JP Morgan 2016 Healthcare Conference Highlights: Key Trends in Oncology, Orphan Drugs, Digital Health, and Genomics

The J.P. Morgan Healthcare Conference is widely regarded as the global bellwether for developments and investment trends in the pharmaceutical and healthcare sectors. As the 34th edition of the conference has just concluded, what are the key highlights worth noting? What are the emerging trends shaping the future of the pharmaceutical and healthcare industries?

On January 27, at the event “Direct Insights into the 2016 JP Morgan Healthcare Hotspots – China Healthcare Global Private Sharing Session,” hosted by Healthbound, four attendees of the 34th JP Morgan Healthcare Conference shared their observations, experiences, and reflections. VCBeat has compiled the highlights and key viewpoints from these guests.

Four Major Hotspots

Zheng Yufen, CEO and Managing Partner of Yueyin Medical Venture Capital, shared her perspective on “JPM Through the Eyes of Investors.” At this conference, the primary area of interest among attendees was oncology treatment, with a particular focus on immunotherapy. It is reported that in a clinical trial concerning immunotherapy for hematologic malignancies, 34 patients were enrolled; two died from cytokine release syndrome (immune storm), while the remaining 32 achieved complete remission.

The second major hotspot is rare diseases and orphan drugs. This field is characterized by low R&D costs, a well-defined patient population, and autonomous pricing by companies. Currently, the FDA and CFDA have streamlined and accelerated the approval process for such drugs. The market size continues to grow, attracting increasing attention from enterprises and investors. Data indicates that the global orphan drug market was projected to reach $176 billion in 2020, accounting for nearly 19% of total prescription drug sales.

The third major area of focus is mobile health, with the U.S. FDA having approved 10 apps. Many mobile health products abroad have been genuinely integrated into clinical care processes, whereas China’s market remains in a fragmented and highly competitive state. We have engaged in in-depth discussions with no fewer than 200 projects, but we only select those with relatively stable business models and established scale.

The fourth major area of interest is genetic testing. Yang Yunxia, Executive Director at Sequoia Capital China, has long focused on this sector. She believes that genetic testing essentially provides data services. There are two key factors in assessing the competitiveness of a genetic testing company: first, its sample collection capability; and second, its ability to build analytical models. In the currently hot field of liquid biopsy, it is required to extract DNA fragments only a few nanometers in size from just 10 milliliters of blood, making sample processing capability critically important. Additionally, strong information processing capabilities are required to ensure no errors occur during extraction and amplification, or to enable error identification.

Yang Yunxia believes that companies focused on epigenetic testing and genetic analysis represent a growing trend. Beyond genetic mutations, epigenetics plays a crucial role in the development of diseases, particularly cancer, presenting numerous investment opportunities in this field.

M&A Transactions Remain Active,IPOSlowdown

Zheng Yufen stated that, globally, M&A activity in the biopharmaceutical sector remains robust, while IPOs have slowed slightly.

Bao Jun, Vice President and Chief Commercial Officer of Sheng’aoji Pharmaceutical Company, believes that high-quality companies can still pursue initial public offerings (IPOs), although it will become increasingly challenging. Currently, more than half of the transactions in the pharmaceutical industry occur at the early stage, as projects in later stages are significantly more expensive. Therefore, early-stage deals will become both more frequent and more costly in the future. This presents a significant challenge for venture capital (VC) firms, as the risks associated with valuing early-stage projects will continue to rise.

Rational and Calm Selection of Investment Targets

Mi Jie, Executive General Manager of CICC Jiacheng Investment Management Company, shared insights into the differing mindsets of Chinese and American attendees. “Chinese investors are eager to close deals; their participation in such events is akin to attending a fashion show, characterized by high enthusiasm and strong purposefulness. In contrast, American attendees are relatively calm, seeking suitable partnership opportunities and investment targets based on technology and market demand.” China has begun to gradually engage in global pharmaceutical mergers and acquisitions as well as R&D activities; however, it should adopt a more rational and composed approach when selecting investment targets.

Meinian Onehealth’s Yu Rong: BullishCEnds, Building Two Major Closed Loops

Yu Rong, Chairman of Meinian Onehealth, stated that within the major sectors of the broader health industry—namely medical services, medical devices, and pharmaceuticals—business models integrating with consumer-facing (C-end) markets will garner increasing attention from both business development perspectives and capital markets. For instance, while gene sequencing companies have previously focused primarily on business-to-business (B-end) clients, their future competitive edge will ultimately depend on their ability to effectively serve individual consumers (C-end).

In the future, Meinian Onehealth will further strengthen its closed-loop ecosystem in the health examination sector. The company’s two core strategies—namely, its two major closed loops—will expand around medical services and innovation incubation. Health examinations will extend into both the medical treatment and preventive care segments, ultimately integrating with insurance payment providers to form a complete closed loop. Meanwhile, continuous adoption of new technologies and products is required to further optimize examination services. The combination of new products, new technologies, and capital investment will foster the emergence of new incubators, reflecting the trend of cyclical listings that Yu Rong aims to establish.

On the big data platform, Yu Rong proposed several strategic initiatives: First, continue to expand big data volume, aiming to achieve an annual health checkup traffic of 40–50 million within approximately three years. The larger the platform scale, the more pronounced the benefits become. Second, establish a proprietary data system; Meinian Onehealth prefers a closed rather than open approach to health data. By integrating health checkup data, the company plans to develop an offline platform supporting multi-site practice for physicians in the future. Third, leverage the data system to drive innovation, such as combining it with genetic testing to enable more precise disease risk assessment and prediction. Fourth, explore and develop intelligent diagnostic tools in specialized medical fields.

Furthermore, Meinian Onehealth’s M&A strategy will be further strengthened. The three key directions are intra-industry acquisitions, cross-sector acquisitions, and supply chain integrations. In addition to continuing to expand its entry point in health check-ups, the company will also focus on relatively asset-light specialty sectors, such as dentistry, ophthalmology, and medical aesthetics. Diagnostic technology companies that offer synergies within the industrial chain will also be targeted.

In response to recent rumors that Meinian Onehealth’s takeover offer for iKang Guobin was aimed at fulfilling its listing performance commitments, Yu Rong stated that data disclosed in Meinian Onehealth’s publicly released third-quarter report indicates the company will exceed its 2015 performance targets. Moreover, under A-share back-door listing regulations, earnings generated through mergers and acquisitions cannot be counted toward the listed company’s committed performance figures. Therefore, Ciming’s results cannot be included in the listed company’s performance commitments.

Yu Rong stated that the strategic alliance between the two leading companies in the health checkup sector is not merely a simple commercial addition, but rather an effort to eliminate internal industry friction. This move aims to foster rapid and healthy industry development while creating highly promising growth opportunities at the health checkup platform, which serves as a key entry point for health-related demands.