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January 12, 2024 | Insights

J.P. Morgan Healthcare Conference Takeaways

Bowen recently attended the J.P. Morgan Annual Healthcare Conference in San Francisco. Here are our top three takeaways.  

 

1. The word of the day is “Capitulation” 

    • The heady days of 2021 left an indelible mark on the healthcare startup community. Massive bets, structured using cheap capital, were made on money-burning companies at eye-watering multiples. When the music eventually stopped, startups were forced to make hard decisions. The ones that made it through tightened their belts, optimized for profitability, and continued company building. Yet now they had baggage. Their sky-high valuations, once an accolade, were no longer supported by the market.  

 

    • This valuation discrepancy created a pricing gap throughout 2023. Companies with low growth and/or unprofitable financial profiles faced significant discounts. Austerity measures and internal rounds helped to delay the need for funding, but eventually, founders and investors began to capitulate.  

 

    • 2024 is the first time Bowen is seeing broad acceptance of the new pricing reality, a sentiment echoed by the numerous VC and PE firms we met with while in San Francisco. It’s not all doom and gloom for insiders, though. Bowen is increasingly observing innovative deal structures being used to keep management and investors whole while delivering potential upside.  This bodes well for deal activity, and with rate cuts on the horizon, Bowen is “cautiously optimistic” that 2024 will be an active and profitable year for the healthcare startup ecosystem. 

 

2. Pharma software and services are primed for a breakout year 

    • Software and services for life sciences is an industry segment that Bowen knows well. We’ve remained close to the space, keeping connected with industry leaders and innovative startups. At JPM, they were all saying the same thing: Sales into pharmaceutical companies were slow in 2023, but 2024 should be a record year.  

 

    • Tales of delayed meetings, missed deadlines, and rigorous review processes colored our conversations. The easy selling environment of a few years ago had vanished, replaced with a more restrictive and budget-conscious crowd. Projects weren’t canceled outright but were, more often than not, pushed down the road. Though this negatively impacted 2023 performance, it primed the segment for a standout 2024. With rich pipelines, and a market that appears to be on the mend, executives are confident that it is only a matter of time before sales begin to materialize.     

 

3. The picks and shovels of AI 

    • AI was a frequent talking point among conference participants, with new potential use cases cropping up across the healthcare value chain. When a transformative new technology bursts onto the scene, it’s easy to get caught up in the excitement. As optimistic as we are about AI’s potential, it is still early in the development cycle, and serious questions remain regarding how technology will be deployed at scale. 

 

    • Given the uncertainty, Bowen is spending more time on the proverbial picks and shovels than on the AI models themselves. Supporting solutions, such as software and services that support the flow of data, ensure its accuracy, and maintain security, are all primed for outsized growth. Bowen is excited about the opportunity in the segment and is exploring additional M&A and fundraising opportunities. 
Insights by

Max Rieley

Associate

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