Summary
The 41st Annual JP Morgan Healthcare Conference in rainy San Francisco earlier this month was relatively low-key compared to pre-pandemic versions of the health care investment symposium, which returned this year from an in-person hiatus. The discussions and activity were as compelling as ever at the gathering of global industry leaders, emerging companies, technology creators, and the investment community.
Several Ballard Spahr attorneys from the firm’s Life Sciences Industry Group were on hand for the conference January 9-12.
The Upshot
Key takeaways for pharma and biotech from the 2023 JP Morgan Healthcare Conference:
- It’s a buyers’ market for Big Pharma, which has stockpiles of cash on the balance sheet. Many innovative biotechs, both public and private, are running short on cash, but patent cliffs may keep valuations for quality later-stage assets higher as Big Pharma looks to refill the pipeline.
- Oncology and immunology will continue to dominate, but other areas, such as the central nervous system, cardiovascular, and vaccines should continue to see interest.
- While dynamic, valuations remain misaligned, so other deal-making arrangements such as partnerships and collaborations are expected to increase. They can serve as a lifeline to a reopening of the IPO window and private investment, as biotech companies continue to find creative ways to survive without having to resort to a fire sale.
- Inflation Reduction Act of 2022 rules will affect research and development (R&D) priorities for 2023 and beyond based on factors such as differing drug negotiation exclusionary periods.
- Increased efficiency in R&D will be a focus, with advanced technology as a core component. But can regulatory agencies keep pace with change in areas such as AI and biologics?
The Bottom Line
A mix of changing development focus, market conditions, and geopolitical forces are at work, creating an intriguing outlook for 2023—where capital will come at a higher price and lower company valuations could create opportunities for strategic growth.
The 41st Annual JP Morgan Healthcare Conference in rainy San Francisco earlier this month was relatively low-key compared to pre-pandemic versions of the event, which returned this year for the first time since 2020. This year we were even able to meet in hotel lobbies for free! The discussions were as compelling as ever at the premier gathering of global industry leaders, emerging companies, technology creators, and the investment community. A mix of changing development focus, market conditions, and geopolitical forces are at work, creating an intriguing outlook for 2023—where capital will come at a higher price and lower company valuations could create opportunities for strategic growth.
Ballard Spahr attorneys from the firm’s Life Sciences Industry Group were on hand for the conference January 9-12.
Here are five takeaways from the conference:
Buyers’ Market for M&A. With more favorable company valuations, but a continuing uncertain market outlook, expect to see more Big Pharma bolt-on and tuck-in acquisitions of later-stage assets to restock the pipeline as drugs roll off patent, as opposed to mega-mergers or assets that still need significant clinical development. Buyouts, especially for earlier-stage assets, are more likely to come with contingent payment provisions as a risk-mitigation strategy amid economic uncertainty.
The More Things Change… Oncology and immunology will continue to dominate, but other areas, such as the central nervous system, cardiovascular, and vaccines should continue to see interest.
A Bridge to Nowhere? While dynamic, valuations remain misaligned, so other deal-making arrangements such as partnerships and collaborations are expected to increase. They can serve as a lifeline to a reopening of the IPO window and private investment, as biotechs continue to find creative ways to survive without having to resort to a fire sale.
There were 11 IPOs in the sector all of last year. The IPO window may reopen this year, depending on macroeconomic factors.
The Inflation Reduction Act. The effects of the law on prescription drug prices are still top of mind, as companies and investors continue to work out how the rules will alter R&D and investment priorities. This could include prioritizing biologics over small-molecule drugs, given the differing drug negotiation exclusionary periods (13 years versus nine years)—which can determine up to 60 percent of value.
The Pace of Change: Increased R&D Efficiency. Disruption in the drug discovery and development process, through the use of artificial intelligence, machine learning, and in silico drug development, continue to garner a lot of attention—and investment—with the goal of reducing development time and expense. As drug pricing dynamics in the U.S. continue to evolve, these and other novel technologies will help the industry continue to thrive. But can the FDA and other applicable regulators keep pace?
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