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Reporter’s notebook: Muted deals, weight loss drugs, AI at JP Morgan Healthcare Conference

Healthcare’s largest industry conference was bereft of major deal announcements and solid indications of IPO plans.

San Francisco’s financial district was buzzing this week with thousands of business suit-clad attendees of the JP Morgan Healthcare Conference, the largest industry event of its kind.

The four-day symposium is normally accompanied by a slew of deal announcements, from M&A to new financing. But for private companies, such activity was subdued this year.

Although healthcare is considered more resistant to downturns than most other industries, US VC funding into healthtech and life sciences startups declined last year to pre-pandemic levels, according to PitchBook data.

 


While these two verticals may have hauled in more venture deals and dollars than other sectors in 2023, such as ecommerce or fintech, the low number of new rounds announced during the conference could be an indication that VCs are still not feeling too bullish about the industry.

Still, one of the largest deals revealed this week, on Jan. 11, was a General Catalyst-led $95.5 million round for Harbor Health, a Texas-based primary care clinic group. The investment is also notable because the firm said in October that it plans to buy a yet-to-be-named healthcare system, an unusual move for a VC investor.

General Catalyst CEO Hemant Taneja said at last year’s JP Morgan Healthcare Conference that he expects a good deal of consolidation in the industry because there are now “too many” solutions on the market and that employers are reluctant to add more offerings as they look to manage their costs. Although Taneja’s firm may be following through on his prediction, overall M&A activity in healthcare has been dismally low.

Also at the 2023 conference, Headspace Health said it had plans to buy smaller players, but the meditation app and teletherapy services provider hasn’t made any known acquisitions during the past year. Instead, the company announced during its presentation this week its intention to partner with other digital providers of mental health sub-specialties.

IPO plans for large VC-backed companies are also being pushed out.

Adam Chekroud, the co-founder of mental health company Spring Health, said on the sidelines of the conference that while his company previously hoped for a 2023 or 2024 listing, it won’t go public until the IPO markets fully open, which is unlikely to be this year.

Somatus, a provider of kidney care, and fertility specialist Kindbody, said during their presentations that they will seek public listings but are waiting for market conditions to improve.

Another potential IPO could come from Grail. The cancer early-detection specialist was purchased by Illumina in 2021. However, after the acquisition closed, regulators found it to be anticompetitive. That decision was upheld Dec. 15 by a federal appeals court. Illumina said at the conference that it will conclude in Q2 whether to sell Grail to another corporation or take it public.

Despite the muted dealmaking, healthcare companies have a couple new areas of excitement.

One much-discussed topic was AI. Nearly all digital health companies mentioned the use of AI to improve their offerings, including Clario, a clinical trials specialist; Sword, a pain-management startup; and Heartflow, which offers a cardiac diagnostic platform.

“AI can make a significant impact on administrative aspects of healthcare management,” said Oak HC/FT co-founder and managing partner Andrew Adams in an interview.

But he voiced doubts that AI can help make clinical diagnoses.

Another was the breakthrough development of of Ozempic and Wegovy. These and other GLP-1 weight loss drugs have become so important to the industry that one of the three keynote sessions was devoted to issues related to this new category of medicines, which has shown nearly miraculous results.

While the leaders in the GLP-1 market are large pharmaceutical companies, VC-backed biotech startups, such as MBX Bioscience and Rivus Pharma, are also entering the space.

Featured image of the location for the 2024 JP Morgan Healthcare Conference by Greta6/Getty Images

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