What a great way to kick off the year – the JP Morgan healthcare conference.
I should be clear, I was a “hanger on” this year, I didn’t actually have an invite to attend the conference itself. For most entrepreneurs, this is far from a deterrent to be there and to take advantage of such a stellar congregation of the “good and great”. The whole city becomes one great big networking event and good luck trying to find a secluded corner of a restaurant, bar or even a Starbucks to have a quiet conversation, it’s pure mayhem.
… and it’s exciting as hell.
Standing in Union Square across the road from the Westin St. Francis hotel provides a fascinating spectacle that visually captures the healthcare/biosciences food chain. As the bankers and large-cap public company CEOs swan in and out past security, they pass through a crowd of investors, analysts, media commentators and smaller-cap CEOs all trying to launch into a new year of life, all trying understand where the industry is going. Outside the building are the entrepreneurs, trying to grab someone on the way in/out for a quick pitch. Milling around the entrepreneurs is the homeless population of Union Sq hoping to pinch a buck from a captive sea of entrepreneurs that have nowhere else to be. For the avid people watcher, it’s pure entertainment.
Around JP Morgan there are a whole host of other conferences that have sprung up over the years and are becoming equally important to the small-cap/private end of the spectrum. On behalf of Factor Therapeutics (née Tissue Therapies) I attended the Biotech Showcase, which has evolved into an excellent investor networking and partnering event. Meetings start early, pharmaceutical company and investment bank receptions go late into the night. It was good to see around a dozen ASX-listed bioscience companies present at Biotech Showcase this year and, in particular, I heard good feedback about the Imugene (ASX : IMU) and Opthea (ASX : OPT) presentations.
For the retail investor who is curious about the “mega trends” of the healthcare/healthtech landscape over the next 12 months, there were four big take-home messages that I picked up on during the week:
1) Healthcare Investing is Becoming Incredibly International
There were some very large Asian (particularly Chinese) contingents that were highly visible. China is throwing big $s at healthcare, both as a way of diversifying the economy and addressing some major social challenges that are clearly going to hamper growth in the future. “China” is nothing new, but China as a global healthcare investor is, and I think this is something that Australian health/bioscience companies need to think about and are well positioned to take advantage of. This is a dynamic in our backyard and we need to have a handle on it.
2) Digital Health is Kind of a Big Deal
I was surprised to hear how prevalent the topic of Digital Health was, even in unconventional contexts (and several focus groups/conferences ran in parallel to the conference, dedicated to this topic). There seems to be a growing recognition that how we manage big data around diseases has just as much potential to impact human health as new drugs. This theme seems to have also been picked up in Davos this week. This isn’t just the sexy consumer end of apps and wearables, but anything that is going to improve drug adherence, streamline clinical trials and lower the cost of post-market product surveillance. I also walked away with the firm impression that major biopharmaceutical companies are willing to invest. The ASX has quite a few interesting companies in this space and they will warrant closer attention in 2016.
3) Precision Medicine is Here to Stay
Diagnostic medicine has never been a controversy-free part of the bioscience continuum and the landscape is littered with failed companies offering big stories for human health, but also fundamentally lousy product/service economics. It’s not enough to diagnose disease, diagnosis needs to change patient management and outcome. Diagnosis also has to be cheap and scaleable. Despite the downfall of companies like Theranos, we are going to see more and not less focus on this area and it is going be driven by the genomic health revolution that is just starting to have the economic viability to make a meaningful impact. It’s no longer “biomarkers”, it’s “genomic biomarkers” – the rest doesn’t really matter.
4) Drug Pricing
How are we going to pay for all those exciting new immuno-oncology drugs? How do we get balance right between a financial incentive for pharmaceutical companies to innovate and the fragile reality that our healthcare systems are massively overburdened? The amount of media attention this issue got was really palpable during the conference and “pricing” dominated conversations in the hallowed halls of Union Sq hotels. This is a timely reminder to retail investors that companies that cannot articulate the pharmacoeconomic benefit of their therapeutic products are not serious about defining their place in our healthcare systems. Be wary.
The Big Sell-off
We went into the week with a pretty major life sciences / health equity sell-off, compounded by mediocre US economic data and the tizzy around both Chinese and global growth (IMF) re-forecasts. Having attended the conference during some pretty bleak years, I could sense the concern but it wasn’t as negative as it perhaps could have been. The truth is, the US biotech sector has had an unparalleled run over the past 5 years and a correction was bound to happen eventually. There is still USD $200Bn of retail money chasing investment in in health/biotech, so I personally expect the dip to be short-lived. Closer to home, with resource stocks in the toilet and retail not far behind, the prospects for health/bioscience public equities are very interesting to say the least, even if investor sentiment toward very early-stage (pre-commercial) companies will be cautious.
Anyhow, my 2c worth.
Immuno-oncology is still hot. Regenerative medicine still attracts interest. But in 2016, it was the global economy, health economics and the importance of digital health that dominated the conversation.
It’s going to be a fascinating year.