Science trumps politics for CI health-fund manager

Discoveries will produce "the next Pfizers," says Andrew Waight.

Diana Cawfield 8 December, 2016 | 6:00PM

Andrew Waight, who holds 75% of the assets of CI Global Health Sciences in U.S.-based companies, is unconcerned about the political environment following Donald Trump's victory as U.S. president-elect.

"We really don't know what Trump's long-term policies are." says Waight. "He is so unpredictable. Going forward, I am sort of bullish about the opportunities because, one, the presidential cycle in the U.S. is behind us, and two, just the science that's going on. I can't emphasize enough just how exciting that science is."

Waight thinks that medical discoveries and initiatives making their way towards the market and being validated, "will produce the next Pfizers of the world." (U.S.-based health-care giant  Pfizer Inc. (PFE) provides multiple pharmaceutical drugs and medical devices to consumers.)

Apart from being the world's biggest consumer of health care, the U.S. is a deep market in terms of investment capital and innovation. "So you've got the backing for biotech companies as they emerge," says Waight, "and you get the depth of investment opportunities as they mature."

Also encouraging for investors are the big-picture drivers of health care, says Waight. Populations in the major developed markets are aging, and the bulk of health-care expenses occur in the final years of people's lives. Another driver is the adoption of Western-style practices by medical-services providers around the world, leading to a volume expansion for medical products and services. "Drugs that you're selling in the U.S. and Europe are finding a new lease on life in some of the emerging markets," says Waight.

The CI fund is positioned for some of those opportunities, taking a global view. Apart from the hefty weighting in the U.S., the mandate includes investments in Brazil, Europe, Japan and one holding in China.

The Chinese holding is NASDAQ-listed China Biologic Products Inc. (CBPO), a biopharmaceutical company. The company is engaged in research and development, manufacturing and sales of plasma-based products to hospitals and inoculation centres for life-threatening emergencies and diseases. "Where we've tended to play has been in franchises that have succeeded in the West," says Waight, "and plasma-based treatments have been a very successful business model in the U.S."

In China there are only one or two players that have Western-style management teams and they seem to have state backing. Waight says there are risks associated with investing in China, such as those related to governance, politics and regulations. As a result, he limits the exposure to China to 2% of the fund.

Waight focuses on innovative companies that are providing drugs or services of medical devices that offer substantial benefits. Pertaining to drugs, he looks for companies that can fulfil unmet medical needs.

Many of the CI fund's holdings represent companies that offer drugs much more targeted to specific diseases, have fewer side effects and produce the best results. According to Waight, that's reflected in names in the fund such as Swiss-based  Roche Holding AG (RHHBY), a global pharmaceutical and diagnostic company, with its wide spectrum of medicines.

Another top holding is NxStage Medical Inc. (NXTM), a U.S.-based dialysis company. The U.S. dialysis market is dominated by big clinics where people go for three or four hours, multiple times a week, to get their blood purified from toxins. "What NxStage offers," says Waight, "is the same benefit at home without having to travel. You can do it more frequently, and there's evidence to suggest that that is beneficial."

NxStage enables users to hook themselves up to a portable dialysis machine, which NxStage sells, and have their blood cleaned as they sleep. "So lots of benefits," says Waight, "and we're early stage."

U.S.-based  Ionis Pharmaceuticals Inc. (IONS), also among the top holdings, is engaged in drug discovery and molecular treatment for genetic disorders and infections. Ionis's business strategy involves negotiating distribution deals that generate royalties. "You can model out what you think the revenue and the penetration are going to be, and the pricing," says Waight. He likes the fact that the company is "not burning cash," since its royalty arrangements help cover R&D costs.

As the sole manager on the fund since 1999, Waight draws on extensive health-care experience. Before joining the investment industry in 1993, he managed three medical clinics in Toronto. He holds an honours bachelor of science degree in genetics, a master's degree in biochemistry, and an MBA, all from the University of Western Ontario.

"You obviously like to go to the labs and talk to the researchers that are doing the actual hands-on petri-dish work," says Waight, "but a lot of it is also the scientific understanding of the mechanisms of the drugs, or the best cost-benefit approach."

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
China Biologic Products Holdings Inc116.95 USD0.29
Ionis Pharmaceuticals Inc64.61 USD0.12
Pfizer Inc38.29 USD0.68
Roche Holding AG ADR38.57 USD0.36

About Author

Diana Cawfield

Diana Cawfield  Diana Cawfield is an award-winning writer who has been a regular Morningstar contributor since 2000. Her numerous publication credits include the Toronto StarAdvisor's Edge and Chatelaine, as well as the Canadian Securities Institute's online educational services.