10 Key Takeaways for Life Sciences from 41st Annual J.P. Morgan Healthcare Conference

Healthcare industry leaders came together from across the globe at J.P. Morgan’s 41st Annual Healthcare Conference earlier this month to share insights, form strategic alliances, and present key developments and milestones. It was the first time in three years that the world’s largest and most informative healthcare investment symposium was held in person and the energy was invigorating.

While scientific innovation is showing no signs of slowing down, the uncertain economic environment was prominent throughout conversations. Kathryn McDonough , Co-Head of Healthcare for Middle Market Banking & Specialized Industries, highlights a few recurring themes heard over the four days.?

1. Overarching concern on access to capital continues to weigh on management teams, particularly for smaller biotech companies. Ongoing efforts to preserve cash, extend runway and evaluate strategic alternatives are paramount.
2. Market dislocation and instability are highlighting the importance of choosing strong and supportive partners and advisors and experienced board members. A majority of the life sciences investment community has not been through a downturn.
3. Optimism for improved biotech market conditions in 2023 is centered around progression of pipeline assets and companies reaching their value inflection points. Positive clinical trial data throughout 2023 will spur more deal activity.
4. VC and PE capital is still plentiful but as LPs review new investments they will be more thoughtful and patient with deploying capital.
5. Large emphasis on the need for differentiation of drug delivery platforms and therapeutics relative to market and competitors – expect companies to take measures to prioritize lead programs (company reorganizations, workforce reductions) and announce new programs addressing unmet needs.
6. The fact that we are seeing fewer deals likely means that record historical valuations have still not tapered.
7. There is strong conviction that Seed and Series A investments will get done. In particular, look for institutional funds to syndicate and come in earlier to provide more structure and de-risking earlier in the investment cycle.
8. Series B and later stage investments will likely continue to be challenged due to inflated valuations. We could see more Series A extensions instead to extend timelines and achieve additional clinical milestones ahead of new rounds.
9. As companies work to extend cash runways, more companies are likely to consider debt financings and other strategic alternatives.
10. While the M&A market remains less active than in prior years, biotech companies are open to dialogue with large pharma partners on partnering for both pipeline development and non-dilutive cash flow extension.?

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