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J.P. Morgan Healthcare Conference: The Mood Music Insight

J.P. Morgan Healthcare Conference: The Mood Music Insight

With political uncertainty looming over both sides of the Atlantic, the future of the healthcare industry is more blurry than bright.

In its 37th year, the 2019 San Francisco-based J.P. Morgan Healthcare Conference (‘JPM19’) continues to illuminate developments within the ever-evolving biopharmaceutical sector.

With an estimated >40,000 life science executives in San Francisco, the ‘meeting’ or more accurately, collection of meetings, brings together a blend of industry leaders, emerging companies, innovative technology creators and investors. It enables like-minded individuals to rub shoulders, discover industry trends and pursue their agendas. It is ultra-speed-dating for the business professional, requiring long days, long nights and super stamina.

To gain insights about the ‘mood music’ from the JPM19 from those that were there, we invited six key industry players to share their experiences at our ‘BioWednesday’ event, hosted in partnership with One Nucleus. The speakers were:

• Mike Ward, Head of Content, Informa Pharma Intelligence
• Madeleine Armstrong, News Editor, Vantage
• Kevin Johnson, Co-founder and Partner, Medicxi
• Peter Pack, CEO, Crescendo Biologics
• Andy Richards, Chairman, Congenica
• Nooman Haque, Managing Director of Life Sciences and Healthcare, Silicon Valley Bank

Is it worth it?

One question underpinned the session: is the event still the must-attend, business-building week for the whole industry or is it just the fear of missing out that compels us to continue going?

Opinion from the panel was split.

Mike Ward reflected positively on the atmosphere – despite the unfortunate January weather – and spoke of the high-profile, high-spend deals which took place (such as the $74bn Bristol Myers Squib-Celgene merger announced just before). However, from a media perspective, the rest of the news announcements were unsurprising and lacklustre, and overall blurred into one.

Andy Richards was an emphatic ‘yes’ but, when questioned about giving any overarching commentary on the conference, he said: “…it’s like the “Total Perspective Vortex” from “The Hitchhiker’s Guide to the Galaxy” - so vast an occasion that no individual could possibly experience it as a whole”.

While attendance at the formal JPM Healthcare investor conference has stayed relatively static, Andy noted this did not recognise the increasing volumes of people who flood San Francisco each year to hold meetings of their own. He noted that the WuXI Apptec and Biotech Showcase meetings had become significant meetings in their own right. He also noted that this year saw many new faces on the block from the tech sector, such as Google.

“Sitting in the UK, being served by a single payer in the form of the NHS, you do not get a true picture of the pace of change that healthtech is making to the US ecosystem” he said, “For US payors it’s becoming all about outcomes, however they are achieved.”

Peter Pack, CEO of Crescendo, added that it was often the chance encounters in departure lounges, hotel lobbies or at the myriad of after parties, that resulted in the most meaningful interactions and made the journey worthwhile.

Though many smaller companies may be discouraged from future attendance by the cost of flights, hotels and conference attendance itself, the panel highlighted ways in which costs can be reduced, including travelling multi-leg vs direct flights and using Airbnb accommodation vs hotels.

Leading VC, Kevin Johnson was another who felt attendance was a necessity regardless of the growing expense. One of his top tips was when planning meetings, “…keep some ‘white space’ in the diary”. He deliberately kept open gaps in his meeting schedule to allow for unplanned interactions because one never knew who one would meet in the street!

For one member of the panel the mood was more sour than sweet. Madeleine Armstrong likened the event to “… fast food after a long night; attractive in theory but ultimately disappointing”. The utter scale and rising costs of the event made navigating the sea of suits feel more flash than substance provoking her to consider an ‘SF exit’. Presentations and interactions had become increasingly superficial leading Madeleine to ask the question:

How many meetings at J.P. Morgan actually result in a deal?

While a rational question, two of the corporate experts in the room – Andy Richards and Kevin Johnson – recognised attendance not as a means to bring deals to life but rather to avoid killing them.

For companies seeking investment/deals, it was imperative that they be present – even if just to remain on the radar of investors or big pharma for future discussions. Missing out on one event, one conversation, one important interaction could be all it took to drop off someone’s radar and miss out on a potentially transformative opportunity.

Friends vs frenemies

The competitive strains starting to arise between rival investors did not go unnoticed.

The Life Sciences VC environment has in recent times been characterised by the syndication of like-minded VCs. However, Kevin noted that competition is gradually heating up with the friends vs frenemy ‘cycle’ turning less friendly again as VCs race to find the best companies to invest in.

The investors in the VC firms are also beginning to look a little less enthusiastic about investment. To meet the need to invest big, the VCs are raising larger funds, more frequently. This increase in deployment of cash usually marks lower returns for the LPs. Nonetheless, as Nooman Haque observed, LPs are still investing as the return is better than at the current interest rates. He summed up the situation perfectly, noting that the period from investment to return is now only 2.9 years - less than a leveraged buy-out. As he said: “it’s either bonkers or brilliant!”

This competition has also intensified geographically as US and Chinese VCs scour Europe for the ‘cheaper’ investments on which to make returns - not possible in their own territories. Large ‘war chests’ of cash are being offered providing many opportunities for companies. The issue will come about when the uplift expected by private investors cannot be achieved any more on exit – either via the equity markets or through acquisition.

Peter was first to observe the more prominent Chinese presence at JPM19, particularly in investment, with universal agreement from the rest of the panel. Nooman Haque added that, perhaps unsurprisingly, Chinese investors are being gently encouraged by the Chinese government to specifically avoid investing in the US while it is under Donald Trump’s leadership. Companies seeking investment are meanwhile feeling pressure to choose between the East or West for their investors; a choice which could potentially limit their options in the future.

Finally, audience member Sally Bennett raised the question about the return possible for investors once a private company goes public given the rising valuations. As a public market investor, she found the situation ‘petrifying’ as more $1bn ‘unicorn’ companies come to the market, still expecting a 1.3x uplift in value upon IPO. “I’m out”, she said firmly. “It can only go one way”.

Identifying the ‘grit in the oil’ that could catch-out the market in 2019

Finally, predicting outcomes of the year ahead was deemed a ‘fool’s errand’ in the current political and economic climate.

Instead, the panel identified key factors poised to potentially wreak havoc on the healthcare market. The listed answers ranged from Trump and his healthcare reforms to exponential price increases (driven by the desperate race to buy assets), the increased East vs West polarisation and the huge impact of value-based healthcare. 

As always, there are a large number of factors ready to drive or slip up this $1.3 trillion market. However, as everyone agreed, the ride is never boring, and that while San Francisco continues to host the meeting, the city in the second week in January would continue to be inundated by the biopharma industry…


Melanie Toyne-Sewell
Managing Partner

Melanie Toyne-Sewell
Managing Partner