UBS Michael Yee: We've been quite bullish on the pharma sector

FOREIGN SUPPLY. AND THIS ALL COMES AS THE WHITE HOUSE TOUTS HEALTH CARE AFFORDABILITY EFFORTS AHEAD OF THE MIDTERM ELECTIONS. MIKE. >> ATIKA. THANK YOU. WELL, THE HEALTH CARE SECTOR HAS BEEN A STRONG AREA OF THE MARKET LATELY, THE BEST PERFORMING SECTOR IN THE PAST THREE MONTHS, IN FACT. FOR MORE ON WHERE THE SECTOR GOES FROM HERE, LET'S BRING IN MICHAEL YEE, UBS SENIOR PHARMA AND BIOTECH ANALYST. MICHAEL, GOOD TO SEE YOU. >> GREAT TO BE HERE. >> SO IT SEEMS THESE DRUG PRICING AGREEMENTS HAVE KIND OF WORKED WELL MUTUALLY. RIGHT. THE ADMINISTRATION, YOU KNOW, MAKING SOME EFFORTS ON AFFORDABILITY WHILE THE INDUSTRY GETS SOME LEVEL OF CERTAINTY, MAYBE THE TERMS AREN'T PARTICULARLY ONEROUS. IS THAT HOW YOU SEE IT? >> THAT'S RIGHT. AND SO FOR INVESTORS THAT ARE LOOKING AT. >> THIS SPACE. >> WE'VE BEEN QUITE BULLISH BECAUSE TWO THINGS ARE HAPPENING. THE ADMINISTRATION IS WORKING REASONABLY WELL WITH THE INDUSTRY TO ATTEMPT TO LOWER AREAS OF DRUG PRICING, MEDICAID, A CERTAIN SMALLER SUB SUBSEGMENT OF THE POPULATION, BUT STRIKING A DEAL. THAT'S GOOD. BUT IMPORTANTLY FOR INVESTORS, THAT THIS HAS REMOVED A LOT OF OVERHANG AND UNCERTAINTY, THAT THE ADMINISTRATIONS ARE TRYING TO HAVE DRAMATIC, YOU KNOW, OVERHAULS OF THE SYSTEM. SO BECAUSE THESE ARE NOT DRAMATIC OVERHAULS, NOT GOING TO DRAMATICALLY CHANGE THINGS THAT ARE IMPORTANT FOR INVESTORS. AND THERE'S BEEN A LOT OF M&A, AND WE MIGHT EVEN VIEW THIS AS A BIT OF THE ANTI AI TRADE. PLEASE TAKE A LOOK AT THE FBI IN SOME OF THESE PHARMA STOCKS LIKE YOU JUST TALKED ABOUT. THEY'RE STARTING TO BREAK OUT. AND WE'RE HAVING A RENAISSANCE. >> YEAH THERE'S NO DOUBT THAT IT HAS VALUE BY SOME INVESTORS ESTIMATION IN A PORTFOLIO FOR THAT ANTI A I KIND OF CHARACTERISTIC. BUT YOU KNOW THIS WAVE THAT WE'VE SEEN MAYBE IT'S JUST ANECDOTAL OR IT FEELS LIKE IT'S COINCIDENCE OF RELATIVELY BIG APPROVALS A LOT OF KIND OF CLINICAL TRIAL PROGRESS IN VARIOUS AREAS. IS THERE ANYTHING TO MAKE OF THAT? IS ANYTHING TYING THAT TOGETHER, WHETHER IT'S, YOU KNOW, SORT OF TECHNOLOGIES NOW BEING REALIZED OR SOMETHING ELSE? >> WELL, I THINK THAT FIRST AND FOREMOST, PHARMA, YOU KNOW, HAS THE MOST CASH EVER HAS BEEN SPENDING MORE AND MORE IN R&D OVER THE LAST FEW YEARS AND IS DESPERATE, OBVIOUSLY, TO PUT UP SOME GREAT NEW BLOCKBUSTER DRUGS. SO THERE'S BEEN A LOT OUT OF THAT. OBVIOUSLY, FOR THE STELLAR SUCCESS OF OBESITY, YOU KNOW, AND GLP ONE, WHICH HAVE DRIVEN A LOT OF PROFITABILITY AND SUCCESS FOR LILLY AND OTHERS, OBVIOUSLY, IN ONCOLOGY AND ALL OF THE THINGS THAT YOU'VE HEARD ABOUT WITH THE MODERNA MERCK CANCER VACCINE JUST TWO WEEKS AGO, A BIG SUCCESS OUT OF THAT. AND SO WHILE PEOPLE WEREN'T REALLY PAYING ATTENTION, YOU KNOW, THERE HAVE BEEN OVER THE PAST FEW YEARS IN A BEAR MARKET, PEOPLE ARE STARTING TO APPRECIATE AND VALUE AND GIVE CREDIT FOR. A LOT OF THIS IS HAPPENING. SO GIVEN THAT THE SPACE HAS BEEN SO CHEAP, SO UNDERAPPRECIATED, AND THERE IS A STRIKING AMOUNT OF GOOD NEWS AND M&A, THESE STOCKS CAN MOVE. AND I THINK THAT WE'RE GOING TO MOVE HIGHER BECAUSE PEOPLE ARE APPRECIATING THIS. AND THE VALUATIONS ARE NOT EXPENSIVE. SO THAT LEADS TO ALL THE GOOD RECIPE OF TAILWINDS. AND I THINK REALLY THE CHARTS ARE STARTING TO BREAK OUT. PEOPLE ARE PAYING ATTENTION AND THEY SORT OF HAVE TO YOU KNOW, REALLY BECAUSE THE SECTOR IS IS BREAKING OUT. >> WHERE WITHIN THE GROUP WOULD YOU EMPHASIZE WHERE THERE SEEMS TO BE BETTER LEVERAGE TO A LOT OF THE FAVORABLE TRENDS? YOU MENTIONED. >> I THINK, IN TWO SPACES. ONE, OBVIOUSLY, WE'VE BEEN SUPER BULLISH ON MERCK. WE GOT A LITTLE BIT LUCKY WITH THE MERCK MODERNA NEWS TWO WEEKS AGO, BUT THAT'S JUST ONE OF SEVEN THINGS ACROSS MERCK'S PORTFOLIO THAT YOU'RE GOING TO HEAR. AND THAT'S SORT OF THE HAS BEEN THE OLD SLEEPY PHARMA WITH THE BIG PATENT CLIFF. AND THEY'RE REALLY TRANSFORMING THAT COMPANY INTO A GROWTH COMPANY. SO WE THINK THERE'S MULTIPLE EXPANSION. YOU THINK YOU HEAR A LOT ABOUT THEIR NEW CHEMO ADC, SAC, TMT CANCER DRUG LATER THIS YEAR ALONG WITH THE MODERNA CANCER VACCINE. SO THAT'S ONE BIG ONE THAT'S OFF THAT PLAY. WE ALSO THINK REV MED REVOLUTION MEDICINE. THE OTHER BIG STORY EARLIER THIS YEAR THAT I'M SURE YOU HEARD ABOUT WITH THEIR BREAKTHROUGH PANCREATIC CANCER DRUG THAT CONTINUES TO PUT A BIG DENT IN LUNG CANCER. SO WE'VE REALLY JUST S