Conference Report: 2023 JP Morgan Healthcare

Author: Robyn Easley

The 41st Annual J.P. Morgan Healthcare Conference set the tone for focus and objectives in the ZRG Life Sciences Practice. This premier conference is the largest and most informative healthcare investment symposium in the industry, which connects global industry leaders, emerging fast-growth companies, innovative technology creators and members of the investment community. This year its roots were expanded as a life-sciences focused, sell-side event, now promoting dealmaking and networking for the major Venture Capital (VC), Private Equity (PE), and strategic players across the healthcare industry. The meetings were centered around 13 themes related to healthcare and life sciences. In ZRG’s Life Sciences practice, we find that behavioral health trends, market environment, along with sequencing startups and growth of genomics are most relevant when driving business development, especially where valuation has sagged amongst VC and PE companies since 2021 during the COVID-19 Pandemic.

Behavioral Health Trends

Despite the Pandemic nearing an end, mental health is still a peak concern for the United States' population, increasing the need for behavioral health services to an all-time high. In late 2022, the Centers for Disease Control and Prevention (CDC) reported the percentage of adults who had received any mental health treatment increased from 19.2% in 2019 to 21.6% in 2021. According to Behavioral Health Business, private equity investors have taken note. In fact, PE deals made up more than 60% of behavioral health transactions, according to the data of The Braff Group. Many investors see the fragmented behavioral health industry as a prime target for consolidation and growth.

Most deals in 2022 valued at $3.3 billion. While investing in these companies is going to yield exponential growth for PE companies, being able to place clinicians, physicians, and therapists is going to provide the bigger return for partnering search firms. We are already seeing a growing trend in active searches where the ZRG Government and Life Sciences practices are heavily collaborating. This vertical will be especially important from a hybrid care (telehealth and in-person) perspective as the demand for clinicians increases in order to support patient needs.

Market Environment

Macroeconomic challenges persist, but life and business still go on. Although 2022 was a strong year alongside of 2021’s figures for deal activity across PE, VC, and M&A, Venture-backed founders are feeling the sting of valuation declines. Ideally, they would have raised more capital in 2021 into early 2022 to eliminate worry while networking and doing business. Regular conference goers are dealing with the throws of the challenge head on, yielding transparent yet awkward introductions from executives in biotech. Similarly, health systems are looking at alarming operating cash cliffs. Most private equity and M&A, sponsors and strategics have capital to position well in the market, while they are proceeding with caution.

Inflation puts over-leveraged companies in an uncertain position, while many PE-backed platforms are steadily growing. Bain and Company (Boston, MA) summarized that companies are better to look at year 2022 as a reason to continue going forward with an optimist approach in business, simply narrowing focus, continuously checking up on financial health, and maintaining a resilient outlook. The ZRG Life Sciences Practice is focusing efforts toward connecting our business efforts toward companies with the same mission.

Sequencing Startups and Growth of Genomics

Advances in the field of genomics over the past quarter-century have led to substantial reductions in the cost of genome sequencing. Originally, a genome cost around $3 billion. JPM meetings were inclusive of presentations highlighting the variety of use cases for genomic sequencing such as precision oncology, cancer detection, population, and preventive health. Element Biosciences, Inc. recently announced the lowering of a genomes cost to $200 or $2 per gigabase. CISION PR Newswire shared encouraging quotes from JPM speaker, Molly He, PhD, Element CEO and Co-Founder as follows, "Our goal is to enable labs everywhere to produce high-quality data at the lowest cost," as well as "Making a $200 genome available on benchtop systems today is an important milestone in that mission." The combination of lower sequencing cost and better capabilities has significant benefits for startups downstream that rely on sequencers for the development and implementation of genome-based testing.

These developments are paradigm to the genome sequencing process, as well as building confidence in research to startup organizations to effectively execute with financial health intact. Currently, the ZRG Life Sciences Practice is partnering with one of the most uniquely structured life-sciences nonprofit biomedical research institutions in the country with a mission to discover precise genomic solutions for disease and empower the global biomedical community in the shared quest to improve human health. Over the past three years, our practice has consistently been active in the genomics space, placing 38 candidates. Nearly 43% are C-Suite level, and more than half are VP, SVP, and EVP level. The quest in 2023 for the ZRG Life Sciences Practice is to continue supporting the ingenuity of our clients’ research, while they are simultaneously saving lives.

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