1 00:00:04,080 --> 00:00:06,660 Sean Aylmer: Welcome to the Fear and Greed Daily Interview, I'm Sean 2 00:00:06,660 --> 00:00:09,750 Sean Aylmer: Aylmer. We've talked a bit about biotech and healthcare companies 3 00:00:09,750 --> 00:00:12,660 Sean Aylmer: in recent months, but what should an investor be considering 4 00:00:12,929 --> 00:00:15,120 Sean Aylmer: when it comes to these companies? It is now a 5 00:00:15,120 --> 00:00:17,189 Sean Aylmer: good time to be looking at them as an investment 6 00:00:17,250 --> 00:00:20,400 Sean Aylmer: option. Remember, this is general information only, and you should 7 00:00:20,460 --> 00:00:24,960 Sean Aylmer: seek professional advice before making investment decisions. Victor Windeyer is 8 00:00:24,960 --> 00:00:28,410 Sean Aylmer: the portfolio manager for the Australian Unity Future of Healthcare 9 00:00:28,410 --> 00:00:29,940 Sean Aylmer: Fund. Vic, welcome to Fear and Greed. 10 00:00:30,540 --> 00:00:32,220 Victor Windeyer: Thanks very much, Sean. It's great to be here. 11 00:00:32,490 --> 00:00:36,209 Sean Aylmer: Can we start with the big picture? How has the 12 00:00:36,240 --> 00:00:41,159 Sean Aylmer: healthcare sector performed over the past couple of years? And 13 00:00:41,159 --> 00:00:42,720 Sean Aylmer: what's it look like going forward? 14 00:00:43,440 --> 00:00:45,839 Victor Windeyer: I think it is a great time to invest as 15 00:00:45,840 --> 00:00:48,839 Victor Windeyer: we look forward. If I can just describe the last 16 00:00:48,840 --> 00:00:52,260 Victor Windeyer: couple of years, if you go back a year and 17 00:00:52,260 --> 00:00:55,980 Victor Windeyer: a half, say, we had governments around the world really 18 00:00:55,980 --> 00:01:00,690 Victor Windeyer: stimulating global economies, through fiscal and monetary policy, driving rates 19 00:01:00,690 --> 00:01:05,880 Victor Windeyer: down to basically unleash a wall of liquidity to try 20 00:01:05,880 --> 00:01:09,420 Victor Windeyer: and prop up economies around the world. Now, that drove 21 00:01:09,450 --> 00:01:13,410 Victor Windeyer: growth sectors generally and healthcare in particular. I think there 22 00:01:13,438 --> 00:01:15,390 Victor Windeyer: were a lot of investors who were attracted to the 23 00:01:15,390 --> 00:01:19,080 Victor Windeyer: sector because they were suddenly aware of it, it was 24 00:01:19,080 --> 00:01:22,649 Victor Windeyer: having an impact on their daily life, and they saw 25 00:01:22,650 --> 00:01:26,969 Victor Windeyer: the opportunity there. So those more generalist investors came into 26 00:01:26,969 --> 00:01:32,220 Victor Windeyer: this and growth stocks went up. And as rates began 27 00:01:32,220 --> 00:01:35,610 Victor Windeyer: to rise towards the end of last year, many of 28 00:01:35,610 --> 00:01:38,400 Victor Windeyer: those investors came back out and there was a rotation 29 00:01:38,400 --> 00:01:42,298 Victor Windeyer: from growth to value as we've all seen. And that 30 00:01:42,300 --> 00:01:46,889 Victor Windeyer: saw a significant outperformance in the value companies over the 31 00:01:46,889 --> 00:01:49,860 Victor Windeyer: growth companies in the last of 6 to 9 months. 32 00:01:49,860 --> 00:01:56,070 Victor Windeyer: So in healthcare, you have the large pharmaceutical companies and 33 00:01:56,130 --> 00:02:00,720 Victor Windeyer: health insurers and hospital groups, and they are more value type companies. 34 00:02:01,139 --> 00:02:08,010 Victor Windeyer: And then these biotechs, MedTech, medical device companies and life sciences 35 00:02:08,010 --> 00:02:12,120 Victor Windeyer: companies, more growth type stocks, if you like. 36 00:02:12,570 --> 00:02:16,800 Sean Aylmer: The point there being that the healthcare sector is huge. 37 00:02:16,800 --> 00:02:20,129 Sean Aylmer: I mean, it's like you think of resources, from some 38 00:02:20,130 --> 00:02:24,059 Sean Aylmer: perspective, minor through to BHP. In fact, it's probably even 39 00:02:24,059 --> 00:02:27,239 Sean Aylmer: more diverse in a way with healthcare because of just the products 40 00:02:27,240 --> 00:02:27,990 Sean Aylmer: that you're talking about. 41 00:02:29,190 --> 00:02:33,300 Victor Windeyer: Yeah, absolutely. It's an incredibly diverse sector. Even within medical 42 00:02:33,300 --> 00:02:37,080 Victor Windeyer: device companies, for instance, they're just quite different. So a 43 00:02:37,080 --> 00:02:42,419 Victor Windeyer: Cochlear implant company, there's very little overlap between those companies in 44 00:02:42,660 --> 00:02:47,760 Victor Windeyer: that particular healthcare niche and, say, obstructive sleep apnea companies. 45 00:02:49,139 --> 00:02:52,080 Victor Windeyer: They're quite different in many ways. So if you take 46 00:02:52,080 --> 00:02:57,660 Victor Windeyer: the full breadth of big pharma companies, MedTech companies, hospitals, 47 00:02:58,169 --> 00:03:01,799 Victor Windeyer: it's an incredibly diverse set of companies. But they have 48 00:03:01,860 --> 00:03:05,850 Victor Windeyer: one common characteristic, I think, which is that they're really 49 00:03:05,850 --> 00:03:09,389 Victor Windeyer: about and they perform well if they enhance the health 50 00:03:09,389 --> 00:03:12,630 Victor Windeyer: and wellbeing of people. And the ones that do that 51 00:03:12,630 --> 00:03:15,269 Victor Windeyer: the best are the ones that outperform the most. 52 00:03:15,839 --> 00:03:20,940 Sean Aylmer: So in a sense, the macro background is demographics, presumably. 53 00:03:21,330 --> 00:03:24,060 Sean Aylmer: And is that working in the right way for health companies? 54 00:03:24,870 --> 00:03:27,929 Victor Windeyer: Oh, absolutely. I mean, there's quite a few key trends, 55 00:03:27,929 --> 00:03:30,120 Victor Windeyer: I think, in the world. But the mass aging of 56 00:03:30,120 --> 00:03:36,119 Victor Windeyer: the global population is one of the strongest underpinning dynamics. 57 00:03:36,119 --> 00:03:39,330 Victor Windeyer: And we're at an incredible transition point, right in the 58 00:03:39,330 --> 00:03:41,940 Victor Windeyer: middle of this five- year period in Australia, for instance, 59 00:03:41,940 --> 00:03:44,760 Victor Windeyer: where the number of people turning 80 every year for 60 00:03:44,760 --> 00:03:49,770 Victor Windeyer: the last two decades has been between 20,000 and 25,000. And from 61 00:03:49,770 --> 00:03:55,320 Victor Windeyer: 2027, that's going to be between 60, 000 and 80,000 people turning 80. 62 00:03:55,320 --> 00:04:00,630 Victor Windeyer: So I think that hasn't quite dawned on everybody, the 63 00:04:00,630 --> 00:04:05,400 Victor Windeyer: significance of that shift, and how important that is. And that 64 00:04:05,400 --> 00:04:09,599 Victor Windeyer: will lead to a supply and demand mismatch, and that's 65 00:04:09,599 --> 00:04:12,359 Victor Windeyer: the sort of investment opportunity to try and close that 66 00:04:12,360 --> 00:04:17,310 Victor Windeyer: gap, either through provision of more supply or through development 67 00:04:17,310 --> 00:04:22,560 Victor Windeyer: of technologies and new devices, and therapies that improve people's 68 00:04:22,770 --> 00:04:25,320 Victor Windeyer: outcomes so they don't have to use those services. 69 00:04:25,678 --> 00:04:27,839 Sean Aylmer: Stay with me, Vic. We'll be back in a minute. 70 00:04:34,470 --> 00:04:37,859 Sean Aylmer: My guest this morning is Victor Windeyer, portfolio manager for 71 00:04:37,860 --> 00:04:42,240 Sean Aylmer: the Australian Unity Future of Healthcare Fund. Okay, Vic, I've 72 00:04:42,240 --> 00:04:43,859 Sean Aylmer: got to ask, how do you get across it all? 73 00:04:43,860 --> 00:04:48,269 Sean Aylmer: I mean, an insurer to a Cochlear, to a biotech, 74 00:04:48,690 --> 00:04:49,740 Sean Aylmer: how do you get across it all? 75 00:04:50,310 --> 00:04:55,020 Victor Windeyer: Well, I've been following this sector for a very long time, 76 00:04:55,230 --> 00:04:57,959 Victor Windeyer: I've been in it my whole career, 25 years, and 77 00:04:57,960 --> 00:05:01,229 Victor Windeyer: I love it. So I mean, I embed myself in it. We 78 00:05:01,230 --> 00:05:05,250 Victor Windeyer: have a team of people working across the business on 79 00:05:05,609 --> 00:05:08,790 Victor Windeyer: the sector. I mean, it's one of the reasons why 80 00:05:08,790 --> 00:05:11,130 Victor Windeyer: Australian Unity's a good place to do this, is we 81 00:05:11,130 --> 00:05:16,139 Victor Windeyer: have 8, 000 employees all predominantly working in healthcare. And 82 00:05:16,139 --> 00:05:18,870 Victor Windeyer: so that there's a lot of insights within the group 83 00:05:18,960 --> 00:05:24,390 Victor Windeyer: in Australia. But it's really just a fascinating space. And 84 00:05:24,480 --> 00:05:27,390 Victor Windeyer: there are a lot of commonalities, and there's quite a lot of 85 00:05:27,390 --> 00:05:31,860 Victor Windeyer: synergies across these companies. So I mean, we a multi- 86 00:05:31,860 --> 00:05:36,539 Victor Windeyer: sector, a multi- asset strategy. That helps us because if 87 00:05:36,540 --> 00:05:42,059 Victor Windeyer: we look at small unlisted company in radiopharmaceuticals, we're also 88 00:05:42,059 --> 00:05:47,160 Victor Windeyer: looking at the large listed radiopharmaceutical company in the US. 89 00:05:47,640 --> 00:05:50,760 Victor Windeyer: And there's a lot of learnings that can be made 90 00:05:50,760 --> 00:05:52,589 Victor Windeyer: across those different subsectors. 91 00:05:52,710 --> 00:05:54,210 Sean Aylmer: Okay. Now, I just want to look at a few 92 00:05:54,570 --> 00:05:59,430 Sean Aylmer: specific companies, ASX based and also overseas. So let's start 93 00:05:59,430 --> 00:06:01,200 Sean Aylmer: with, a great friend of mine was one of the 94 00:06:01,200 --> 00:06:04,560 Sean Aylmer: first ever employees at Cochlear. He was an engineer. And 95 00:06:04,560 --> 00:06:06,450 Sean Aylmer: so I've always followed that company, and that's been an 96 00:06:06,450 --> 00:06:08,610 Sean Aylmer: incredible success story. Can it keep going? 97 00:06:11,250 --> 00:06:15,000 Victor Windeyer: Yeah, it is. Actually, I was an engineer at Cochlear. It was my 98 00:06:15,000 --> 00:06:17,368 Victor Windeyer: first job out of university actually, as a research and 99 00:06:17,369 --> 00:06:21,150 Victor Windeyer: development engineer. But it is a terrific company. Look, I 100 00:06:21,150 --> 00:06:24,659 Victor Windeyer: left Cochlear in 1998, so a long time ago, and it's continued 101 00:06:24,660 --> 00:06:28,650 Victor Windeyer: to have growth since then. It absolutely, I think, will 102 00:06:28,650 --> 00:06:33,690 Victor Windeyer: continue to grow. Even today, after 30 years, there's still 103 00:06:33,690 --> 00:06:39,089 Victor Windeyer: a large unmet demand for that core device, and they 104 00:06:39,089 --> 00:06:42,360 Victor Windeyer: continue to expand their market. So I mean, if you 105 00:06:42,360 --> 00:06:46,410 Victor Windeyer: look historically, it started out in adults, then it went 106 00:06:46,410 --> 00:06:49,949 Victor Windeyer: to children, prelingually deaf in children, then there was a 107 00:06:49,950 --> 00:06:54,719 Victor Windeyer: geographical expansion that occurred, and then within developed countries, and 108 00:06:54,720 --> 00:06:59,250 Victor Windeyer: then it expanded into less developed countries. So there's a 109 00:06:59,250 --> 00:07:02,969 Victor Windeyer: continual source of growth. And that's one of the things 110 00:07:02,970 --> 00:07:07,110 Victor Windeyer: about companies in this space, is that not only can 111 00:07:07,110 --> 00:07:09,299 Victor Windeyer: they continue to grow, but they can usually do that 112 00:07:09,299 --> 00:07:13,020 Victor Windeyer: without requiring additional capital. And they can do that because the 113 00:07:13,020 --> 00:07:16,110 Victor Windeyer: margins are very high. So they have very high self- 114 00:07:16,110 --> 00:07:19,560 Victor Windeyer: sustaining growth rates. And so you can get good returns 115 00:07:19,560 --> 00:07:23,669 Victor Windeyer: on capital and drive growth consistently for many decades. 116 00:07:24,389 --> 00:07:26,160 Sean Aylmer: Well, I mean, when I think of Cochlear, and ResMed's another one, the 117 00:07:26,160 --> 00:07:29,969 Sean Aylmer: sleep apnea group, you always get taught that diversify your 118 00:07:29,969 --> 00:07:32,820 Sean Aylmer: revenue streams. And I suppose it depends how you define 119 00:07:32,820 --> 00:07:36,300 Sean Aylmer: diversify your revenue streams, but they are pretty much focused 120 00:07:36,300 --> 00:07:39,420 Sean Aylmer: on one area of health, aren't they? But they both, 121 00:07:39,420 --> 00:07:42,210 Sean Aylmer: I mean, ResMed's another example, which has been another great 122 00:07:42,210 --> 00:07:45,029 Sean Aylmer: success story, they can just keep achieving it. Is it 123 00:07:45,030 --> 00:07:49,169 Sean Aylmer: because demand is just, it's not infinite, but it's certainly growing? 124 00:07:49,589 --> 00:07:53,850 Victor Windeyer: Yeah, no, that's true. I mean, they do, through improvements in the product, 125 00:07:53,850 --> 00:07:56,880 Victor Windeyer: they do increase the size of their target market, if you'd 126 00:07:56,970 --> 00:08:00,540 Victor Windeyer: like. So, I mean, back 20 years ago, when I 127 00:08:00,540 --> 00:08:04,679 Victor Windeyer: was a Cochlear, it really only targeted the very profoundly 128 00:08:04,709 --> 00:08:09,990 Victor Windeyer: deaf recipients. And then today it's moved into severe and 129 00:08:10,320 --> 00:08:14,700 Victor Windeyer: moderately severe hearing- impaired people. And they bring on other 130 00:08:14,700 --> 00:08:17,940 Victor Windeyer: devices. But these markets are very large, and I think 131 00:08:17,940 --> 00:08:21,570 Victor Windeyer: that's one of the lessons that we look at. And 132 00:08:21,570 --> 00:08:25,530 Victor Windeyer: when we're thinking about investments is, is this device or 133 00:08:25,530 --> 00:08:29,160 Victor Windeyer: drug or biologic going to make a big difference for 134 00:08:29,160 --> 00:08:32,429 Victor Windeyer: a lot of people? Because if it is going to make a 135 00:08:32,429 --> 00:08:36,210 Victor Windeyer: big difference for a large number of people, then that 136 00:08:36,210 --> 00:08:41,039 Victor Windeyer: provides a very significant or potentially multi- decade opportunity for 137 00:08:41,039 --> 00:08:42,209 Victor Windeyer: very strong growth. 138 00:08:42,420 --> 00:08:44,520 Sean Aylmer: Now, another company, which I know you've spoken of is 139 00:08:44,520 --> 00:08:50,309 Sean Aylmer: Clarity Pharmaceuticals. It's in the area of oncology, you'll have 140 00:08:50,309 --> 00:08:51,060 Sean Aylmer: to help me out here. 141 00:08:51,660 --> 00:08:56,670 Victor Windeyer: Yeah, no, that's true. It's a radiopharmaceutical company in oncology. 142 00:08:56,670 --> 00:08:57,000 Sean Aylmer: Right. 143 00:08:57,030 --> 00:09:01,890 Victor Windeyer: And so what that is that cancerous cells, they have 144 00:09:01,890 --> 00:09:07,140 Victor Windeyer: cell receptors that they express. And basically, you can design 145 00:09:07,260 --> 00:09:11,010 Victor Windeyer: a peptide, or you can design something that locks into 146 00:09:11,010 --> 00:09:15,390 Victor Windeyer: that and will hunt it down and lock into that receptor. 147 00:09:15,450 --> 00:09:18,660 Victor Windeyer: And off the back of that targeting agent, you can 148 00:09:18,660 --> 00:09:22,200 Victor Windeyer: connect a little cage. It's called a chelator and into 149 00:09:22,200 --> 00:09:25,440 Victor Windeyer: that, you can put a radioactive isotope. And so it's a 150 00:09:25,440 --> 00:09:29,999 Victor Windeyer: really quite fascinating area of development and technology. There's a 151 00:09:30,000 --> 00:09:32,338 Victor Windeyer: number of companies around the world working on it. And we 152 00:09:32,340 --> 00:09:36,929 Victor Windeyer: have Telix here in Australia and also Clarity Pharmaceuticals, and 153 00:09:36,929 --> 00:09:40,500 Victor Windeyer: there's a number of private companies in the space, and 154 00:09:40,500 --> 00:09:44,220 Victor Windeyer: then some international ones. And Clarity, I think, is a 155 00:09:44,220 --> 00:09:49,710 Victor Windeyer: very exciting company. It's got some interesting assets with using 156 00:09:49,710 --> 00:09:53,309 Victor Windeyer: copper isotopes, which is different to many of the others, 157 00:09:53,309 --> 00:09:56,819 Victor Windeyer: which have some advantages. And they've got an interesting targeting 158 00:09:56,820 --> 00:10:01,679 Victor Windeyer: agent as well, which is also unique, (inaudible) , they're 159 00:10:01,679 --> 00:10:04,710 Victor Windeyer: in clinical trials at the moment. And I quite like it, 160 00:10:05,820 --> 00:10:08,699 Victor Windeyer: it's became very cheap and we recently bought some more 161 00:10:08,700 --> 00:10:11,608 Victor Windeyer: of the stock. And so we find that quite an 162 00:10:11,609 --> 00:10:15,929 Victor Windeyer: attractive place to invest. There's a few transactions that have 163 00:10:15,929 --> 00:10:18,960 Victor Windeyer: occurred in this space. Novartis, one of the world's largest 164 00:10:18,960 --> 00:10:24,059 Victor Windeyer: companies made an acquisition in the area and that oncology 165 00:10:24,059 --> 00:10:29,849 Victor Windeyer: piece, that precision medicine oncology is a very exciting area 166 00:10:29,910 --> 00:10:31,078 Victor Windeyer: of development today. 167 00:10:31,380 --> 00:10:33,960 Sean Aylmer: It is a fascinating sector. Vic, thank you for talking 168 00:10:33,960 --> 00:10:34,860 Sean Aylmer: to Fear and Greed. 169 00:10:35,460 --> 00:10:36,480 Victor Windeyer: Thanks very much for your time. 170 00:10:36,960 --> 00:10:40,588 Sean Aylmer: That was Vic Windeyer, portfolio manager for the Australian Unity 171 00:10:40,590 --> 00:10:43,139 Sean Aylmer: Future of Healthcare Fund. This is the Fear and Greed 172 00:10:43,139 --> 00:10:45,988 Sean Aylmer: Daily Interview. Remember, this information is general in nature and 173 00:10:45,990 --> 00:10:49,140 Sean Aylmer: you should seek professional advice before making any investment decisions. 174 00:10:49,500 --> 00:10:51,750 Sean Aylmer: Join us every morning for the full episode of Fear 175 00:10:51,750 --> 00:10:54,840 Sean Aylmer: and Greed, Australia's most popular business podcast. I'm Sean Aylmer, 176 00:10:55,170 --> 00:10:55,800 Sean Aylmer: enjoy your day.