Current State of Activism in Healthcare

Adam Torres and Patrice Bonfigli discuss activism in healthcare.

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Show Notes:

Why should investors pay attention to activism in healthcare? In this episode,  Adam Torres and Patrice Bonfiglio, President at Sarissa Capital Management LP, explore the current state of activism in healthcare.

About Sarissa Capital Management LP

Sarissa Capital Management was founded by Alex Denner, Ph.D., in 2013 to capitalize on compelling opportunities for constructive shareholder activism within the healthcare sector. Sarissa’s team of subject matter experts and philosophy of thoughtful engagement aims to create positive outcomes for investors, shareholders and patients by taking an owner-oriented approach to their investments. Sarissa seeks to optimize healthcare companies so they can efficiently provide important medicines to society and increase the impact of medical innovation, while also generating value to shareholders.

Full Unedited Transcript

 Hey, I’d like to welcome you to another episode of Mission Matters. My name is Adam Torres, and if you’d like to be a guest on the show, just head on over to missionmatters. com and click on Be Our Guest to Apply. All right, so today’s guest is Patrice Bonfilio. She is president over at Sarissa Capital Management LP.

Patrice, welcome to the show.  Thank you, Adam. I’m excited to be here. I I look forward to our discussion.  All right, Patrice. So happy to have you on the show here. And I know that you are referred to us in coming off of the activist investor conference. I wanted to be there so, so much, but I was booked for another conference.

So I was like, I couldn’t make it, but But how was the conference? I know you were a speaker there.  It was great. It was very different have the perspective of activist investors, the vendors that are sometimes championing the companies where we’re actually campaigning against. So you’re getting all sides from law firms, vendors, investors, even some students were there.

So it was a good mix. Whoa, how’s that? So you’re seeing the other side and you’re all in the same conference. Obviously, it’s collegial. I’m not, I don’t mean like that. This isn’t like the playground, right? Oh, I mean, but to see everybody like that, that is a different feeling. I know. I didn’t consider that.

You got both sides there, right?  Yeah, you remember, you remember everyone you respect everyone’s craft and job and you can recognize when people are doing their diligence and when they’re motivated by the right factors. So that that helps. Oh, that’s interesting. You get to, and you get to spend the day with them.

This is interesting. We’re normally like, you know, in crossing paths, you would see each other, obviously wherever out or whatever else, you know, but, but to spend the day in a conference. I never thought about that. That’s, that’s interesting.  but also I feel like that type of collaboration and being exposed to those type of ideas, like for the whole, the industry as a whole, like that had to be pretty inspiring overall or educational, inspiring, whatever the word is, but it’s an experience, right? 

I agree it’s good for the industry. It’s good for the ultimate companies. So, at the end of the day, no matter what side you’re on, you want to help to create companies that are built for long term value. So, whether you’re trying to preserve it, because you feel that is the right thing, or you’re trying to engage and enhance it because you feel that is the right thing.

Our goals are usually the same.  so talk to me about some of what you presented in your content out for for those that weren’t able to attend such as myself. since the whole conference is about activism, I was trying to hone in on healthcare and activism, and it’s, it’s a specialized area because, you know, once you own a single share of a company, you become an owner, you’re a shareholder.

So, as owners. You can choose to be passive and just let it sit in your account, or you can be an engaged shareholder. And that’s what activists really are.  take that role incredibly seriously. And we’re almost like consultants that. Aren’t charging a fee, which, you know, you can, you can pay a lot of money for advice, but we are those in the space that have seen it and done it and do it day in and day out and within the healthcare sector.

So I like to compare. The IP of a healthcare company, let’s say a pharmaceutical company that that has a drug that the FDA approves. That patent can last for 20 years. And maybe by the time they commercialize, maybe it’s 10 years, but basically that whole time, no one else is allowed to compete with you on that product.

Yeah, compare it to a company that is selling some sort of hardware or even a local pizza shop. You have to make sure that your product is the best and that your customer service is the best and that you’re open every, every day and you need to. Ensure that the product you are making is consistent.

And better than all the competition. So, if you are serving a pizza that doesn’t taste as good, or that’s cold, you might not get those return customers and that revenue is going to immediately suffer. Right? So you have to make sure your management team, anyone governing that pizza shop. Is on point and making daily decisions about the trajectory of the firm  or of the shop.

So that’s where it starts to deviate. Imagine instead of just, you know, 10 pizza shops in your town, there was 1. And, you know, in some cases, people needed pizza to live, right? That’s the comparison we’re making here. Right? So it’s usually medication along with making me hungry. Patrice. Thank you. So, tell me, go ahead.

Please. I’ll tell you more about this pizza that we’re competing with now.  A lot of my examples have to do with food, but It’s a huge difference in the mindset of revenue. A lot of times you think of an entrepreneur or someone running a company like, okay, we need to hit our deadlines.

We need to make our target and that shift. And governance is so important, because you need to make sure that you are not taking for granted the revenue coming in 1 day. It will end and you want to make sure your organization is healthy and that the owners of the company are also seeing that success and That’s the major difference in healthcare and 1 thing that I shared at the conference that people hadn’t necessarily thought about before they, they see activist investors in a lot of different sectors, but you do need specific knowledge to play in the healthcare ecosystem. 

what initially introduced you  or kept you in, like, the healthcare niche? Like, how’d that come about?  Oh, that’s an interesting question. nothing that I saw on the wall really. well, you’re in good company, by the way. So I didn’t know I was gonna be a podcaster.

I don’t even know if podcasts exists. When I was I was in school. I’m like, I didn’t know that was happening either. Go ahead, please. Yeah. You know, you kinda stumble into your passion.  . Yes, ma’am. So I had worked in the hedge fund industry my whole career. you know, I didn’t go to school for this, but I had started. 

Directly after graduating college, and I was at a firm, a commodities firm. It was a hedge fund in the city and we were winding down and the firm was closing and he got a phone call and I was in the middle of grand central. Anyone from New York knows how cabinets that that places I could hardly hear what they were saying, but it says something about health care and activism and I realized I could take my skill set.

And be part of something that is long term in nature, because a lot of what hedge funds do, you’re trading in and out every second. There’s trades going through and to be a part of something that is, you know, going to be lasting in nature. Was appealing and, you know, I had always been a very focal  person when it comes to mental health and mental illness and trying to advocate.

For my brother, who had been diagnosed. So, you know, usually when you’re coming with a skill set of accounting and compliance and operations, you don’t think, oh, I’m going to take that and then somehow be involved with a field that can help to find a cure or create a better quality of life. So, to me, it was a slam dunk.

I’m like, I can, I can actually.  Combine my efforts on my career front and also my, my personal agenda and advocacy. So it was, it was a dream for me to try to move into this industry or portion of the industry. And it’s been, it’ll be 11 years for me in November that I’ve been that’s amazing. Yeah, that’s an amazing story.

I love to hear how people find their passion and their niche and how it comes to them and how they can sometimes match these things because I mean, this is my personal qualm. I’m not claiming to have a better system by the way but I always think back about when I was picking my major think about what I want to do and I’m going to college and I’m 18 and I’m like 18 year old Adam was really trying to plan out his life.

Are you kidding me?  What you want to be when you grow up, are you kidding? I’m still thinking about that.  So it’s interesting how, as youth, tasked with those, you know, big decisions kind of early on to find our way. So, so Patrice, I mean, we’ve talked a little bit from obviously the industry side of things and the industry standard.

Let’s, jump around a little bit. I do want to speak, you know, address this topic as well from the investor’s point of view. So why should investors be paying attention to activism in healthcare?  So, it is a great niche. So, one of the reasons why it’s great to diversify your portfolio and include activism in healthcare is that there, there are these patents, right?

There is a lot of. Profit that can be made in this industry. And I think when someone conjures up the idea of big pharma, they know there’s revenue out there. when you say that, by the way, I want to really quick when you say that, I want to circle back for everybody listening. Remember, Patrice came from the hedge fund world.

So when she’s saying this, like, This was her world for a long time. Go ahead. I just want to, cause I like context. I’m like, if you’re saying that it’s a little bit different than, you know, you’re no offense to the advisor down the block. I was that person for many years. I was in finance almost 14 years.

So I’m not picking on that person, but it’s just a little different. So please continue.  You’re right, it is different. So, with hedge funds, you’re getting allocations from the large pension funds or institutions, some family offices. So, the portfolio is constructed, In a very specific way, and there are trends that change over time and things fall in and out of favor.

And I think from ever since cobit, I think the industry has really returned with a renewed respect for healthcare and and biotech and what we can do on a global scale. that really caused a huge explosion and valuations and, and.  Healthcare was overvalued and then we saw that really dropped dramatically.

So now we’re at a very sweet spot in what typically is a cycle and it’s the perfect time for people to try to migrate over and expand their portfolio and just tying it back to that. That story of, you know, the pizza shop versus the, the, come on, get right back in there, Patrice.  Yeah, weave it through.

Right? Yep. Get right back in there. I’m ready.  Yeah, you know, imagine the company that still has, let’s say, 7 years left on their patent. You can get involved in that company and make sure that they’re continuing to run it for the benefit of shareholders. There’s a lot of value that is guaranteed to be there.

So. If you have an activist, they’re making sure that they have a pulse on capital allocation on the investment in and what’s appropriate any, any sort of share buybacks to investors. There’s so many different tools in the toolkit of how to manage a company. You can do it well, or you can just sit on your laurels.

And if you know that an activist is involved, there will be a real, helpful guiding eye throughout that process. it’s definitely a way to add necessary thread to your portfolio.  you can share, you know, something that you’re working on if you’d like to don’t have to not putting you on the spot or just something in general that you’re following any interesting cases or situations that you’re, keeping up with right now in healthcare specifically in regards to activism. 

with activists, typically, you’re building the position. First before you go public. Mm-Hmm, . And so, you know, I can’t that’s why I said if there’s something public, when I was interviewing some of the other in individuals on here, we already used the Disney example. So we’ve been doing that one.

We’ve been doing a couple of the other ones. I don’t know, it could be present or, or if there’s nothing, it’s okay too that I, again, I’m not putting you on the spot for any companies. You’re working on  . Yeah, no, but I can give an example. So so as you know, I’m President Issa, but I’m also on the.  On the board as a director for Ameren Corporation, and that is 1 of our portfolio companies.

And if we rewind a year ago, we were in the middle of a public proxy site. We, we, but  we were successful and we’ve been partnering with them to do some great work. So that is an interesting case where a company. Needed to change, they needed a refreshment. The drug had lost the patent. So, that was a juncture where leadership had to make a plan to change and even if there’s an, a patent in the United States, there’s also the rest of the world.

So, there’s tons of opportunities where you can commercialize Europe in Asia, in South America. It’s almost endless. So you can keep renewing, not renewing. It’s different patents, but you extend the life and the revenue and the runway of the company by expanding to the rest of the world. So that’s, that’s a very good example of how you can shift with the right leadership and activists involved. 

That’s interesting. I I haven’t really thought about it from the, we’ve been having, well, I guess I technically, I did do some interviews for the conference from the, and, and we covered the activist investor situation in Canada, which I learned a whole lot about and understanding like how forward they are in thinking in the, obviously it’s a smaller market, right?

But, But but it was interesting to see their take on it. So I haven’t really thought about outside of maybe us and the Canadian market, but how that maybe applies abroad and internationally and maybe some other countries, that’s interesting.  Yep, and with healthcare, there’s a lot of global monolith companies that are able to commercialize drugs quite well because of their portfolio.

So it’s always the global element is always part of the conversation.  Well, Patrice, I have to say it has been a great having you on the show today. And Thank you for making some time for us after the, after the conference and after that engagement. And again, I wish I wish I could have been there next year.

I’ll be there though. An activist investor conference in NYC held by deal flow events. And I know Charlie and Phil and all their whole team over there worked really hard on that. So I’ve, I’ve heard nothing but good things about it. So I will be there next time. But that being said for today, Patrice, if somebody wants to.

To learn more about Sarissa capital management, or if they want to follow your journey or connect, how did they do that?  So, if they want to check with me, you can find me on LinkedIn, Patrice Banfilio and Sarissa Capital. And if you’d like any information on Sarissa, you can email info at sarissacap.

com. That’s S A R I S S A C A P. com.  Amazing. And we’ll put the websites, all that good stuff in the show notes for the audience. And speaking of the audience, if this is your first time with us, Hey, don’t forget hit that subscribe button. This is a daily show and each and every day we’re bringing you a new content, new, amazing guests like Patrice, and we don’t want you to miss a thing.

And if you are a long term listener and haven’t left us a review yet, come on, you better, better get that review done. We, we sure do appreciate it. And Patrice, again, thank you so much for coming on.  Thank you, Adam. Have a lovely time.