Ballard Spahr attorneys from the firm’s Life Sciences and Health Care Industry Teams were on the ground for the 42nd Annual J.P. Morgan Healthcare Conference (JPM24) from January 7-10. While still less crowded than pre-pandemic levels, there was a general air of optimism that had been missing last year and the discussions were as compelling as ever at the premier gathering of global industry leaders, emerging companies, technology creators, and the investment community.
Here are the main takeaways:
- Obesity Drugs Dominated the Discussion. Glucagon-like peptide-1 (GLP-1) drugs such as Wegovy and Zepbound are spurring collaboration activity and competition. We’ll continue to see developers looking to commercialize GLP-1 for obesity and other indications, including cardiovascular disease this year and beyond.
- Renewed Optimism for Deal Making in 2024. With several deals announced leading up to JPM24, the conference shed light on promising deal making in 2024 overall, particularly for late-stage assets. This comes on the heels of last year where we saw a general increase in licensing activity and M&A. We will continue to monitor several key factors including the looming patent cliff, lots of dry powder, diversification strategies in response to the impact of the Inflation Reduction Act, and others.
- The IPO Window Cracked Open. Although the financing environment remains challenging, it is beginning to show signs of life (particularly for assets with strong clinical data) with initial offerings by Metagenomi, ArriVent, and Dyne Therapeutics.
- AI Craze Shows No Signs of Slowing. There was heavy discussion regarding the prominence of AI in the industry, and the use of AI and computing tools to fuel drug discovery. Life sciences companies are demonstrating the ability of AI applications to transform R&D.
- Cell and Gene Therapies are Top of Mind. Though challenges remain, there is a lot of energy around cell and gene therapies, particularly as models become more accepted by payors. We expect more growth and approvals as the year goes on.
- Care Delivery Is Re-Tooling for Post-COVID World. The pandemic drove a focus on more localized delivery of care (e.g., acute care and ambulatory care providers), a shift to telehealth, and renewed interest in behavioral health. Interest in these areas continues, with some players identifying them as areas of planned expansion, while others who have already made acquisitions pointed to them as sources of strength and continued focus.
- Reducing Cost of Care Remains a Focus. We heard lots of talk about strategies to reduce hospitalizations, which are a driver of higher cost of care. These strategies are focused on early interventions, delivering care in the home, and care delivery via telehealth. Cost reductions of this kind are of particular interest to those exposed to Medicare Advantage and shared savings programs, where reimbursements are capitated and cost savings are incentivized.
- Health Care Workforce Shortages Improving but Still an Issue. Shortages of health care workers continue to plague hospitals and other providers. While we heard some indications that these strains may be improving, worker shortages remain an issue. This dynamic drives interest in technology that can promise to enable providers to do more with less, and to some extent, acquisitions of providers who are able to absorb patient volume and relieve pressure on strained institutions.
- Health Care Deal Making Expectations. The mood appears to be brightening as the interest-rate environment stabilizes. We expect deal making activity to focus on: (1) hospital consolidations, driven by a need to bolster balance sheets now that COVID-related capital infusions are gone but input costs remain high; (2) PE-based roll-ups of specialty provider and facility types seeking to gain efficiencies of scale by consolidating fragmented market segments; and (3) continued acquisitions in primary care, as hospitals, insurers, and other strategics expand their footprint in what, for most patients, is the gateway to the health care system.
- Macro Issues to Watch in the Industry. Regulatory headwinds including new antitrust rules, enforcement focus from the FTC and DOJ on private equity, and drug pricing negotiations will be topics of discussion in 2024. There will be continuing developments in the financing environment and the likely impact on the industry from the U.S. Presidential election.
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