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  • Writer's pictureDane Callow

Takeaways from JPM Healthcare 2024



Many regard the annual JP Morgan’s Health Conference as a pulse check on market sentiment in the healthcare industry for the upcoming year. Cautious optimism was the main feeling of attendees after the conference on January 8th-11th. This sentiment may ring bells for those who remember last year’s similar optimism, but a flurry of announcements on Merger Monday, coupled with the Fed’s promise of an economic soft-landing and potential rate cuts, may indicate that there is more substance to this year’s claims.  

 

For us, there were several key takeaways: the incorporation of AI, the shift away from COVID-19, the exploration of popular mechanisms of action, and most notably the improvement in the M&A market, – specifically, the increased attention of big pharma on smaller biotech companies. We credit this improving M&A environment to a few key factors. 

  • Anticipated economic stability, a ‘Goldilocks’ outcome, coupled with the Federal Reserve’s announcement of the interest rate hiking cycle ending in 2024.  

  • Substantial cash accumulation among big pharma meets potential value in funding-constrained smaller companies. 

  • Patent expiration of blockbuster drugs on the horizon and acquisition-oriented lifecycle management strategies. 

 

Building on the momentum of Q3 and Q4 2023, when deal volume began kicking up in earnest, continued acceleration of M&A in 2024 is anticipated, and we expect much of this activity to align with the prospective Fed interest rate adjustments later in the year. 

 

Following the FTC’s notable investigation of Amgen’s Horizon Therapeutics acquisition (which ultimately was not blocked), we suspect that major acquirers may turn their focus towards multiple smaller developers in lieu of larger targets that could attract further anti-trust regulatory scrutiny. While 2023 could be characterized as large acquiring large – see Pfizer’s acquisition of Seagen for $43 billion or Bristol Myers Squibbs’ deal of purchasing Karuna for $14 billion – we think 2024 will be characterized by large acquiring small, in more of a string-of-pearls approach. In following with the behavior of big pharma acquirers, we expect that early funding opportunities will remain sparing until investors see proof in the pudding, and that increased focus on the feasibility of commercialization will remain prevalent even as M&A grows.  

 

While the anticipation for an improving M&A market was one of the more exciting news from the JP Morgan Health Conference, other emerging trends offer key insight for 2024. A pivot from COVID-19 initiatives was emphasized. Despite meeting projected revenues from COVID-19 vaccines and related products, the primary developers of these vaccines have expressed interest in diversifying away from pandemic-oriented products with shrinking profit margins. Four years since the beginning of the pandemic, big pharma is now reinvesting their COVID-19 and blockbuster drug revenue into innovative mechanisms of action, such as ADCs, RLTs, CGTs, CAR-Ts, and treatment areas with significant unmet patient need, namely oncology, obesity, and neurological conditions. Still, experts have noted concerns about the difficulties of commercializing these therapeutics amidst ongoing supply chain challenges and whether there are truly as many seats at the table as there are companies vying for.  

 

To secure an edge in these competitive treatment areas and novel mechanisms of action, many developers are exploring applications of AI. Currently, the industry seems to be at an inflection point with AI, as the cost to implement these novel models reaches parity with traditional methods and only promises greater scalability and efficiency in the future. This year’s conference was marked by several announcements, by developers and health system alike, that implementation of AI would revolutionize their businesses, as was seen with Mayo Clinic’s new collaboration with Cerebras. Interestingly, these promises are now being made in both directions: Nvidia’s announced partnership with Amgen at the conference exemplifies AI’s investment in healthcare and not just the inverse. 

 

With the promises of new mechanisms of action, value-driving AI, and a friendlier economic environment, activity has already begun to stir. Still, 2022 and 2023 echo loudly, and limited funding opportunities have left many companies with tight purse strings. This acknowledgement brings us back to cautious optimism. We expect the Fed’s interest rate behavior will have significant ripple effects on M&A and funding. Even if a boom like that of 2020 remains unlikely, anticipation is high to see what 2024 has in stock. 



 
Author: Liam Boyd, Ciara Murphy

If you are interested in learning more, get in touch at strategy@spinnakerLS.com. 

Spinnaker offers true partnership and comprehensive guidance to help leaders navigate the complexities of the Life Sciences industry and chart a path to success. From early-stage market assessment through commercial execution and ongoing lifecycle management, we deliver tailored solutions to ensure optimized practicable results.

The content is provided for general informational purposes only. Readers are advised to use the information at their own discretion, and the company disclaims any liability for reliance on the content.  


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