D.A. Wallach – Investing in Healthcare

**D.A. Wallach** (0:04)
Hello and welcome, everyone.

**Patrick O'Shaughnessy** (0:05)
I'm Patrick O'Shaughnessy, and this is Invest Like the Best. This show is an open-ended exploration of markets, ideas, methods, stories, and of strategies that will help you better invest both your time and your money. You can learn more and stay up to date at investorfieldguide.com.

**SPEAKER_1** (0:24)
Patrick O'Shaughnessy is the CEO of O'Shaughnessy Asset Management. All opinions expressed by Patrick and podcast guests are solely their own opinions and do not reflect the opinion of O'Shaughnessy Asset Management. This podcast is for informational purposes only and should not be relied upon as a basis for investment decisions.
Clients of O'Shaughnessy Asset Management may maintain positions in the securities discussed in this podcast.

**Patrick O'Shaughnessy** (0:48)
My guest today is DA. Wallach, one of the most interesting investors I've come across. He is the former lead singer of the group Chester French and the former artist in residence at Spotify where he was also an early investor.
While he's an early investor in companies like SpaceX, his focus the last five years has been on early stage healthcare and life sciences investing, which is the topic of this conversation. We discussed the entire health investing ecosystem. This was recorded in the very early days of the coronavirus outbreak. So while we touch on it briefly, it isn't the primary focus and I intend on returning to more traditional episodes like this one in the coming weeks, meant to be evergreen conversations.
Please enjoy this conversation with DA.

**D.A. Wallach** (1:26)
Wallach.

**Patrick O'Shaughnessy** (1:31)
So DA. I thought a really fun place to start would be in and around 2015 with a transition from sort of music and some early investing into your keen focus now. Maybe you can describe what got you so interested in the world of healthcare and specifically in the investing in early stage healthcare businesses.

**D.A. Wallach** (1:50)
So, I had been investing, as you allude to, in a wide range of early stage consumer technology companies, and that included most notably Spotify, which was sort of my pivot out of my life as a musician into my life investing. And I think what has always guided me is kind of a dual motive, on the one hand, looking for where you can make a lot of money, but also where you can have a great impact. And I kind of resist the term impact investing, because I almost think all investing should be impact investing. In other words, it's not a good thing in general to be directing your power as an investor or any other kind of person at things that are bad for the world. So I've been superficially interested in healthcare, because obviously it's pretty central to all of our lives and our family's lives.
And we all understand healthcare, or most of us do, who are 40 or under, primarily understand the healthcare industry from the perspective of a relatively healthy person.
So when I initially got interested in the sector, I was kind of thinking about how terrible my experience as a sort of average healthy patient was. And that came down to sort of the indignities of going to the doctor's office and having to wait for an hour and be treated like cattle. And then they move you into an exam room and you wait for another hour. So it just struck me that as a consumer technology investor, this was one sort of consumer experience that had yet to be significantly modernized. And that was kind of my door in. And the first investment I made in healthcare was a company called Doctor On Demand, which is a telemedicine service. So their product is very simple. You install an app on your phone, you open the app, and you're thrown into a video chat with a physician.
And through a video conference, it's actually possible to question you about your symptoms and to diagnose a pretty wide range of conditions. And even subsequent to that, to prescribe medication without you needing to be face to face or at least in person with a physician.

**Patrick O'Shaughnessy** (4:05)
What is, do you think, the major or best way to categorize early stage health care investments? Meaning, is there a taxonomy? Is it biotechnology, pharmaceuticals, care services, kind of similar to how the public markets would operate in health care? Is there a useful way that you sort of divide and conquer the different types of businesses?

**D.A. Wallach** (4:25)
Yeah. So the highest order taxonomy, I think, would be to distinguish between, call it biopharma and health care.
So they're all integrated, but the way I think about it is biopharma refers to the products of medicine, and that would encompass drugs, diagnostics, medical devices, and potentially research tools. And then health care is sort of the delivery system by which we get those products to patients. And then of course, it also includes in the delivery side, services that are provided by physicians like surgery. So the health care economy can roughly be broken down in this way, the products of medicine on the one hand, and then you could think of it as the stores on the other.