Biggest, noisiest conference for health care investors convenes amid bubble fears

Sarah SmithJanuary 17, 2023

SAN FRANCISCO — The healthcare business class returned to their San Francisco haven last week for JPMorgan’s annual health conference at the gilded Westin St. Francis in Union Square. After a two-year pandemic pause, the mood among the executives, bankers, and startup founders in attendance was like a reunion, gossip about promotions, work-from-home routines, who was getting what investments. Dressed in their finest capitalist clothes, from gleaming blue or pastel purple blazers to sumptuous puffy coats, they would go to big parties, hang out in art galleries or restaurants.

But the party was tinged with new anxiety: Will the big money invested in health care because of covid-19 continue to flow? Will investors beg to see results – i.e. profits – and not just cool ideas?

At the noisy conference, there was as much talk about profits as about patients. The crowd, mostly without masks, spoke English, French, Japanese and, of course, money.

In addition to corporate and investment types, visitors regularly saw amazing characters such as the famous Dr. Mehmet Oz, fresh out of the Senate, holding court in the lobby on January 10th.

If the atmosphere in the hotel’s crowded lobbies was upbeat – or at least cheery – there was a tremor of unease beneath it, as everyone knew the health-care business bonanza seemed to be slowing down.

The conference began with a protest against the pharmaceutical company Gilead Sciences, whose drugs to fight HIV and hepatitis C are fabulously effective and fabulously expensive. During the pandemic, Congress pioneered a plan to allow Medicare to negotiate U.S. drug prices, which are by far the highest in the world. In a statement, company spokesperson Katherine Cantone said Gilead is the largest private donor to HIV programs in the US, adding, “Gilead’s role in ending the HIV and hepatitis epidemics is to discover, develop and provide access to our life-saving medicines. ”

Then there is the economic environment, which becomes treacherous. Journalists of the financial publication Bloomberg noted the lack of interesting deals. Startup executives who previously could easily raise millions of dollars in investment seemed obligated to show results in their impromptu presentations in bars and coffee shops. Business leaders of all stripes have promised that they are either making a profit now or will soon.

“I think this is a challenging year,” Hemant Taneja, CEO of venture capital firm General Catalyst, said during one of the panel discussions. He suggested that many medical technology startups were overvalued and that their customers would be more interested in whether they actually provide useful services.

The new message from potential investors was clear. “The idea that you can grow and not be profitable is dead, gone,” Dr. John Cohen, CEO of mental health startup Talkspace, said in an interview.

There was cognitive dissonance at the conference. Take, for example, BioNTech, a vaccine developer whose mRNA vaccine, co-created with Pfizer, provides powerful protection against the coronavirus. Company co-founder Uğur Şahin was interrupted by applause during a presentation highlighting its role in the fight against the pandemic, and this was before he talked about his company’s role in reducing infectious diseases, saving lives and meeting global health needs in the fight against the pandemic. tuberculosis and malaria.

The conversation later turned to the price of his company’s flagship vaccine, which it is trying to set at over $100 a dose, compared to the government’s average purchase price of $20.69. It was a fair price given the “health economics,” explained BioNTech chief strategist Ryan Richardson: hospitalizations and serious consequences were averted.

Or take pharmacy giant CVS, which has steadily expanded beyond its retail roots in health insurance and primary care. CVS Health CEO Karen Lynch said that as part of its healthcare business, the company considers all the factors behind wellness. “Health is not just about dealing with a supplier; we are talking about all other factors, including housing and food,” she said. What has been left out is what CVS customers often greet when entering a store: candy, chips and other processed foods.

For critics, it was a stunning comment. “Last I heard, CVS was a commercial company, not a welfare agency,” said Marion Nestle, a researcher and longtime food industry critic. “He sells junk food that makes people sick and medicines to treat those diseases. How do you like such an elegant business model!

CVS spokesman Ethan Slavin offered a very different vision, in which CVS aims to become a leading center for health and wellness. “We are constantly improving our food and beverage portfolio to offer healthier and trendier products.” He also added that he supports programs to increase food availability in underserved areas.

Some tech professionals have faced renewed skepticism about “artificial intelligence.” Ginkgo Bioworks co-founder Jason Kelly noted during his presentation that people at the conference heard so much about artificial intelligence during meetings that “they want to stop hearing it.” (Ginkgo’s AI, used to support pharmaceutical and biotech research, was different, he said.)

One surgeon, Dr. Rajesh Aggarwal, found that conversations with financiers about a hidden startup he founded that focuses on metabolic health focused on silver bullets. “Tell me, if I invest in this, I will increase the costs by 10 times,” he said, paraphrasing the bankers. According to him, many wanted to “do something good” for patients as well.

Aggarwal felt that investors were looking for simple solutions to health problems. And one item fits that bill: a new class of drugs called GLP-1 agonists, a type of drug that helps you lose weight but is likely to have to be taken for a long time. Some analysts predict that these drugs will cost $50 billion. Bankers, according to Aggarwal, “do not think about health care”, they “think about the dollars attached to the pill.”

KHN (Kaiser Health News) is a national news service that produces in-depth journalism on health issues. Together with Policy Analysis and Polling, KHN is one of the three main operating programs of the KFF (Kaiser Family Foundation). KFF is a charitable non-profit organization providing health information to the nation.