Matt Arens has been fortunate to combine two distinct passions in his career: investments and life sciences. Since entering the investments field in 1997, Arens has followed small-cap stocks, with a particular focus on identifying companies with high growth potential in the health care sector.
Prior to founding First Light Asset Management in September 2013, Arens was president and senior portfolio manager at Kopp Investment Advisors. While at Kopp, he served as the sole portfolio manager for the firm’s health care-focused investment strategy.
Arens graduated from Purdue University with a bachelor of science degree in financial planning. He has been a keynote speaker at the PricewaterhouseCoopers CFO Forum, and has been featured in publications, such as BusinessWeek, Barron’s, Pensions & Investments, Investment News, Minneapolis Star Tribune and St. Paul Pioneer Press.
Will the future of healthcare be most significantly defined by reining in costs or accelerating outcomes?
With U.S. health care expenditures projected to exceed $5.5 trillion by the middle of the next decade,1 there is nothing that will define healthcare more than our ability to rein in costs while simultaneously providing excellent patient care. The benefit of any medical advancement must be evaluated within the context of its cost to the healthcare system. If the system is unable to support a costly healthcare solution that can improve people’s lives, its benefits are largely lost. Fortunately, there are brilliant entrepreneurs who recognize this tremendous need and are advancing some amazing solutions that I believe will bend the cost curve and dramatically change the way health care is practiced in the United States.
What is the definition of value in healthcare today and what should it be?
People often relate value to saving money in the short term. However, I believe one has to consider the benefits a solution provides and its total cost when defining value in healthcare. For example, a vaccine to prevent a disease or a therapy to cure a disease may be viewed as expensive in the short term, but, over the life of a patient, the ability to provide medical preventions or cures can represent tremendous value when compared to the costs of simply treating a chronic disease.
What’s the biggest blind spot in healthcare today?
I believe one of the biggest blind spots in health care today is the “hand-off” as patients move from private insurance to Medicare. There are some incredible solutions on the horizon that can effectively prevent or cure disease, but until these two systems are aligned, the complete burden of cost will fall on private insurers who will — out of necessity — prevent access to these potentially game-changing therapies. I believe the way to achieve this alignment is by moving away from the current model, which is based on a massive one-time payment for treatment, toward a system that more closely resembles an annuity model agreed upon by all constituents. Only then can we cost-effectively advance treatments — such as organ transplant and gene therapy — that in the short term look expensive, but over a patient’s life may actually provide tremendous value.
What’s your company’s or sector’s biggest blind spot?
Many people may assume that because First Light invests solely in healthcare companies, our staff is full of MDs and PhDs. That is not the case.
We do have multiple team members who have been investing in the healthcare industry for more than 20 years. During that time, I and the other individuals have developed domain expertise and identified key areas for evaluating healthcare companies from a business perspective, including workflows, reimbursement, and intellectual property. These areas are second nature to us and, historically, we’ve been successful in approaching healthcare investing from a business and finance standpoint.
One could argue we have a blind spot when it comes to understanding the deep science within healthcare. We work hard to avoid this issue by working extensively with outside resources — MDs, PhDs, and others who are world-renowned experts in their particular fields of study. Because healthcare is such a specialized and nuanced industry, we believe it is often critical to consult with experts in areas we are researching in order to be most effective in our work.
This approach allows us to combine our business insights with our expert network’s tremendous depth of knowledge around specific disease states and treatment approaches. We feel this collaborative model is critical in turning what could be a blind spot into an area of strength for First Light.
Why is a presence in Minnesota, known as the Medical Alley, critical to your company?
First Light’s presence in Minnesota is critical to our success. We benefit from the state’s tremendous healthcare ecosystem, composed of industry titans across the healthcare spectrum, incredible healthcare systems and innovative university programs. The ability to sit down in-person with people shaping the future of healthcare without having to get on a plane is invaluable and, we believe, a competitive advantage.
What is the one thing, other than time or money, you wish you had more of?
I believe the solutions to cure some of the biggest problems in healthcare exist today. Some may be in the very early stages of development in someone’s garage, some may be advancing through the regulatory process, and some are already being presented at scientific meetings.
Knowledge around, and awareness of, these opportunities is the lifeblood of investing in the healthcare space. While incredible innovations are introduced to us each week — from gene editing and genomic profiling technologies to ground-breaking new surgical robots and solutions for detecting cancer through a blood draw — the desire to learn more, see more, and understand more is always present.
1Centers for Medicare and Medicaid Services, (n.d.) National Health Expenditure Projections 2017-2026. Retrieved from http://www.cms.gov/Research-Statistics-Data-and-Systems/Statistics-Trends-and-Reports/NationalHealthExpendData/index.html
