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Healthcare and Life Sciences
JP Morgan’s Healthcare Conference shines the light on four trendsSubscribe to Healthcare and Life Sciences March 8, 2016
This year’s JP Morgan Healthcare Conference brought global executives, industry analysts, and policymakers to San Francisco for four days to discuss the top developments and most pressing issues facing the industry. This bulletin synthesizes observations from the conference as well as takeaways from more than 200 conversations with industry leaders, investors, analysts, and regulators. The upshot? Four trends highlight the accelerating pace of change and increased emphasis on performance throughout the industry.
Consolidation is on the rise as investors look for returns.
- Several elements bode well for an active 2016. Select opportunities may exist across all sectors and regions, and the opportunities will be met by private equity’s deep pockets (approximately $1.34 trillion in global capital at the end of October 20151), high cash-to-debt ratios for corporate targets, and the continued push to consolidate highly fragmented segments.
- M&A is becoming more fruitful. According to Baker & McKenzie, “in the fourth quarter of 2015, cross-regional M&A activity rose to 719 deals worth around $390 billion, a 25% drop in deal volume but 31% increase in deal value over the same period last year."2
- US investors have gone on a spending spree in Europe. Transactions involving North American buyers targeting EU companies accounted for nearly $238 billion in 2015.
- Many executives feel that, although China was perceived to be the key strategic market for growth, recent developments suggest its growth may be slower than expected when compared to other emerging economies like India. However, in many emerging markets improving operating efficiency and effectiveness must take precedence over rapid expansion in 2016.
The pace of innovation in research is accelerating, and the potential of precision medicine is finally starting to be realized.
- Scientific discovery is experiencing a renaissance. The development and approval of new medicines is rampant, and drug and product pipelines are currently healthier than at any point in the recent past.
- Big data is not the key but an enabler. Players are exploring how the combination of clinical, research, and social data can deliver healthcare solutions in areas ranging from clinical trials to disease management. Many companies focus on the patient journey and experience in addition to clinical outcomes—for example, by using insights from patient interviews to influence clinical-trial design. However, the danger is that scientists will find all sorts of information to support their conclusions using unstructured sets of big data instead of asking the right questions first and working to prove the null hypothesis.
- The distance between pharma companies and patients is narrowing. Pharma companies are using technological innovation and big data to select patients for clinical trials based on specific traits, an approach that enables individuals to contact pharma companies and directly enroll in trials.
- Genome-editing technology could soon allow biotechnicians to delete, repair, or replace the genes that cause certain diseases, offering new hope for some previously untreatable genetic conditions such as Alzheimer’s.
- Technology is permeating the industry. The need to capture increasingly complex data sets is driving companies to rapidly update their technology-infrastructure platforms. This development comes with a note of caution: researchers must ensure they ask appropriate questions to avoid using this seemingly new data to support existing assumptions and conclusions.
Digital transformation and the Internet of Things will disrupt the entire industry.
- The Internet of Things is poised to connect devices more seamlessly, enhancing patient monitoring and allowing individuals and their physicians to better manage conditions. These developments will usher in new business models that could upend the traditional relationships between customers, payers, and providers.
- Sensors connected to the Internet of Things have the potential to engage patients in their disease management, which could help lower costs and reduce the incidence of adverse events. Notably, wearable monitoring devices hold tremendous promise for improving the patient experience throughout consultation and treatment.
- Breakthrough developments in robotics could deliver some caregiving services, such as monitoring treatments and drugs, to older individuals.
- Technology is rapidly moving outside of the hospital: Early-stage medical-device companies are developing products that can deliver care in locations such as physicians’ offices or surgical centers.
Talent remains a top priority and key driver of performance.
- The fight over the best talent will intensify. In some verticals (such as oncology and cloud solutions), talent will be the primary source of competitive advantage due to the imbalance in supply and demand. Further, organizations in emerging markets will continue to grapple with leadership instability, emphasizing the need to strike hard bargains in order to retain and attract top talent.
- Companies will be focused on integration and the divestiture of noncore businesses or therapeutic areas from major acquisitions, which will flood the market with experienced executives. New entrants in healthcare will compete with traditional players for talent as technology disrupts age-old business models.
- M&A and consolidation is creating new leadership models, where partners will demand a bigger role in decision making, and collaboration will be driven by both organizational strategy and personal chemistry between leaders.
- Senior executives around the world seem more amenable to relocating anywhere for the right position and company. For example, EU employees—both European executives and expats—are looking to pursue careers in the United States, an indication of the greater opportunity for long-term career growth in the country’s biopharma market.
Despite the turbulence in the capital markets, the outlook for the healthcare and life-sciences sector across the value chain remains robust and optimistic. Still, healthcare companies—particularly large-cap enterprises—need to reevaluate their business strategy and organization to respond to disruptive threats.
1Ayesha Javed, “Firms get creative to spend $1.34 trillion cash pile,” Wall Street Journal, November 2, 2015.
2“Cross-border deals break records in 2015,” Baker & McKenzie, January 2016.