Ahhh, it’s that the time of year again — the J.P. Morgan Healthcare Conference (JPM). It’s the Superbowl of the life sciences; the largest and grandest spectacle of the biopharma year.
When Investment Rhymes with Canada
Canada has a proud history of achievement in the areas of science and technology, and the field of biomanufacturing and life sciences is no exception.
JPM rolls around every January, setting the tone for the biopharma year ahead.
Or does it?
We were curious whether the predictions and the sentiments at JPM really play out over the following 11-12 months. To test this idea, we went back through five years of JPM conferences and compared the January news stories and investor notes to the end of year reports.
Here’s what we found:
2013
Top quote: “Overall, the mood and spirit at JPM felt very positive this year,” wrote two healthcare investors, Stephen Kraus and Ambar Bhattacharyya, noting that the macroeconomic concerns and uncertainty around healthcare reform were finally lifting.
Industry experts were beginning to see the light and growth was happening in the sector, proving the issues the field was grappling with could be overcome.
- Pricing IPOs remained a challenge, but aftermarket performance was strong.
- Many sensed that the FDA was shifting towards a more innovation-friendly stance.
- A bolus of young startups triggered fears of a Series A crunch. VC dollars were spread too thin.
The year in review: The IPO market came back with a bang. A massive 37 biotech IPOs raised over $2.7 billion in gross proceeds — more than at the height of the tech bubble.
- FDA approved 27 new molecular entities (NMEs), a drop from 2012 but consistent with the 10-year average.
- Overall VC investment in the sector was consistent with previous years.
- Early-stage funding increased slightly, at the expense of late-stage rounds.
Verdict: If anything, #JPM13 folk were a little cynical. It wasn’t a year for unbridled celebration, but the industry was slowly and steadily moving in the right direction. The wildcard was undoubtedly the IPO window, which greatly exceeded expectations.
2014
Top quote: “In big contrast to every other year, I rarely heard a management team say, “I think we’re undervalued,” wrote David Miller, a portfolio manager for hedge fund Alpine BioVentures.
Things went from good to great for the 2014 event. Illumina boldly announced the $1,000 genome and Big Data excitement built. At the same time, public dismay over drug pricing reached a new level, with protesters turning up in Union Square.
- Uncertainty around the ACA was voted the biggest headache by executives.
- Big Pharma was on the prowl for acquisitions or licensing deals.
- There was no shortage of VC funding.
The year in review: Emotions ran high in 2014. There was a frenzy for deals, the National Biotechnology Index dipped but then finished strong and many companies successfully floated that year.
- Over $200 billion in deals were made, the most since 2000.
- A record year for IPOs triggered talk of a biotech boom.
- Generalist investors grew nervous about the sustainability of drug pricing.
Verdict: #JPM14 pundits were optimistic, but the sector in January was just inching back to health. By the end of the year it was running at full steam. In that respect, the state of the industry in 2014 was better summed up by the #JPM15 crew.
2015
Top quote: John Carroll, then the editor at FierceBiotech, summed the event up with an article titled: “The JP Morgan mood: Damn the biotech valuations and full speed ahead in 2015.”
It was a vintage year for the biotech industry and many felt it had truly come of age. Enthusiasm radiated out from Union Square.
- The industry was extremely well capitalized, perhaps more than any other year.
- Technology was rationalizing the drug development process, to the delight of investors.
- M&As were plentiful and large.
The year in review: “As innovative science dovetailed with a strong demand for both early- and later-stage drug candidates this year, venture capital funding for biotech firms surged,” wrote Lisa Jarvis for Chemical & Engineering News.
- Investment totals obliterated 2014, which had been a record year.
- M&As and IPOs were running hot.
- FDA approved 45 new drugs.
Verdict: It was the right time to party. The next 12 months rounded out a stellar year.
2016
Top quote: The bad vibes started on day one, as captured by this Bloomberg headline: “Worst Start to Health Conference Since 2001 Has Investors Glum.”
The situation picked up slightly, but there was no denying the biotech bubble had burst.
- The drug price debate was still shadowing Big Pharma leaders. If Clinton got in, there would no doubt be regulations. If Trump got in, who knows?
- Valuations were inflated from five-years of investor optimism.
- Companies would either sink or swim, without the artificial floatation of a bull market.
The year in review: Twelve months later, the EP Vantage Biotech & Pharma 2016 Year in Review report hit on the same trends. The Biotech Index ended in the red for the first time since 2008 and all major pharma and biotech indices registered declines despite broader optimism in other markets.
- Uncertainty around the election all but froze major deals by Q4.
- While the IPO market was dim, venture backing for smaller companies held up.
- Some $98.7 billion was spent on acquisitions in 2016, less than half 2014’s total during the biotech boom.
Verdict: Forecasters nailed this one. The bull market was retreating and by the end of the year, everyone was just holding their breath. True innovation and value were rewarded, but there was little appetite for risk-taking.
2017
Top quote: Attendees described the mood as “optimistic but on edge” and “volatile,” based on the “volatile leader poised to take over the White House.”
Healthcare costs were on everyone’s mind. As if on cue, Trump took aim at the industry on day three, declaring drug companies were “getting away with murder.”
- The flow of biotech news was better than the previous year, but still not great.
- Big Pharma pipelines appeared weak and there was an overall lack of late-stage assets.
- With tax reform on the cards, many thought large acquisitions would slow down during the year. Smaller M&As should have been unaffected, analyst Brad Loncar noted.
The year in review: The uncertainty of January was justified. Trump seemed to side with the industry in a White House meeting a few weeks later and the year wrapped up with no new measures to curb prescription drug costs. According to the EP Vantage 2018 Preview report:
- The volume and value of M&A deals were down, despite J&J’s $30 billion takeover of Actelion.
- VC investment was strong; as was demand for IPOs and secondary offerings.
- More than twice as many drugs were approved as in the previous year.
Verdict: Political instability made 2017 a mixed bag. Drug price regulations didn’t pan out and few experts anticipated such a blockbuster year of approvals. M&A activity, on the other hand, was as predicted.
The results?
The relative optimism or cynicism of each JPM crowd was fairly predictive of the year ahead. But often the feeling was neither; attendees were simply cautious or uncertain. Such cases usually boiled down to political uncertainty around elections or the implementation of the ACA — variables that no one could confidently call.
Perhaps the more pertinent question is whether or not the insights were new. They weren’t. The last five JPMs were more or less predictable based on the final quarter of the previous year.
More than anything, the conference is simply a time to collectively stop and reflect on the industry as everyone descends upon Union Square.
Photo: John Rensten, Getty Images
