Goodwin Insights January 26, 2018

Five Takeaways from J.P. Morgan Healthcare Conference Week 2018

Below I summarize my five key takeaways from the 2018 J.P. Morgan Healthcare Conference week. I distilled my list down to these five main points based on attending networking receptions, panel discussions, conferences, and client meetings held in San Francisco during the J.P. Morgan Healthcare Conference.  

1) Growth of Life Sciences Outside of the United States.  One of the most interesting events I attended during week was the Vive La Biotech reception hosted by Women Innovating Together in Healthcare, or WITH, and BPIFrance.  At this event, the CEOs of Sanofi, BPIFrance, WITH, along with CEOs of several French biotechnology companies and venture capitalists discussed the recent growth in the life sciences sector in France. According to the panelists the election of Emmanuel Macron, and subsequent legislative changes, notably in labor law, were instrumental in growing the entrepreneurial nature of the country. Today, France has dedicated 5 billion euro to biotech start-ups in the country, and as of 2017, there are three times more biotech startups in France than there were in 2002.  Although the majority of the biotechnology companies are located in and around Paris, the nation would like to create a broader biotechnology corridor that rounds Paris, Lyon and Strasberg. 

The panelists also cited issues that need to be addressed in France for the continued growth of the life sciences sector. Among the more pressing issues discussed were the following: (i) need to increase speed at which technology transfer offices license technology to companies, as the process is currently very slow, (ii) need to increase speed at which reimbursement decisions are made; can take up to 400 days following approval, (iii) need for research analysts in France and (iv) a more mature networked production system.

2) The Funding Dilemma – Disproportionate Dollars Allocated to Hot Technology or Disease Area.  One topic that was discussed at several events was the fact that disproportionate investment dollars are spent funding research on the hot technology or disease area, which many argue is currently immuno-oncology, while leaving other important technologies and disease areas with inadequate funding. Many commentators noted that this is a serious issue as numerous investment dollars are being wasted on “bad science” so that investors can claim that they have a stake in the hottest game in town; even though such dollars would be better put to use by funding quality science in other disease areas. While many agree that this is an issue, it is an extremely difficult problem to solve in a free market system.  Some people suggest that this problem could be partially ameliorated through greater levels of collaboration throughout the participants in the life sciences industry, while others suggested that some relief might be possible with further increased funding of the industry as a whole.

3) Difficult Funding Climate for Medical Devices and Diagnostics Continues.  Several panel discussions at the Redefining Early Stage Investments Conference highlighted that the funding climate for medical device companies and diagnostics companies continues to be very difficult.
Medical Device: Many venture investors have been hesitant to invest money in new medical device companies as it has been unclear if sufficient capital will be available in the market to get a medical device company to a commercially viable product. Panelists therefore suggested that medtech entrepreneurs should seek to leverage alternative funding sources such as accelerators, family offices and local and state governmental programs. In addition, medtech entrepreneurs should seek to develop relationships with potential strategic partners as early as possible to better understand the requirements for achieving a partnering deal or a liquidity event. Finally, panelists suggested that they expect structured deals will become more common in the medical device space if funding to the sector continues to decline.

Diagnostics:  Very few venture funds are investing in the diagnostics space, therefore it can be very difficult to navigate funding in this sector. Entrepreneurs in the diagnostic space were encouraged to seek funding from alternative sources such as federal, state and local grants, accelerators, investment arms of insurance companies, foundations and family offices. Panelists noted that even if a diagnostic company can get funded, it will generally have a lower valuation than a pharmaceutical or medical device company, given that the pricing for diagnostics is generally cost plus as opposed to value pricing. Panelists also noted that clinical evidence is key for successful diagnostics as payors will not reimburse for diagnostic testing without clear clinical evidence that the diagnostic actually works.

4) Hot Areas for Future Investment.  Several panels during the week highlighted emerging areas in life sciences that are likely to see increased funding dollars in the future. Panelists suggested that health IT, including artificial intelligence, and genomics were hot areas for investment as many large companies want to invest a portion of their research and development budget in technologies that (a) prevent disease as opposed to treat disease, and (b) pre-determine responders and non-responders to a given therapy in order to increase the return on investment for a given therapy. Many people felt that artificial intelligence would play a key role in healthcare in the near future given the need to interpret large amounts of data to arrive at better diagnoses or to potentially identify patterns that suggest future disease if proper preventative steps are not taken.

5) The Amazing Role of Serendipity.  The final thing that struck me during the week is to never underestimate the potential for serendipity. On numerous occasions, I was amazed that the right group of people somehow ended up at the same event at the same time leading to the creation of something magical. For example, during one of the evenings I hosted a dinner with one of my colleagues without assigned seating. Without any conscious planning on our part, three CEOs of companies in the neuro-rehabilitation space ended up sitting together at one end of the table and were able to engage in deep conversations about the neuro-rehabilitation space, bouncing questions and ideas off of each other.  It was truly a magnificent event to watch unfold, and I am sure that many others experienced the same during the week.