Feb 5, 2020 - Politics & Policy

Health care VCs haven't made plans for a Bernie Sanders win

Illustration: Sarah Grillo/Axios

Bernie Sanders still may eke out a win in Iowa, and is the consensus front-runner in New Hampshire. But most venture capitalists investing in America's health care industry — the primary target of Bernie's ire — have shoved their heads so deep in the sand that they've found water.

Why it matters: At some point, it could become a failure of fiduciary duty.

The big picture: Health care accounts for over 20% of all U.S. venture activity.

  • A majority of that is in biotech/pharma, which last year saw 866 deals raise around $16.6 billion.
  • Investors view many of those deals as binary: Either the drug doesn't work, resulting in a total write-off, or it does work and the financial sky's the limit. Strike out or grand slam.
  • Sanders pledges to limit the upside, either by limiting drug prices under the current system or (if he gets Medicare-for-all) by establishing a single, centralized buyer.

Few health care VCs I speak with are working on a Plan B in the event of their risk/reward models being made obsolete, nor are they hearing such concerns at the portfolio company level. Three main reasons:

  1. They don't believe Sanders will win. One investor told me he's "not electable." When I asked if he felt Trump or Obama were "electable" early in the campaign, he took a very long pause. Another said that contingencies will begin if Sanders gets the nomination.
  2. Even if he does win, they don't believe Sanders will get Medicare-for-all. This is the "Senate firewall" theory, and will probably prove correct. But it ignores that a Sanders victory likely comes with electoral coattails down-ballot, and the typical rule that new presidents get at least some version of their flagship policy. In this case, that could be drug price caps, which already has bipartisan support.
  3. If Sanders wins and implements his full plan, then it's such a revolutionary shift that there's not much health care VCs can do to counter it. As a Boston biotech investor told me, it's kind of like worrying about the size of your fund if the dollar begins hyper-inflating. Why bother? At that point, the whole thing is chaos.

Health care VCs also argue that industry concerns about a President Sanders will first be reflected in public market valuations, with private market valuations to follow. And one mentioned that there could be fewer deals in areas like ultra-rare disease drugs, which come with ultra-high prices, because of fears that Sanders could call them out by name.

The bottom line: For now, health care venture's strategy is see no Bernie, hear no Bernie. We'll see how long that's viable.

Go deeper: Venture capital has no guesses as to what 2020 has in store

Go deeper

World coronavirus updates

Data: The Center for Systems Science and Engineering at Johns Hopkins; Map: Axios Visuals

Brazil on Monday recorded for the first time more deaths from the novel coronavirus in a single day than the United States, Reuters notes. Brazil reported 807 deaths from COVID-19 in the past 24 hours, compared to 620 in the U.S. for the same period.

By the numbers: Almost 5.5 million people have tested positive for the virus as of Monday, and more than 2.2 million have recovered. The U.S. has reported the most cases in the world (over 1.6 million from 14.6 million tests). The U.K. is reporting over 36,900 deaths from the coronavirus — the most fatalities outside the U.S.

Coronavirus dashboard

Illustration: Aïda Amer/Axios

  1. Global: Total confirmed cases as of 8:30 p.m. ET: 5,490,954 — Total deaths: 345,962 — Total recoveries — 2,228,915Map.
  2. U.S.: Total confirmed cases as of 8:30 p.m. ET: 1,662,250 — Total deaths: 98,218 — Total recoveries: 379,157 — Total tested: 14,604,942Map.
  3. World: Italy reports lowest number of new cases since February — Ireland reports no new coronavirus deaths on Monday for the first time since March 21 — WHO suspends trial of hydroxychloroquine over safety concerns.
  4. 2020: Trump threatens to move Republican convention from North Carolina — Joe Biden makes first public appearance in two months.
  5. Public health: Officials are urging Americans to wear masks over Memorial Day.
  6. Economy: New York stock exchange to reopen its floor on Tuesday — White House economic adviser Kevin Hassett says it's possible the unemployment rate could still be in double digits by November's election — Charities refocus their efforts to fill gaps left by government.
  7. What should I do? Hydroxychloroquine questions answeredTraveling, asthma, dishes, disinfectants and being contagiousMasks, lending books and self-isolatingExercise, laundry, what counts as soap — Pets, moving and personal healthAnswers about the virus from Axios expertsWhat to know about social distancingHow to minimize your risk.
  8. Other resources: CDC on how to avoid the virus, what to do if you get it, the right mask to wear.

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Updated 1 hour ago - Politics & Policy

In photos: Authorities issue warning as Americans venture out for Memorial Day weekend

Ocean City in New Jersey on May 25. Photo: Donald Kravitz/Getty Images

Authorities urged Americans to maintain social distancing and wear masks to protect against the spread of the novel coronavirus amid reports of packed beaches and bars during the Memorial Day weekend.

Details: Law enforcement stepped up beach patrols, and there were crowded scenes in several places, notably at Lake of the Ozarks bars in Missouri and at Daytona Beach and on the Gulf Coast in Florida, per AP. Police dispersed crowds in some places, ABC notes. But many Americans did take precautions against COVID-19 as they ventured outside for the long weekend, some three months after the pandemic began in the U.S.