JP Morgan Healthcare Conference 2015 Recap, 2016 Outlook
By Gregory Benning
MassBio hosted its 2016 JPM Recap event last Thursday with a record number of registrants. Back Bay Life Science Advisors was asked to join as part of the panel offering observations on the conference and implications for the year ahead. This year, JPM was really two conferences:
One focused on investors and the funding side of the biopharma/life sciences balance sheet
The other focused on business development – assets, pipelines and partnerships
The investor side was overwhelmed with macro concerns about hard landings in the oil patch and China, and political rumblings over drug price increases.I commented that a key goal for public CEOs at bear market conferences becomes investor retention: If you like our story and progress, stick with us, and don’t engage in market timing. The overriding point made by the panel was liquidity planning, because it is uncertain whether a re-opening of the small cap equities market will be driven by positive trials results over the near term, or a multi-year settling out of global capital market dynamics.
The business development side, in contrast, was very engaged, positive, and well-funded. There is an enormous amount of investable cash, a large backlog of un-partnered assets in VC portfolios, and a solid pipeline of new pre-clinical innovations. This half of the conference was robust, well-organized and forward looking.
What will this mean for deal-making in the next 12 months?
We anticipate 2016 to be another big year for Life Sciences M&A in terms of deal volume. The headlines will be driven by mega-deals.
Large pharma is under pressure to deliver continued earnings growth, and the limits to price increases on their current portfolios will drive either success by materially accretive acquisitions, or result in consolidations around cost elimination and other expense efficiencies. This “deal heat” will result in showing some level of acquisition premium in their share prices.
Away from extensive analyst/investor scrutiny of large deals, a critical consideration for smaller company deal discussions will be the number of counterparties involved in any deal discussion and related transaction dynamics. Discussions with multiple parties will be able to drive timelines and focus on intrinsic value and value creation. Deal timelines for single party discussions will be manageable for highly strategic transactions, but otherwise may be prone to timeline drift involving “buyers market” incremental asset de-risking and liquidity gamesmanship/tactics.
Reconciling the attitudes of biotech investors and BD personnel is possible, but that will rely on the points above, with mega-mergers and accretive acquisitions righting the ship. We hope that any negative headlines or clinical setbacks don’t cloud what is set to be a potentially bright 2016.The video contains the entirety of the JPM Recap. A special thanks to MassBio for holding such a successful event, and to the other panel members for their insights.