The J.P. Morgan Healthcare Conference continues to be the largest healthcare investment symposium, bringing together global industry leaders, emerging growth companies and multiple constituents from the investment community. It was raining again during this year’s conference, but overall sentiment was optimistic, due to the recently-passed tax reform, a series of positive pre-announcements and innovation across the sector.
Here are our five takeaways from the 2018 J.P. Morgan Healthcare Conference:
1 | Focus on tax reform. Healthcare stocks rallied into the beginning of the year, with the biotech index up from lows in December and medical device stocks continuing to outperform. Wall Street remains fixated on the impact of tax reform. The initial focus was on rate reduction, but it quickly shifted to capital deployment and investments for growth.
2 | Strong med-tech pre-announcements. There were notably more pre-announcements during the week of the J.P. Morgan Healthcare Conference this year than in previous years. Common rationale for pre-announcing results is that it paves the way for frank discussions on recent results, expectations for the upcoming year, end-market dynamics, reimbursement and potential shifts in strategy. The spate of pre-announcements was marked by almost universally strong fourth quarter (Q4) results – with notable surprises from both large-cap (BSX, ISRG) and mid-cap (ABMD, IART, NVRO) companies.
3 | M&A sentiment – early read was mixed, but remains positive. Sentiment among life sciences investors was high entering the conference, but with only one biotech transaction announcement from Celgene (of a private company), the mood was dampened early in the week. Enthusiasm has since rebounded, with optimism surrounding expectations for an M&A driven rally increasing this week. Meanwhile, the medical device sector has seen continued M&A activity, both in transformative transactions as well as a continued focus on bolt-on acquisitions. For med-tech investors, expectations continue to call for meaningful M&A activity among SMID-cap, publicly-traded private companies as well as private companies.
4 | Fundamentals look good; sentiment is marked by optimism. We collectively sat in on hundreds of 1×1 investor meetings with our client companies over the course of the week and digested several 2018 Outlook pieces. Analysts are pointing to favorable fundamentals entering 2018, driven by procedural volumes, pricing, macro trends and tax reform; and in biotech, several notable commercial and clinical catalysts. Investor questions were probing and cautious as they look for entry points in outperforming assets and as they work on “broken” stocks to take advantage of value opportunities.
5 | Capital markets poised for an uptick in activity. We had the opportunity to meet with investment bankers from bulge brackets, emerging growth banks and boutiques over the course of the week. There continues to be a growing list of companies on the sidelines that are waiting for the market environment to embrace emerging growth offerings. In the meantime, private companies are opting for crossover rounds with traditional public investors participating alongside insiders – often leading the round. Publicly-traded companies are expected to look to access the public markets in early 2018 in order to shore up their balance sheets and extend their cash runway.
Pre-Announcement Trends
We again tracked a universe of roughly 150 medical technology and diagnostics/tools companies for earnings pre-releases during the JPM Conference. We analyzed and tallied the announcements, looking at a variety of factors including results that beat vs. missed consensus, if forward guidance was issued, and which companies presented at the conference vs. just held meetings in San Francisco. Analyst and investor sentiment was positive going into 2018, and was reinforced by many positive pre-announcements last week.
- There was heavy volume of 54 pre-announcements – over a third of the group that we were tracking pre-released Q4 results.
- This trend continues to move upward each year
- The overwhelming majority (42 of 54) announcements were positive, beating consensus estimates and with positively-received guidance
- The average upside in revenue relative to expectations was 3-4%, with only a few notable negative announcements
- Roughly 40% of companies pre-announcing Q4 results also issued forward guidance.
- Large-cap companies also largely commented on tax reform, which has been viewed positively by analysts as a tailwind in 2018.
Thinking ahead to 2019…how can you make the most out of the week?
While there isn’t one perfect prescription for how to tackle the J.P. Morgan Conference, here are some basic tenets to remember:
- Logistics – plan early. Each year, the J.P. Morgan Conference seems a bit more crowded. Book meeting space and hotel accommodations several months in advance. Think ahead and plan how to best use your time at the conference; you will likely have the opportunity to have more meetings than what is reasonable, so prioritize your time to maximize efficiency.
- Don’t stay all week. The conference has gotten so large that meetings are short and hurried – we recommend that you use this week for a brief check-in. If you want an in-depth conversation, follow-up for a longer meeting at another time.
- Update your materials. The new year is a good time to refresh your investor relations presentation deck and overall message. This is important not only from a graphics and visual standpoint, but also to make sure your investor presentation accurately represents your company’s strategy and vision.
- Set objectives for the week. Knowing what you want to get out of a meeting in advance can help dictate how you use your time and what your key messages are at the conference. It can also help you decide if you should pre-announce your fourth quarter and year end results, business highlights or update your materials. Each company has unique objectives and challenges, and it is 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 Conference. Knowing it is always exhausting, we strategically and logistically help companies in order to ensure their week is as productive as possible.
Lynn Pieper Lewis, Founder & CEO
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