This blogger had the opportunity to spend January 9 through 13 in San Francisco at the 29th Annual JP Morgan Healthcare Conference. The annual convocation of public and private investors in healthcare and life sciences companies showcased the excitement around healthcare investments that we are generally feeling from investors. Here are several key observations from the conference:
- Based on several conversations with venture capital and private investors, there is fear about investing in early stage medical device companies that have 510k approval exposure. Several investors indicated that US-based companies must consider a European approval pathway to first introduce devices.
- Investors are excited about health services investing. This can be seen in the stocks of acute hospital chains Community Health Systems, Universal Health Services and Health Management Associates. Acute care hospital chains were generally seen as "winners" in the health reform debate.
- Private equity funds are interested most in low acuity outpatient services investments and investments that remove cost from the system while improving quality. Urgent care, sleep labs, dental chains and other low-acuity service providers are prime targets for private equity funds. Many funds are still hesitant to invest in healthcare service providers that have reimbursement exposure.
- Investors do not appear to be frightened yet about the potential impact of state budgets on Medicaid programs. Federal health reform efforts put much of the coverage expansion burden onto the states and their Medicaid programs. At the same time, state budget cuts may impact this expansion of coverage. For example, the Illinois legislature passed HB 5420 last week imposing new limits on Medicaid coverage.
The JP Morgan Healthcare Conference typically acts as the kickoff to the year in healthcare dealmaking. Based on what we saw at the conference, it should be a busy year!