Four members of the Rare Collective trekked out to San Francisco for the J.P. Morgan Healthcare Conference. Doug Paul and David Lapidus discuss what we learned…
Doug:
David, I saw you chatting with investors and VCs at the conference. What’s their take on the financial climate for orphan drugs?
David:
The specific dynamics of the orphan drug world seem like they’re getting swamped by bigger issues. There’s a sense that unusually large forces are going to impact us—and the rest of the financial world. The presidential election has reduced investors’ confidence in their ability to predict the future environment, and that adds an extra layer of risk to their investment decisions.
Doug:
What are the election-related issues that they’re talking about?
David:
There are two factors, one positive and one negative. The positive one is the expected reduction in the corporate tax rate. U.S. companies have about $2 trillion sitting abroad to avoid U.S. corporate taxes, and investors expect a significant share of that will be brought back if the tax rate falls. They’ll have to find a place to put all of that money, and that means a potential windfall for companies needing investment. Of course, that includes biotech start-ups who are developing orphan drugs. This is really exciting, because it means more shots on goal, more successful products, and more patients living better lives.
Doug:
So, is the check in the mail?
David:
Don’t build a new corporate HQ just yet. The cash influx is subject to political timelines. First, the legislation has to be passed and implemented. If you assume that the president and Congress cooperate, that could happen quickly. But companies might not rush to bring the money home, given other uncertainties that they face. The new administration and this Congress will control the political environment for at least two years. Four years is a strong possibility, too. If the tax cut happens, the money will flow in over a period of at least two to four years.
Doug:
It sounds like good news, even if the timing is unclear. But you also mentioned a negative factor.
David:
Investors don’t like instability, and now the US political environment is more uncertain than it has been in decades. The new president is broadly perceived as being pro-business, but we’ve already seen him take aim at major companies like Ford and Carrier. And just a few days after the JPM conference, he tweeted that drug companies are “getting away with murder.”
Doug:
It’s one thing to fire off a tweet, but it takes real time and effort to implement a law for a tightly regulated industry. Do investors feel that there’s already grounds for concern?
David:
They’re uncertain, and that’s the issue. No one knows yet if that tweet was mere theatrics or a serious shot across our bow. It’s even hard to predict when the uncertainty will be resolved, because the new administration doesn’t seem to operate using standard processes. All we do know is that he has taken notice of us.
David Lapidus is the Founder of LapidusData, and his proprietary models and data collections systems serve as the backbone of commercial infrastructure throughout the product lifecycle.
RARE COLLECTIVE® is a trademark of Rare Collective, LLC. 