How health care in the U.S. may change after covid-19

Dr. Brian Abrahams, Co-head of Biotechnology Equity Research at RBC Capital Markets, joined Yahoo Finance to discuss the health care outlook post covid-19.

Video transcript

SEANA SMITH: Let's turn to the healthcare industry because just over 50% of US adults are now fully vaccinated. So let's talk about what this means for the larger healthcare industry. And for that, we want to bring in Dr. Brian Abrahams. He's the co-head of biotechnology equity research at RBC Capital Markets. Dr. Abrahams, great to see you. We know RBC held its healthcare conference last week. COVID, of course, has been dominating your industry over the past year and a half. Now that it seems to be getting under control, at least here in the US. Talk to us just about what you heard last week and, really, how optimistic the industry is, going forward.

BRIAN ABRAHAMS: Well, first off, thanks so much for having me on. We're certainly seeing a lot of encouraging signs here in the US. 40% of the country fully vaccinated, over half with at least one shot, as you mentioned. Whether we ever realistically will get to a point in the near term where COVID is completely eradicated, where you probably need roughly 2/3 to 3/4 of individuals being immune is unclear, though, due to vaccine hesitancy and much lower vaccination rates outside of the US, where the pandemic is still raging. But I think what's important is that at least here in the US, we're getting to a point of much greater disease control and substantially lower transmission.

And for the first time, around mid-April, the case fatality rate for COVID-19, which is the percentage of people who die after testing positive, dropped below 1%, with the highest risk segment of the population now vaccinated. And that's a key metric, I think, both for society as a whole and the delivery of healthcare. And we saw some of that optimism reflected in the companies we spoke with at our recent healthcare conference.

ADAM SHAPIRO: Dr. Abrahams, when we talk about healthcare-- and it's going to be much larger, obviously, than COVID and vaccines and treatment for COVID-- what's coming down the pike, though, in developments of treatments from what we've learned from dealing with COVID?

BRIAN ABRAHAMS: Yeah, absolutely. So there's a lot of exciting therapeutics and development across the biotech space. And that's really been facilitated by a revolution in the past decade or two in our understanding of many disease areas and their underlying biology. And that's really been showcased tremendously over the last year as biopharma companies have pivoted towards the treatment and development of treatment of vaccines for COVID.

Now, we've also come a long way in a lot of different disease areas, like multiple sclerosis, cystic fibrosis, and hepatitis C. But there's still improvements that can be made and many diseases where currently available treatments have significant limitations-- Alzheimer's, ALS, pancreatic cancer, just to name a few examples. Some of the ones that we're most excited about and keeping a close eye on are a gene therapy for muscular dystrophy from Sarepta, a breast cancer drug from a culture [INAUDIBLE] from Gilead, and a novel cocktail for schizophrenia from a company called Karuna.

SEANA SMITH: Dr. Abrahams, we know that there's been appetite for M&A out there in other industries. What does that look like within the healthcare industry? Did you get a sense of that last week?

BRIAN ABRAHAMS: Yeah, absolutely. So it's a really important topic because I think one of the reasons that the biotech sector has lagged over the past few months is that there has been a slowdown in M&A over in the first half of the year. And so coming out of our conference, after speaking with a lot of companies about their business development plans, we actually did an analysis looking at the potential for future M&A in the space. And we found that there's several fundamental reasons why this should pick up in the back half of the year and we think reignite interest in the biotech sector. Biopharma balance sheets remain strong. Patent cliffs by the end of the decade for a lot of companies or maturing franchises create a need to bring in external assets to foster growth and revenue sustainability.

And with the sector down in the first half of this year, valuations are more attractive. And actually, when we look over the past five years, any sharp downtick in M&A activity over half a year has always been followed by a sharp uptick. And in fact, we saw an acquisition just this morning of a biotech company, Constellation. So that's something we're going to be looking towards more and seeing more of in the back half of this year.

SEANA SMITH: Dr. Brian Abrahams, co-head of biotechnology equity research at RBC Capital Markets, always great to speak with you.