The JP Morgan Healthcare Conference faces stiff competition from CES for headlines next week. But the 26th annual gathering of investors and companies is the event of 2008 in biotechnology.
More than 300 companies, ranging from public corporations like Genentech to tiny startups, will get 30 minutes each to impress the 3,500 investors there. Designed for investors, the conference has long been where the smart companies have found smart money.
"It is the event in the world of biotech and health care. It's a must-do on everyone's calendar," says Andy Schwab, a founder and managing partner of 5AM Ventures, a venture capital group headquartered in Menlo Park, specializing in early-stage biotechnology companies.
Biotech investors face increasingly varied terrain. Some analysts believe that the end of the blockbuster drug era is upon us, and that niche drugs will have to sustain the industry going forward. That's a tough reality in a high-risk, high-reward industry where investors have counted on big hits (like Pfizer's Lipitor and its $12.9 billion in 2006 sales) to cancel out the many misses and long-investment cycles that come with strict FDA regulation. According to Yahoo Finance, biotechnology's public companies have a market capitalization of $308 billion, but a collective profit margin of a mere 0.1 percent.
Schwab says this is a "conservative time" in health care investing, but the venture capital ecosystem of the sector remains strong.
"We feel really good about the fundamental side of the business," he said. "There's plenty of venture money out there. And pharma companies are still aggressive, doing deals and making acquisitions."
Matthew Hudes, U.S. Managing Principle of Biotechnology at the consulting firm Deloitte, agrees, saying he expects to see pharmaceutical companies acquiring a healthy number of biotech products and companies this year.
To venture capitalists, such acquisitions are "liquidity events," because they allow the VCs to pull their money out of the biotechs. It's the big payoff that entices VCs to put their money on the line in a field where about one in 10 companies is profitable.
Political journalist Bob Woodward will deliver a lunchtime conference keynote, a panel of economists will discuss health care in an election year and Kerry Weems, acting administrator at the Centers for Medicare and Medicaid Services, will also speak.
Hudes attributes the conference's increased focus on politics to the aging of the biotech industry. "(Politics) is even more important in this election cycle because many of the biotechnology companies are more mature and have commercial products that are affected by (government) pricing and reimbursement decisions."
But the real meat of the conference will be taking place out of the public eye, in the back hallways and restaurants of San Francisco's Union Square. "Most of what happens are the deals and the transactions around the conference," Hudes says.
Schwab agrees. "We have a ton of meetings set up with the pharma companies. They all send their business development groups to work on new deals. Every year, there are more and more receptions being sponsored by pharma, and they use those as a way to get to VCs and VC-backed companies."
The conference kicks off Monday morning with a speech by Jamie Dimon, chairman and CEO of JPMorgan Chase, and ends Thursday afternoon.
