Piper Jaffray’s Gitkin: Ophthalmology Occupies “Prominent Space” in Minds of Investors
Andrew Gitkin, managing director and head of West Coast biotechnology investment banking at Piper Jaffray, says ophthalmology remains one of the “top two or three” most exciting sectors within healthcare. “Even you go year by year, and you can look at how many deals are getting done in ophthalmology. And sometimes it’s the top 2 or 3, sometimes it’s top 7, top 10, whatever it might be. But that’s sort of quantitatively. From a qualitative standpoint, when you meet investors and you talk to them one on one, or as a banker when I meet executives at large companies who are looking to consolidate or grow, regardless of what the numbers say, ophthalmology is always a pertinent area of interest for all of the positive fundamentals that I referenced earlier.”
Andrew Gitkin is a managing director and head of West Coast biotechnology investment banking at Piper Jaffray. Mr. Gitkin has 20+ years of experience, most recently at Moelis & Company, where he was a senior vice president in the life sciences investment banking group.
Tom Salemi: This is Tom Salemi from OIS TV. I’m at OIS@ASRS and I’m here with Andrew Gitkin, Managing Director and head of West Coast Biotech Investment Banking at Piper Jaffrey. Thanks for joining us.
Andrew Gitkin: Happy to be here. Thank you.
TS: Thanks for giving the presentation today. I caught a good part of it. I had an interview going on, but I did kind of come in the tail end of it. And covering ophthalmology, I’m tracking all the deals that are going on. Obviously the summer’s been a lot of interesting acquisitions, the InFocus deal. I’m not going to ask you to focus on anything specifically, but there seems to be a lot going on. The Glaukos IPO, the M&A. Is it because I cover ophthalmology that I think there’s a lot going on? Or is ophthalmology really one of the – hot might be the word, but one of the more active sectors within life sciences?
AG: I think ophthalmology as a whole occupies a pretty prominent space or mind share amongst investors. And I would say that both for private investors, but also even public investors for a whole host of reasons. Really, it’s been an area of tremendous innovation. It’s been an area that has had a lot of notable and high flying M&A exits, which creates a lot of excitement. And there’s been, from a fundamentals standpoint, a lot of nice components to the overall industry, really around reimbursement and pricing. And from a consolidation standpoint, there tends to be a lot of activity. So when you sort of take it all together, it absolutely continues to be, I believe, one of the top 2 or 3 more exciting sectors and also one of the top 2 or 3 areas of most interest among investors. And even you go year by year, and you can look at how many deals are getting done in ophthalmology. And sometimes it’s the top 2 or 3, sometimes it’s top 7, top 10, whatever it might be. But that’s sort of quantitatively. From a qualitative standpoint, when you meet investors and you talk to them one on one, or as a banker when I meet executives at large companies who are looking to consolidate or grow, regardless of what the numbers say, ophthalmology is always a pertinent area of interest for all of the positive fundamentals that I referenced earlier.
TS: We’ve obviously been talking about the later stages, about the M&A. But this is an ophthalmology innovation summit. We’re talking about innovation. And the two are connected. I mean you can’t have that later stage acquisition if innovation hadn’t happened earlier on. So what’s your sense of the innovation side of ophthalmology, from where you sit, from looking from high above? Do you see a lot of interesting things going on that have you maybe excited 5 or 7 years down the road, however long these ideas take to develop into products and get to patients?
AG: This is a very exciting time in ophthalmology innovation, drug discovery, which is an area I tend to focus more on in my position at Piper Jaffrey on the biopharmaceutical side. You see a number of the technologies or approaches that are really in a renaissance. Gene therapy, for example, which has been a very exciting area in the last couple years.
AG: You see a number of the leaders in that sector really moving forward very exciting products in ophthalmology. And perhaps more than other therapeutic areas where gene therapy has been tested and experimented with, ophthalmology right now has probably one of the better success track records. And I think that bodes really well, particularly for back of the eye type indications, which continues to be an area that, if I had to choose between back or front of the eye, tends to get a bit more of the investment dollars, a bit more of the focus from investors. But I would also point out very quickly that from the front of the eye perspective, a number of exciting approaches ongoing there, too, in terms of correcting vision in a variety of different ways, both through pharmaceutical approaches and device approaches. And one of the things I love about my job, at least, is as a banker you’re sitting on – you’re the front lines of witnessing a lot of this innovation. And ophthalmology, every bit as much as all the hype that oncology gets and it’s justified, is just as innovative. And if you think about how treatment will change for a whole host of significant indications over the next 5 and 10 years, it’s going to be dramatically different. Dramatically different. And when I talk to optometrists or ophthalmologists, surgeons, there are a number of indications where you think the treatment is fine, and you think you’re providing the patient or the person with a nice set of options and outcomes. But when you really start to drill down into it, there’s still very much a need, a medical need, as much as you find in other indications, which I think continues to drive innovation, and honestly, capital formation into the sector.
AG: So I think we’re on the front end of what will be a very exciting I call 5 to 7 year period in ophthalmology.
TS: And again, connecting the later stage to the earlier stage, coming back out to later stage, we’ve seen so much activity at the highest end. I mean we covered Pfizer-Allergan stories for as long as it went on. And there was a lot of – looking at that deal for a second, there was sort of a lot of hand wringing that if an Allergan becomes part of a Pfizer, does that diminish the influence of ophthalmology, ophthalmology sector. Because I do think one of the strengths of the ophthalmology sector is the fact that there’s 5 or 6 kind of real robust players elbowing at each other for different products. What do you see at that level? Do you see any consolidation coming? Has that sort of dance come to a close? Is there still a lot of discussion and maybe whispers about this company or that? What do you see at the highest level in ophthalmology?
AG: Yeah. I think the players that are very much in ophthalmology, it’s central to what they do, continue to be very active in trying to build out their capabilities and fill out their product opportunities. There are a number of companies, maybe more on the fringes where they may have one foot in ophthalmology and a foot somewhere else, and when you talk to those types of companies, they are absolutely looking for ways to expand their footprint. Some of them are coming at it from a device standpoint and are looking for ways to maybe even integrate pharmaceutical approaches into their device platform. And others are pharmaceutical companies who haven’t really had a presence necessarily in ophthalmology, but may have it in sort of other ways that are tangential to other disease that they treat, and are looking for other ways to get into it as well. So I think from a consolidator of large company perspective, the ones that are there continue to be very active. I think they’re constantly looking for ways to improve their product offerings and their development programs. But I’d also point out there’s a number of other companies as well, without getting to names, who have expertise, let’s say, in optics or vision from a different perspective, and have a mandate to expand into healthcare. Well, the crosshairs really do line up pretty well in ophthalmology. And we do see those types of companies very much getting part of the conversation now.
TS: So ophthalmology is an intersection of so many different disciplines.
TS: Yeah. So is it possible that we may see some more players added to this roster going forward? We may have some new masters of the industry up there on our stage in a year or two?
AG: I think if you were to ask those companies in the protected atmosphere of a board meeting when they’re talking about 5 year and 7 year visions, they would like to think of themselves potentially being that way. And I think they have the wherewithal to do it. But we’ll see. It’s a very competitive sector. The ones that have a leg up, the ones that we all know the common names, you know, the top 3 or 4 guys who are in this space, make it a little harder for new companies to come into it because they have an ability to compete in a way that they can. They have more knowledge, they can move quicker because they’re more comfortable, so they understand risk better, if you will. They get more comfortable with it. And they can leverage those sort of expertise, if you will, to be ultra-competitive in a potential sale process. So for those that wasn’t to get into it, they’re going to have to, I think, get a little bit into – get a little uncomfortable, if you will. And that will come down to what their true commitment is. So you won’t really know what it’s going to look like until they test it. But my sense is that you are going to see a couple of other names added to that list of maybe not quite the top 3, but there’ll be a close sort of tier 2 beneath it that could be very, very acquisitive and active.
TS: Interesting. And you mentioned earlier you cover biotech primarily. And you referenced oncology. I’m curious. Where does ophthalmology sort of fit in – I don’t know if there’s a pecking order; it’s not the right term – but within other diseases in the biotech sector? Is it still one of the smaller ones that’s growing? Or where would you sort of place it in the specialties within biotech?
AG: It’s not going to be like oncology.
AG: Understandably. And that’s OK. But when you look at how sell side research analysts across the Street, what their coverage list looks like, many of them have companies that are ophthalmology companies in it. And because as you said a few moments ago, it’s a cross-section. Ophthalmology is a real cross-section of a number of different specialties. And as different type of drug discovery and interventional approaches have evolved in the last couple of years – cell therapy, regenerative medicine, gene therapy, understanding just biology better now than we ever did before, obviously – that’s ripe for biotech minds to think about it and understand how there could be a nice nexus in their expertise. And we’re seeing that. I keep coming back to gene therapy. We’re in a very exciting area that didn’t really think about that in ophthalmology until the last couple of years. So I believe that alongside oncology, alongside immunotherapy indications or autoimmune indications, infectious disease type indications, you’re going to see ophthalmology occupy a place there of real mind share amongst the biotech community. All of which will be facilitated if we continue to see positive data. We saw some nice data last year out of Spark, and a late stage ophthalmology indication. And if we get more of that, and there is more sort of coming, if you will, in terms of data events, that would only sort of add fuel to the fire. And I think you’ll see more mind share, if you will, both from a sell side perspective on Wall Street and also on the buy side perspective – think about investors – be allocated to it.
TS: That’s a perfect segue to my final question. What are we going to be looking back on in OIS 2018? Over the next couple of years what successes, what milestone achievements do you hope to see happening in this space?
AG: Exquisite solutions to afflictions that affect a lot of people. Absolutely. I think we’re in a period of time now where I think the technology has gotten so advanced, clinical trial design has gotten so refined that companies now that may not be so large and have the resources of a large company are going to be able to tap into the potential of products on their own that treat significant markets. And I think we’ll begin to see evidence around that in the next couple years, which will create a very interesting dynamic in the coming years. So I think if we’re in 2018 and we’re sitting here talking, we‘re going to look back and there’s going to probably be 2 or 3 real landmark developments. Maybe not on the market yet, but where it’s essentially been de-risked and you know there’s a signal there, and then you extrapolate that to what the commercial potential could be, both what could be both on market as well as potentially off label in terms of how it may work, I think you could see some very significant opportunities.
TS: Great. I look forward to your presentation at OIS 2018. Thanks for joining us.
AG: Happy to be here.