This year’s J.P. Morgan Healthcare Conference was similar to years past, bringing together global industry leaders, emerging growth companies, and multiple constituents from the investment community. Despite the torrential downpour on Tuesday, umbrellas turned inside out, and rain throughout the week, investors and executives had packed schedules of meetings, receptions, and events.
The incoming presidential administration will definitely have an impact on the healthcare industry through changes in the regulatory landscape, drug pricing, and the potential repeal and replace of the Affordable Care Act. Additionally, broader impact on capital markets and the potential for loosening regulation on Wall Street will impact the sector as well. This year’s political climate may trump the flurry of news (haha!).
Here are our five takeaways from the 2017 J.P. Morgan Healthcare Conference.
1 | Trump claimed that the drug companies are “getting away with murder.”
President-Elect Trump held his first press conference on Wednesday, where he talked about his plans to reduce drug prices from pharmaceutical manufacturers. While we don’t yet know how this will translate once in office, having an incoming president committed to bringing down prices in an industry that has already been plagued with margin pressure doesn’t augur well for the pharmaceutical sector.
The biotech index, which is typically robust throughout the J.P. Morgan Healthcare Conference, traded off 3% throughout the week. Despite this and the related uncertainty around what will happen with the Affordable Care Act, we came out of the conference incrementally more optimistic on the healthcare sector, based on positive investor sentiment, expectations for potential M&A and financing activity, and the broader capital markets.
2 | Investor sentiment is marked by optimism.
We collectively sat in on hundreds of one-on-one investor meetings over the course of the week. In our view, investors are looking for entry points in outperforming assets and working on “broken” stocks to roll up their sleeves and take advantage of value opportunities. After the healthcare sector dramatically underperformed the S&P 500 for the first nine months of 2016, it finally appears to be positioned for an uptick and hopefully a reduction in volatility.
3 | Capital markets are positioned for an uptick in activity.
Over the week, we had the opportunity to meet with investment bankers from bulge brackets, emerging growth banks, and boutiques. Feedback indicates there is a growing list of companies on the sidelines that are waiting for an improved market environment so they can move forward with a potential IPO. In the meantime, private companies are still opting for crossover rounds with traditional public investors participating alongside insiders. Publicly-traded companies are expected to look to access the public markets in early 2017 to shore up their balance sheets, provide an exit for venture investors, and/or extend their cash runway.
4 | M&A activity is on the rise.
Most companies that come to San Francisco use the J.P. Morgan Conference as a forum to host business development and other strategic meetings. Sentiment is that M&A activity is on the rise, in terms of transformative transactions as well as a continued focus on bolt-on acquisitions. Expectations are that many private companies will be acquired rather than executing an initial public offering. Furthermore, it seems there will be meaningful M&A activity among publicly-traded companies as well.
5 | Pre-announcements pave the way for productive discussions.
As always, there was a flurry of pre-announcements during the week of the J.P. Morgan Healthcare Conference. Of our client companies in San Francisco last week, several pre-announced fourth quarter and year-end 2016 results. In some cases, this was driven by results that differed from expectations. While it made for from some pointed conversations with investors, it also paved the way for frank discussion on end-market dynamics, reimbursement dynamics, and shifts in strategy.
How to make the most out of the J.P. Morgan Healthcare Conference
While there isn’t a perfect prescription for how to tackle the J.P. Morgan Healthcare Conference, here are some basic tenets to remember.
- Plan ahead. Book meeting space and hotel accommodations several months in advance. More importantly, plan out your time at the conference and how to best use it: Meeting with investment bankers? Investors? Potential strategic partners? Are you looking to provide an update to existing investors and covering analysts or trying to forge new relationships? These considerations are important, as you will likely have the opportunity to take part in many meetings.
- Don’t stay all week. In addition to planning ahead, we suggest that you prioritize your time so that you are focused on the highest priorities. The conference has gotten so large that meetings are short and hurried; if you want an in-depth conversation, we recommend planning it elsewhere.
- Update your materials. Coming in to the new year is a perfect time to refresh your investor relations presentation and overall message. Over time, the investor deck is updated with new information and financials, but it’s worth taking a step back to make sure it still accurately represents your strategy and vision.
- Set objectives for the week. Knowing what you want to get out of the meeting in advance will help to dictate how you use your time and what your key messages will be. It can also help you decide if it makes sense to update your materials and pre-announce your fourth quarter and year end results and business highlights. Finally, each company has unique objectives and challenges, and it’s important to develop a customized IR Strategy that will achieve those goals.
We have worked with hundreds of healthcare companies as they prepare for and navigate the J.P. Morgan Healthcare Conference. Knowing how exhausting this conference can be, we help companies strategically and logistically plan their week to ensure it is as productive as possible. We’d love to work with your healthcare company and come up with a strategy to make next year’s conference productive for you.