Hedge funds are often seen as predators, short-term investors only interested in making a profit, whatever the cost. Alex Denner, president and founder of Sarissa Capital, provides a more nuanced view, in which the creation of value rhymes with the general interest.
Leaders League: How do you see the pharmaceutical sector reconciling the search for profit with the need to take into account the greater good?
Alex Denner: I believe that the interests of the pharmaceutical industry and society at large are aligned. The profitability of the industry is determined by the meaningful value it brings to patients, doctors and healthcare payers thanks to the development of more effective, less expensive medicine. A reasonable level of profit is important to guarantee the continuous distribution of capital necessary to support the development of innovation in a high risk sector that features multi-annual payments. Recent medical progress – new cancer treatments, treatments of genetic diseases, etc. – and those to come are impossible without investment. While looking to make a profit (but not only) pharmaceutical companies advance the greater good of all.
How to harness this approach as a growth lever?
Despite numerous high-profile examples of bad pupils operating predatory pricing policies, the majority of pharmaceutical companies act responsibly and are actively engaged in improving the health and wellbeing of people all over the world. For this reason, a significant part of their revenue is dedicated to financing new research programs that are essential to both the viability of their business and the ability of the industry to offer the best possible treatment to patients.
How far should the government go in regulating the activities of businesses so that they act in the interest of the general public?
I believe that the role of government is to carefully establish the ground rules in order to ensure that the interests of the principal stakeholders are taken into consideration, then let the decision making process take its own course. Regulators already play a major role in the safety and effectiveness of the medication on the market, guarding against any underhand activity regarding commercial practices, for example, and enforcing intellectual property rights to encourage investment. However, the majority of the other problems the industry faces are better handled by the companies themselves. Too much regulation can stifle creativity and lead to a waste of firms’ resources, which can have a disastrous impact on an industry as innovation-dependent as pharmaceuticals. If the government believes that certain activities are being neglected, such as the development of vaccines, they should call upon the private sector to act within the existing framework.
Interview by Yacine Kadri
(Translation: Simon McGeady)