The JP Morgan Annual Healthcare Conference has become the biggest conference for the industry drawing pharmaceutical and medical device companies, clinical research organizations, and of course, their investors.
Over the course of four days, attendees get their fill of back-to-back company presentations. Some found those presentations unenlightening. Audrey Erbes, principal of Erbes & Associates, described presentations from the big pharmaceutical and biotechnology companies as “lackluster — downright boring in some cases.” Erbes added that several in the audience noted the phrases and financial comments were repeated across company presentations.
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But beyond the canned corporate remarks, there were some insights to be made. Shane Climie of consultancy Popper and Co. noted the progress of DNA-sequencing technologies. Announcements from Life Technologies (NASDAQ:LIFE) and Illumina (NASDAQ:ILMN) that they have machines that can sequence the genome in days rather than months, signals broader use of these technologies is coming soon. Climie says the clinical market for sequencing could grow to $24 million in the next few years. Cancer and newborn sequencing markets represent a potential opportunity of $300 million. But he notes that Illumina CEO Jay Flatley says that consumer sequencing could be the biggest market of all because technology has made sequencing both easier and more affordable. And soon, it will be more accessible.
One of the more interesting conference takeaways comes from a pharmaceutical industry consultant who didn’t actually go to San Francisco this year. Mike Wokasch of Wokasch Consulting watched company presentations online and he offers a noninvestor take on the conference. In his view, Big Pharma is rapidly moving away from primary care.
“With almost 75 percent of prescriptions now being filled with generic drugs, the trend may not be that surprising,” Wokasch wrote in his “Pharma Reform” blog. “What is surprising is that the pace of proactive strategic abandonment of primary care is far more dramatic than what I believe most people in the industry would want to admit or even realize.”
Wokasch says pharma companies are refocusing their pipelines and commercialization efforts to target specialty markets. Primary care products received nary a mention at the JP Morgan conference.
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Some observers see opportunities beyond niche, specialty products. The Motley Fool’s Brian Orelli points out therapeutic and investment opportunities can be found in companies targeting common ailments that still represent unmet medical needs. Of note, he points out that more people die from the flu each year than from HIV/AIDS. Despite the flu treatments available, the market represents an opportunity for Vertex Pharmaceuticals (NASDAQ:VRTX), which is developing a flu treatment called VX-787, and Durham, North Carolina-based BioCryst (NASDAQ:BCRX), which is developing its Peramivir flu treatment.
But in the bigger picture, Wokasch sees specialty products eclipsing primary care efforts. Specialty products are higher margin products for companies and therefore are a higher priority. The customer base for these products is smaller and focused, but receptive to marketing of new treatments for these rare conditions. Wokasch sees a shrinking primary care sales force as just the beginning. He sees pharma companies investing less in primary care products R&D. There will be fewer primary care clinical trials. And ultimately there will be fewer primary care products.
“The real message here is that while primary care has been at the foundation of Big Pharma growth and financial success in the past and there may well be exceptions in the future, the importance and interest of primary care to Big Pharma is diminishing quickly,” Wokasch said.
Wokasch’s observation is one that might not be typical of the investor insights at an investor conference, but it raises a question that’s important to ask: What does the shift away from primary care mean for the future of healthcare innovation and ultimately the effort to control healthcare costs?
Photo from Flickr user comedy_nose
