The JPM executive outlook: New science, yes. Pricing moves, yes. Deal frenzy, no

San Francisco (Pixabay)
What was the tone in San Francisco this year? Executives at the J.P. Morgan Healthcare Conference gave FiercePharma their rundown. (Freddie Collins/Unsplash)

As one of our coverage team said as the J.P. Morgan Healthcare Conference was winding down Thursday, this first-of-the-year meeting sets the tone for months to come. And it’s certainly a great place to suss out the general biopharma mood as 2018 begins.

Thing is, this year, JPM felt in a way like a pause before a new round of action—with some of that action on a long trajectory. Or, perhaps, a brief haven from the rapid change that’s happening in the marketplace for drugs, some of it politically charged, some payer-driven.

One big topic: The overall lack of deal announcements that typically characterizes a JPM meeting, what with drugmakers and developers and investors all in one place to talk up their news. More deals on the way as the year progresses? Undoubtedly, but perhaps not the “frenzy” that some have been hoping for.

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Another: Tax-plan cash boosts as foreign profits are brought back to the U.S., and annual savings from corporate rate cuts. But the effects of those could disappoint (as with the M&A outlook above).

RELATED: JPM need-to-know: FiercePharma and FierceBiotech's live blog of event happenings

"In years past ... multinationals who are based in Europe and elsewhere had pretty significant advantages, systemic advantages, over U.S. based multinationals in terms of their effective tax rate," Darren Carroll, Eli Lilly SVP of corporate business development told FiercePharma. "That made them frankly much more capable of paying higher prices and still delivering value to a shareholders, and tax reform has leveled that playing field. That feels a lot better, quite frankly."

But those expecting a "deal frenzy" will be disappointed, Carroll predicted, and Amarin CEO John Thero agreed. "I think some people think there will be a lot of M&A because trapped money offshore will be coming back,” Thero said, echoing many others we spoke with. “I’m not so sure that's the case to be honest." 

It's not just deal discipline that could hold back an M&A flood. Politics could play a role, too, CSL CEO Paul Perreault said. "I think some people think there will be a lot of M&A because trapped money offshore will be coming back. I'm not so sure that's the case, to be honest," he said. "I think people will be cautious about that, because if you bring money back, do big M&A and then cut jobs, that's not exactly the model you want with this government."

VBI Vaccines CEO Jeff Baxter said some of his fellow chief execs are nervous about the markets. "I think there are significant headwinds," Baxter said, citing some recent ups and downs in biotech stocks. He doesn't see a huge M&A boost from overseas profits coming home. "Repatriation of overseas dividends for the Big Pharmas was a big headline, but actually the proposal wasn't that great," he said.

RELATED: With tax reform passed, pharma's dealmakers likely to pick up the pace in 2018

Still, he said, new platforms will continue to get M&A attention. For "people that have some kind of a proven track record and are in clinical development with a good management team, I think you will see their existing investors supporting them."

Pricing and payer pressure also surfaced as a recurrent theme. Though Merck CEO Ken Frazier predicted it wouldn't get any worse, Eli Lilly chief David Ricks pointed out that pharma has a ways to go in terms of making drugs as affordable as they need to be. Jack Bailey, GlaxoSmith Kline's president of U.S. pharmaceuticals, agreed.

"There’s just this balance between the innovation [that] is becoming more and more exciting" and "the importance of our industry, the payers, everybody involved in healthcare, making sure we tackle that affordability question so as many people as possible can benefit, Bailey said.

One cooperative effort between payers and pharma won kudos from those paying the bills. The maker of an ultra-pricey gene therapy, Spark Therapeutics, has set up some pricing plans that pharmacy benefits managers hailed as potential models for the other expensive therapies on their way to market.

Finally, and this is more hopeful, if the fruits of it are some years away: New technology and science that seemed more plentiful at JPM 2018 than in years past. "[W]e continue to see the long investments in science across the industry and government institutions as well, like NIH, are really paying off," Carroll said when asked what stood out about this year’s meeting.

RELATED: Is bigger better? Highlights from FierceBiotech's Executive Breakfast at JPM

“The number of really interesting companies ... and new and emerging technologies that are in many cases still unproven but really hold tremendous promise,” he went on. “I actually think the number of those companies is larger than maybe I’ve ever seen.”

Bailey said the difference between the 2017 meeting and this year's was noticeable on the science side. "[L]ast year, there was a a little bit of a dip in the innovation when we were here," Bailey said, whereas this year's meeting underscored "the upward trend we're seeing in terms of the flow of innovation."

Thero agreed, identifying small-company innovation as an obvious theme of JPM this year. “I think that the innovation that continues to come out of small companies and the growth that continues to come out of small companies is very important in this industry and sometimes overlooked,” he said.

Overall, despite the dearth of immediate deals, the naysayers predicting a disappointing 2018 may be too pessimistic, Bavarian Nordic CEO Paul Chaplin said. His company's reception at JPM was more positive than might have been expected, given the company's prostate cancer vaccine Prostvac fell short in a recent trial, he said. "Personally, I think the market is a bit more upbeat than people think," Chaplin said. "The few meetings that we have [had] so far, it's been quite upbeat considering the failure we had not so long ago. I think that's a sign that life sciences is pretty strong."