An Outsourcing Vibe At JP Morgan 25

By Louis Garguilo, Chief Editor, Outsourced Pharma

The 43rd Annual J. P. Morgan Healthcare Conference held earlier this month was hailed as the largest health-care investment symposium/conference in the world.
JPM, though, has never been a venue for directed discussion on drug development and manufacturing outsourcing.
That’s not to say such discussions aren’t held in corners of the event, nor that executives and others from CDMOs do not attend.
In fact, this year Kurt Nielsen co-hosted a fireside chat at the Expert Insights Annual Reception, devoted primarily to the topics of prime interest to OutsourcedPharma.com readers.
I asked Nielsen – a friend and contributor to this publication – to share some of his insights from this year’s event, and make some comparisons to the event in past years. So, with minor editing, here are his initial thoughts. In part two, we’ll zoom in on the CDMO market.
Where Outsourcing Meets?
“The conference has grown to the JP Morgan Healthcare week, with many parallel events. When I first started attending the event, 50% or more was going to the presentations, and then networking at evening events. The presentations were focused on investors, with topics such as M&A, new products, and then government policy impacts, pricing and reimbursement.
But over time there's become a broad appreciation the entire healthcare ecosystem now convenes at the event. No matter where you sit in the continuum, if you are a certain level executive, there're opportunities to meet and discuss what's important to you.
For service companies [e.g., CDMOs], it's an opportunity to meet executives from your strategic buyers [biopharma sponsors].
If you had good relationships throughout the year or you're developing relationships, it’s become an event where you can potentially get a meeting with a head of CMC Manufacturing, or someone in the C-suite. Those biopharma executives are there for the most obvious reasons of meeting investors and raising funding, but also now look to meet with other members of the ecosystem.
For CDMOs, to meet these C-suite executives and develop relationships with strategic buyers –people who have the most to win or lose by your performance and your ability to deliver – is of great value.
On the other side of the relationship, if you are a biotech looking for opportunities for discussions, partners or funding, JPM has become one of those meetings where if you're not there, it raises an eyebrow.
I don't mean there’s something wrong, but for example, when people say, ‘Hey, are you going to JP Morgan? I'll meet you there,’ if they are not going, they feel obligated to provide a long explanation about why not.
That points to a certain level of importance for this meeting.”
Have A strategic View
“For both drug sponsors and CDMOs, I think one thing that's important when you're having meetings at JP Morgan is to have a strategic view about what occurred the last year, and what is upcoming.
The meeting should have that feel of a strategic review, and look at the next 12 months.
It can be something like, ‘Wow, the last 24 months have been difficult, and I’ll tell you about some of the scars I have, how we’ve learned from them, and where we see a lot of oppportunity arising now. Here are some pitfalls we should both be aware of and how we can not only avoid them, but thrive together.’
When you think about it, these are the very natural conversations that occur at the beginning of the year at most companies. JP Morgan seems a good environment because of timing and the feeling of the event.
Not only do you learn a lot, but you create that environment for a phone call to happen when things aren't going well, or somebody's hearing something unpleasant, and there's enough of a relationship to place a call and say, ‘Listen, I’m hearing this. I'm here. You've been late on the last three delivery milestones. Let’s figure this out.’
This is so important as the entire outsourcing industry continues its evolution.
Not that long ago, outsourcing was an experiment to reduce your variable cost of doing development. Well, the model's been proven. Now, the focus is on how do we make this system work even better.
Specifically this year, some conversations I am aware of covered topics from global sourcing strategies in the aftermath of the BIOSECURE Act, to what's happening with late-stage discovery and emerging disease targets.
It’s really turned into a week where there is something for everybody on the business, technical, regulatory, policy, and yes, outsourcing-relationship side.”
No, The Money Is Not Flowing Yet
“The money is still not flowing in.
When I say ‘flowing,’ the nuance here is the comparison with the ‘free money era’ [low interest rates and pre-COVID], when there was so much money the ecosystem habituated to that abundance.
We're now in the third year of the quantitative [monetary] tightening. There’s been a cycle of easing, and the capital flows are still comparatively lower than before – even though most recently we’ve had some quantitative easing.
This less than fully enthused attitude surprised me because I’m the eternal optimist, and interest rates have been coming down. But it takes longer than we think to take hold. It’s going to take longer to get back to heavy investment in drug discovery and development.
Obviously, this will continue to put pressure on the small start-up biotechs. They'll continue to be challenged to get the follow-on funding needed beyond angel and seed rounds of funding .
It appears equity will continue to feel expensive, because equity can still afford to sit on the sidelines waiting for the best opportunities to arise. I’d guess venture debt will continue to have its moment in the sun for another year or so.
There’s a better way to say this, but I did not hear any CDMOs saying, ‘We're killing it on development and discovery projects.’ Nobody was saying that the money is just flowing back to the CDMO industry for new molecule development.
However, neither did anyone say, ‘We can’t grow.’ The way I interpreted all that was sentiment is positive overall versus last year, but perhaps for different reasons.”
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Nielsen offers insights on that overall sentiment and those reasons in part two.