Activist Investing in Health Care

Before we dive into the conversation with Patrice, don't forget to hit that like button and subscribe to EisnerAmper wherever you listen to your podcasts, and you can also find us on YouTube at EisnerAmper. Hi Patrice, thank you so much for being with me today. 

Patrice Bonfiglio: 

Hi, Elana. Thank you. I'm really excited to be on this episode. Thanks for having me. 

Elana Margulies-Snyderman: 

Absolutely. So, to kick off the conversation, tell us a little about yourself and how you got to where you are today. 

Patrice Bonfiglio: 

Sure. So, I am president of Sarissa Capital, and we launched, it's going to be 12 years ago in May, so quite some time. I joined Sarissa a few months after launch. I've spent my entire career on the buyside from humongous multi-strats to commodity hedge funds and found my home here after winding down another firm in New York City. And I just fell in love with the long-term nature of the strategy. So, we are long biased. We'll hold positions for 3, 5, 7 years at a time, whatever feels right specific to that investment. And we've always been exclusive to health care, biopharma, biotech, mostly public stocks, but I would say give or take about 10% of the portfolio any given year can be in privates. So, we really are plugged into the ecosystem. And while at previous firms I've had exposure to health care, having the deep dive at Sarissa has been really fulfilling. You can actually see drugs go to market and the impact on patients and families. 

Elana Margulies-Snyderman: 

Patrice, congrats on your journey. Given Sarissa's focus on activists investing in the health care space, I would love to hear your overall high-level outlook. 

Patrice Bonfiglio: 

Yes. So, activism is a very niche part of the market where we get to actually be involved. So, my outlook is very optimistic. We don't have to take that blind leap of faith in the stock picking. We are actually hedging that out by being involved and also not committing to exit dates. We do not live and die by the daily change in stock price or the quarterly earnings. It's really about long-term partnership with the investments that we make. And that's why investors choose to diversify and have activism. Even if you have exposure to health care, the activism piece in health care is a differentiator. So, I will always be very pro-activism. 

Elana Margulies-Snyderman: 

And Patrice, more specifically, what are some of the greatest opportunities you see in your space and why? 

Patrice Bonfiglio: 

So, it's an exciting time. I'm sure that many of your guests have talked about AI, but when it comes to integrating AI with health care and you think about the speed that a company can now go through all of the different indications to find the right match for drugs that they already have the process for figuring out new therapies and patching them with drugs to go to market, there's just so much potential, and it really cuts down quite a lengthy process. It's not the same thing as making a sneaker. Going through the whole FDA approval process is quite long and daunting. 

So, I think any firm that is really embracing AI as a part of their process and doing it right would be a big area of opportunity. And I think also it's important, this kind of overlaps with challenges a little bit, but there is some uncertainty in the market around tariffs. So, if you are looking at health care companies that have enough inventory to really glide through that process without significant interruption. So, understanding the supply chain of the companies and their inventory, and if companies have great assets instead of just taking pipeline risk, those are the opportunities that you really want to look for. 

Elana Margulies-Snyderman: 

Patrice, I know you briefly touched on challenges, but I'd love for you to take a deeper dive into some of the greatest challenges you face in your space and why. 

Patrice Bonfiglio: 

Yes. So, I think that the biggest challenges, and I'll talk specifically about activism, is that oftentimes we are investing in companies that other firms would screen out. So, we are taking on the longer challenges. So that is something that you just have the stomach for and that will never go away, but the payoff is well worth it. 

And touching on the tariff discussion that I brought up a few minutes ago, it's important to really talk to the management team about how they view the potential impact. Are they really thinking about not just supply chain, but also other relationships with their counterparties? Are they thinking about the audit disclosures? Has it actually integrated through the whole company, or is it really just a conversation that they're having at the highest level and not trickling down? So those are some challenges that as an activist, you can actually overcome because you're in the room and you're having those conversations being on the board of directors. 

Elana Margulies-Snyderman: 

Patrice, to shift gears a bit, ESG has been a top-of-mind issue for the investment industry and wanted to hear your thoughts on how your firm is addressing this topic. 

Patrice Bonfiglio: 

So, everyone is always surprised when they hear my answer about ESG. It ties back to when we were founded. So, we existed in 2013, and that acronym ESG was not talked about back then in the way that it has been for the past five years or so. So, activism is at its core, really about leading with governance and making sure that everything is seen through that lens. And when ESG became popular in our industry, there were a whole host of firms that began ESG strategies, but we didn't actually have to change. We were very true to what we initially set out on. 

And you'll find that the intersection of value and governance is the sweet spot, because really the best governance is just unlocking the limit on what you view as a possibility. I think some people view governance as really just your books and records and your rules and following that, but it's really about asking the questions to find the best answers. What's new? Why are we doing it this way? What else can be done? And you're really pushing the boundaries in a very healthy and methodical way. And that's why partnering with management of the companies and asking those questions is a really healthy way to produce the greatest outcomes. And it doesn't actually have to start with the acronym ESG, it's starting from a place of pure curiosity and value. 

Elana Margulies-Snyderman: 

Patrice, being a woman leader in the business is very inspiring and I want to hear your thoughts on what you're doing to inspire other younger women to follow in your footsteps. 

Patrice Bonfiglio: 

So, I love talking about my experience because I've had a very positive one. In a male-dominated industry, I've always felt like I could be myself, which may not be everyone's experience. But I was that person that extremely curious. And I've really done so many different jobs throughout my career starting with accounting that I found no matter what firm or role, if I was showing true interest in whatever the men around me were doing, that they would show me more and more. 

And I think for women in this industry, if you have to learn a certain level of knowledge to do your job, go deeper and ask more questions and find whatever really sparks your curiosity and just dive in. Because those natural conversations are what can inspire and form relationship. Those natural conversations are going to be the ones that someone can think back to when they're talking about promotions or board seats or recommendations or sponsorship or mentorship. And then you're alleviating the need to have grown up in the same area or gone to the same business school or do any of those things that are involved with with prior relationships. It's forging a new path, and you're an interesting person by being interested. 

Elana Margulies-Snyderman: 

Patrice, we've covered a lot of ground today and wanted to see if you have any final thoughts or share your firm's future plans with us. 

Patrice Bonfiglio: 

I think it's always a good idea for investors to think about how they can tap into activism and especially the form of activism where you are focused on one sector because then you know that the team is specialized and honed in on all of the peculiarities and nuances of that strategy as opposed to being generally just activists in nature. So, I welcome anyone to reach out to me for a conversation and to learn more about Sarissa. 

Elana Margulies-Snyderman: 

Patrice, I want to thank you so much for sharing your perspective with our listeners. Thank you very much, Elana. It's great being on. And thank you for listening to the EisnerAmper podcast series. Visit eisneramper.com for more information on this and a host of other topics. And join us for our next EisnerAmper podcast when we get down to business. 

transcribed by rev.com