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Updated January 6th, 2024 at 23:28 IST

Late M&A bonanza stokes healthcare dealmakers ahead of JPMorgan conference

The four-day JPMorgan Healthcare Conference is beginning on Monday.

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Healthcare dealmakers are making their way to San Francisco for a major industry conference, optimistic that more deals are in the offing after a wave of biotech company takeovers at the end of last year. The four-day JPMorgan Healthcare Conference beginning on Monday is expected by organizers to attract over 8,000 people, including delegations from the world’s largest drugmakers, a signal of a return to business as usual after fewer participants were invited last year over COVID-19 concerns.

Last month alone, drugmakers including AbbVie, Bristol Myers Squibb and AstraZeneca announced roughly $25 billion worth of U.S.-listed biotech deals, according to data provider LSEG Deals Intelligence. Overall, global M&A activity in the healthcare sector grew 8% on an annual basis to $365 billion in 2023, lagging the previous five-year average spending of $432 billion, LSEG calculated. “We've had an uptick of M&A recently, we're seeing stocks rebound with the market recovery and interest rates lowering,” said JPMorgan global head of healthcare investment banking Mike Gaito, who will interview CEO Jamie Dimon on the opening day. “People are open for business.”

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Among the hottest topics will be the wildly popular weight-loss drugs revolutionizing the fight against obesity that have established Eli Lilly and Novo Nordisk as two of the world's most valuable companies. Analysts forecast current drugs and other obesity treatments in development could garner $100 billion a year by the end of the decade.

Gaito said other companies are feeling the pressure to get into the space, and those that are want to be able to offer other treatment options. Two deals epitomizing this in 2023 were Roche’s $2.7 billion acquisition of Carmot Therapeutics and Eli Lilly’s takeover of Versanis Bio for up to $1.93 billion, which strengthened the Mounjaro maker’s pipeline of obesity drugs. Other themes will range from regulation and antitrust to the financing environment and possible effects of the 2024 U.S. presidential election on the industry, participants said.

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Wall Street Rally 

The conference comes after a blistering Wall Street rally in recent weeks, propelled by expectations the Federal Reserve will cut interest rates this year. Biotech companies were among the beneficiaries. The SPDR S&P Biotech ETF, a gauge of biotech industry performance, was up more than 18 per cent in December. The benchmark U.S. 10-year Treasury note dropped by nearly 50 points last month, easing financing costs for acquirers. "We expect the macro environment, including how people are thinking about sector growth, interest rates and the labor dynamic, to be top of mind (at the conference),” said Ali Satvat, a partner at private equity firm KKR.

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The buying spree by drugmakers late last year was part of their strategy to help offset expected revenue declines as patents on blockbuster therapies expire. AbbVie, already facing biosimilar competition for its cash cow Humira, and Bristol Myers collectively spent roughly $35 billion in deals to bolster their neurology and oncology franchises. The annual conference at the Westin St. Francis Hotel in San Francisco will include smaller drugmakers and companies from all corners of the healthcare industry, such as health insurers and medical device firms.

Investors will meet companies in public and private settings. “It’s an opportunity to actually sit in a small group, with investors but also with some corporate people, and meet with the managements to ask questions directly and really gather a lot of competitive intelligence,” said investment firm Perceptive Advisors managing director Doug Giordano. After a slow 2023, private equity firms will be looking for investment opportunities for a record level of $2.59 trillion of unspent cash. They'll also be searching for buyers. "There is a very significant backlog of private equity-owned companies that will come out for sale in 2024," said Devin O’Reilly, a partner at buyout firm Bain Capital. Dealmakers from JPMorgan’s rival investment banks and law firms also will be in town to win new business from the over 400 healthcare companies expected to attend.

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Competitors set up their own headquarters in hotels near the conference and lure clients by offering better catering and amenities. Latham & Watkins M&A partner Charles Ruck said you could have fun ranking "who has got better food at their mini conferences around and compare it to the JPMorgan.” 

(With Reuters inputs) 

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Published January 6th, 2024 at 23:28 IST

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