In October, New York-based investment firm Miller Tabak launched the Health Care Transformation Fund (MTHFX), which invests in managed care, biotech, pharmaceuticals, and medtech companies. Its top holdings include New York area pharma giants Bristol-Myers Squibb (NYSE: [[ticker:BMY]]) and Merck (NYSE: [[ticker:MRK]]), as well as Boston-based biotech Momenta Pharmaceuticals (NASDAQ: [[ticker:MNTA]]).
The fund’s manager, Les Funtleyder, is the author of the book Health Care Investing (McGraw Hill 2009), which is part of the curriculum at Columbia and other universities. Funtleyder isn’t shy about predicting that investors in 2013 are going to look back and wish they had invested more in healthcare today.
Funtleyder took some time recently to talk with Xconomy about why he believes the upsides in healthcare outweigh the downsides.
Xconomy: Why the name “Health Care Transformation?”
Les Funtleyder: The overlying theory of this fund is that we want to invest in companies that can improve quality, lower costs, increase access, or innovate in healthcare. That’s what we’re looking for on the long side. On the short side we’re looking for companies that do the exact opposite of that. Anybody who causes damage to the system—like increasing costs or making me-too drugs—we’re looking to short.
X: In what sectors of healthcare have you increased your presence recently?
LF: The action this year in terms of upside has been in biotech, and in particular in the anti-infectives like drugs to treat hepatitis. And there has been a little action in oncology, too. Investors are moving back into healthcare in general, but they seem to be a little bit more optimistic about biotech companies, whereas in the last two or three years they really hadn’t been.
X: What are some off-the-radar companies in biotech you like?
LF: I point to Opko (AMEX: [[ticker:OPK]]) and BioCryst (NASDAQ: [[ticker:BCRX]]). BioCryst is in gout, Opko is in a number of areas. They haven’t worked yet. They’re going to take time to develop. But we go and look at asset values. We’re looking for a collection of assets that’s trading below what we call the private market value. So if we wanted to go out and
