pressure

on the SEC too, try to tap the brakes. I think I think it's a lot of bluster, you know, the threat on changing the accounting rules on warrants was a distinction without a difference. It had no cash impact. And you know, incumbents always fear disruption, and they will always use fund fear, uncertainty and doubt to try to slow that disruption. But the end of the day, if

it's a better technology, uh. And Bill Gurley writes about this in his blog about why it is a better way of going public for a high growth innovative company. And I think the data shows that, so mark, you know what, when I grew up with spects, it was typically backed by a really well known and seasoned investor, John mull Own for example, someone like that who has a track record. But now SPACs are with you know,

a rod and celebrities and things like that. Is that not the mark of hey, we've gone too far with this thing. Such a great point, Such a great point. Now, if you go back to the early days of spacks, you know, the spack industry was like the n I T Tournament of fundraising. Nobody wants to go to the n I T Tournament. They all want to be the n C Double A. And so for twenty plus years it was a horrible place to try to raise money. And the returns showed. So up until two thousand and fifteen,

the returns and SPACs were terrible. About seventy per cent of SPACs raised that your had to liquid eight. They changed the rules and by we were down to know SPACs actually had to liquidate. They actually found real businesses to buy. Well, why is that? Well to your point, we started to see real operators and real businesses uh

be be involved in the spack market. Now. I did a presentation called What's so Special about Special Purpose Acquisition Companies late last year, and in it I had a picture. On the left hand side was Chama and Richard Branson, and on the right was a former athlete, former UM writer, author, and a former Goldman Sacks operating executive. And they said,

I'll back the guys on the left right exactly right. Hey, Mark, We're gonna have to We're gonna have to leave it there just because of the time, but we'll have you back. We'll talk more spacks. Mark, you chief executive officer of Morgan Creek Capital Management. Looking at Goldman Sachs JP Morgan, they both both reported some pretty solid results uh this quarter. Both stocks are down a little bit today about the one and a half to two and a half percent.

Let's get the skinny on those names, plus what to expect later on in the week as these big banks report earnings. As it was returned to our in house expert, Alison Williams, senior industry analysts covering all things in the banks for Bloomberg Intelligence, Bloomberg Intelligence, Bloomberg's in house investment research department. Over analysts are stocks, thirty industries, just all over the place. UM. Alison, thanks so much for joining

us here. What are your key takeaways from JP Morgan Goldman? To me, it seems like the bankers really came through. The bankers did really come through, and especially M and A, which is something that we expected to be strong. UM exceeded the consensus estimates, and we really think that there's legs to that revenue stream in the second half as well as UM the adjacent stream of sort of financing businesses and the like UM, but that's a smaller part

of the business, especially for someone like JP Morgan. And then I guess the negative is which is which is something that's been building for a while, is just sort of the disappointing net interest income trends and that's really tied to loan growth. I would say that for JP Morgan today, the the newer I guess negative is the fact that they up there guidance again. So see billion. We started off the year about sixty eight billion in January. That's been kicking up now. Part of that is due

to better business related volumes. So it takes money to to make money. We view that a little bit more favorably than than perhaps what we're seeing a city group. Um, but still, you know, everyone would like to say more revenue and less cost. You know what's interesting as we think about the bankers coming through, it was just Daniel Pinto, I believe within the last two weeks, seeing that the trading slump is over. Do you buy that or are

we thinking that a trading slump could be here to stay? Well? I think that I think, Um, the key point that Pinto is referring to, which we agree with, is the fact that, um, we're not necessarily going to go back to the lows. So thick revenue is down, you know over it was down like forty about the two banks, but still higher than it was in So we're off, you know, sort of the really robust quarter from a

year ago but still stronger. So, UM, what what makes us sort of agree with the fact that, you know, revenue might not go back to some of those lower levels that we saw in UM. You know, I guess, I guess there's there's a few things. But you know, one of the key things that that we're seeing right now is obviously the huge monetary support support for the moment, policy support for the moment. The longer term trend is

obviously GDP and capital markets development. And one of the things that we've seen at the banks and asset managers alike in recent quarters is the build out in China. That's something where UM Goldman has been really focusing and sort of that revenue stream coming on board helping the banks. Alison, and this is just a question based upon my I used to spend a long time working at these investment banks like you did. Did they say anything about coming

back to work? What's going on there? Because it's it's a big issue. There's definitely a focus on having client facing UM bankers and traders back in the office UM. And so that's something that we've been seeing UM over the last several weeks in terms of getting people back in the office, and you know, we hear a lot about certain banks using that as a differentiator UM in

terms of giving more flexibility. UM. Obviously, at the end of the day, you know that competition is tough in the in these businesses, especially if you're going to see normalizing revenue. And so I think it's you know, it's all fine until you know someone loses out on a deal UM. And so I think that UM to the extent that people are in the offices and are outseeing clients, UM, they want to be doing their their best for market share. And by the way, that's that's the other thing that

will be interesting as the full quarter shakes out. We did see equities trading better than expected by both competitors today UM Prime brokerage record balances we heard from both companies. Now hedge funds we expect as an industry have record balances. But we're also curious to see how things are shaking out in the wake of Credit Sweezes pullback. Um Arcos

was the story last quarter. UM Credit Sweeze has had sort of a more dramatic pullback in their business, whereas you know Morgan Stanley and us UBS, which also took hits Um you know, have also made changes, but a little bit more at the margin. Just about forty seconds to a minute here, Allison, what does this mean for any indication of what we can get for tomorrow as

we get further bank earnings reporting. So two things for tomorrow, well three, One is will not interest income guidance come down, especially for Bank America and while Spargo UM also City Group that they have sort of already taken their expectations down a bit um. The second UH is costs. As I said, we saw a higher business related costs for UM, JP, Morgan, City Groups. Full your guidance is going to be key to watch there. And then third, what's happening in equities?

Are these banks gaining some share in the prime business? All right, Allison as always great follow up there and we'll be chatting with you, I'm sure later in the week as these banks continue to roll out their numbers. Alison Williams, she's a senior banks analysts for Bloomberg Intelligence, joining us on the phone from the swamps of Jersey. I guess um so again Goldman sacks, JP Morgan's some

solid numbers here today. One of the issues that I found interesting from Allison's comments was the lack of loan or disappointing or lower than expected loan growth. And that's a theme that we've heard from some of the banks, and perhaps that's a reflection of there's so much cash in the marketplace, fiscal stimulus, easy monetary policy, that the overall demand for some of these loan products not quite where they'd like to see it. Well, I'm more coming up.

This is Bloomberg. Wolfgang Coaster joins us. He's a senior strategist for Kyrieba'll get us thoughts on the currency business. You know, during the pandemic, the currencies, the US dollar has been fairly steady, but not so much with some other currencies. Wolfgang, thanks so much for joining us here. I know you guys are out with a currency impact report. What are the big takeaways from this report as to

what currency volatility has cost companies? Yeah? Sure, well, thank you for having me first of all, um, So, this Currency Impact Report looks at twelve companies around the world's focused four hundred in Europe and eight hundred in North America.

And what we accumulate there is the fact, so the quantitative facts of who has been hurt or who has gained from currency impacts, and then we actually validate that against what the standards in the industry are, what is acceptable as a currency impact and what is not acceptable. And what we've seen this quarter is is that we've got just under ten billion dollars of losses that have been pointed out by the corporations. If you accumulate them

all around the world. This really is a significant increase even over last quarter, and we expect that to actually continue for a couple of reasons. One obviously seeing UH the economy not only in the United States but elsewhere heating up, and so you're gonna start seeing more flow

of supply chains of products going across. The other thing is with that, you're actually seeing a material increase in volatility um impacting corporations that do not manage currency risk properly and to the fact have a continue get hurt. And those are typically surprises that the UH investor community punishes. You know, it's been interesting coming into this year. The over welming call was for further dollar weakness, and yet since June you've actually seen some dollar strength as of late.

What does that mean for hedging as it relates to the dollar. Yeah, it's great point. And the one never knows where the dollar is going. Only one thing is sure. When there's no volatility, there will be volatility or whatever the direction is. Now, when you're thinking about this, and this is a little bit counterintuitive from most, is when the dollar goes up, that means that whatever revenues you

have abroad are actually worthless to you. And unless you've manage that risk by hedging it or managing in other ways, um, you will have negative impacts with a strong dollar. That's typically counterintuitive. Everybody thinks, well, dollars going is strong, therefore things are great, things are going well. Well for corporations, we don't manage that. That's actually typically not good news. And to put that in further uh, in kind of further context, the average SMP company has over fifty cent

of its revenues from outside the United States. So that means the average spy, if they do nothing, have fifty of their revenues at risk due to currency of volatility. All right, well, kind when I see a number like nine point five billion dollars lost due to a currency of alatility, is my takeaway is that corporations are not very good at hedging. Um, some are and some aren't, but the ones that have to disclose it are not,

is the fact of the matter. So the nine a half billion that disclosed it are not very good at managing their risks. So that takeaway is absolutely correct. Now, we at cariber Triped help companies actually look at that and manage that properly and really not manage it, but understand that exposure. And so we hope that less and

less corporations get impacted. But when you think about one quarter nine and a half billion dollars lost in stock, in the in the revenues, etcetera, that's those are you could equate that to jobs, right, that's a lot of jobs people can't really afford to because they're not managing their currency risk to the levels they can. And to put a benchmark at this because you're asking which direction

that goes to. The benchmark is if a company has more than one sent earnings per share impacted by foreign exchange, that's material and too much. There are lots of companies we saw PEPSI coming out earlier today, no impacts. There's lots of professional companies of all sizes. By the way, it isn't just the larger the company the better they are managing it. But you can have small companies like a Hubble, for example, that does a great job at

managing their currency risk and have no impacts. They are would referred to as currency agnostics. They manage their financial affairs in such a way that the currencies do not really impact the results. That's very doable and by the way, not very expensive today. Wolfgan, thanks so much for joining us.

A really appreciated Wolfgang Coaster Senior Strategies for Kiribe. They have their quarterly Cairibbe's Currency Impact Report that came out this morning and in the key takeaway corporations lost nine point five billion dollars due to increased currency of alatility in the past quarter. It seemed like a big number

to me. Taylor, Yeah, certainly does. I was taking a look at the We have a great chart on the terminal with the bond volatility index, the equity so the move the VIX, and then the currency the G seven and it's actually been bond ball that's been spiking lately. You've actually equity and effex vall falling. How much, of course, is that due to the federal reserve playing a pretty

heavy hand in these markets. Yeah. Absolutely, Looking at the vix right here at you know, sixteen level, you know, you know it had been pre pandemic in that level, but as we remember, it's spiked up to eighty during the beginning of that pandemic here, right back down to more normalized level. Thanks for listening to the Bloomberg Markets podcast. You can subscribe and listen to interviews at Apple Podcasts or whatever podcast platform you prefer. I'm Matt Miller. I'm

on Twitter at Matt Miller three. Put on false me. I'm on Twitter at pt Sweeney before the podcast. You can always catch us worldwide at Bloomberg Radio. M