The Game Isn’t Worth The Candle: Reflections On The JPM Healthcare Conference

Posted January 14th, 2019 in Atlas Venture, Biotech financing, Pharma industry

Another year, another JPM week. With a weekend to recuperate and reflect, I come away more concerned than ever about JPM and our industry.

For context, by JPM I don’t mean the actual J.P. Morgan Healthcare Conference at the Westin St Francis hotel – I mean the annual conflagration of healthcare folks that converges into the 6-block radius around Union Square and occupies all of the hotels, restaurants, bars, and coffee shops in that part of the city for 4-5 days every January.

On the positive side, JPM’s proximity to New Year’s Eve makes it a powerful forcing function for closing the books on the past year and laying out the expectations for the next. “What’s our messaging going to be at JPM?” is a common refrain amongst biopharma executives through the fourth quarter.  Timing big announcements “by JPM” is standard practice: so many new deals, financings, collaborations, and hires are released to the press just before and during the meeting. We certainly saw plenty this year with Celgene, Loxo, Adaptive, and many others.

At its best, the JPM week in San Fran is a hyper-networking event: connecting executives, entrepreneurs, and investors with the rest of the investment community; connecting service providers with current and prospective clients; and reconnecting old friends and acquaintances.

These are the good things about JPM.

But this year several more negative themes, all in place for years, reached a tipping point for me. This blog captures a few reflections.

This year the word “excessive” became synonymous with JPM week.

Excessively expensive, for sure. Hotel costs for 4+ nights are often $8-20K per person (link). Hotels have also begun selling “time” for meetings in their lobby (e.g., Hotel Nikko renting table at $30 per person per hour). Food prices are also crazy.  Want a simple egg breakfast?  How about $28/person. How about a $21 coffee (here)? Uber and its surge pricing also loves JPM. Add on the flights and cars to get there from all over the country (and world), and JPM becomes an absurdly large cost for everyone, but especially smaller companies. Dropping $50-100K to send half-a-dozen people to JPM is commonplace today, sadly. In a bit of irony, it’s good to know that underneath it’s very liberal veneer, San Fran is as capitalist as Adam Smith would hope.

Beyond excessive costs, JPM also highlights our industry’s other excesses.  Who was the marketing genius at J.P. Morgan that picked an expensive looking gold pill with golden DNA as the logo for the year’s conference? The juxtaposition of shiny gold and our industry’s medicines in a world where healthcare costs are considered out of control is the pinnacle of tone deafness. Only made worse by the fact that almost every major Pharma announced list price increases in the days before or during the conference.

To top it off, we all celebrated the flood of capital into the sector – overall VC funding is back to its dot-com era scale, untranched mega-rounds are daily occurrences in healthcare, and there are rumors of $1B Series A fundraises. Disciplined capital allocation appears a thing of the past; instead, it feels like the collective industry just wants more money, green money, dumb money… and gold pills. Not sure our industry’s PR experts, or our corporate boards for that matter, are doing an adequate job advising us.

Lastly, it seemed to me that the week revealed an industry that has lost a bit of its mooring, at least to some extent. Why are we here? We’re here to make medicines that help patients, and this conference week is supposed to rally us all around that mission. But I didn’t hear a lot about patients and impact this year.  There were no new Emily Whitehead’s, Creed Pettit’s, or Evelyn Villarreal’s to capture the essence of what we are doing as an industry. Did we not have enough new transformational data this year to shine the light more positively on impacting patients?  Maybe. But where were all the patient voices and stories?

Instead, I heard a lot about financials – market sizes, revenues, M&A synergies, and deal values. For instance, how small, exactly, is the market for Loxo’s drugs? How much longer could highly profitable cash flows of older drugs like Revlimid and Rituxan be protected from generics? Is $3-4M reasonable for a cell & gene therapy? How much will BMS have to cut into R&D? All of these are real and important questions in the grand scheme of running a company, analyzing a stock, or financing a sector, so I understand we need to be thoughtful about them – but its critically important to remember that behind every data point is a person. This year I didn’t hear enough about patients in the St Francis, in our meetings, in the receptions, or on the streets. But perhaps I wasn’t in the right places.

Further, on the way home from JPM, the spotlight was instead shown on the financial toxicity of our healthcare system: Michael Becker, a well-known Biotwitter voice and cancer patient, who reminded us in the past that “data always has a face” – announced he had to put his house up for sale to cover the broader costs of dealing with cancer for the last three years. It’s not just drug costs, but lots of other things too – including opportunity costs. Social media erupted with emotional support, rightfully. But this moment highlights, yet again, that we really need to come together to figure this out.

On the streets around Union Square, the dichotomy of the JPM event was also striking: the have’s in their tailored suits and the have-not’s begging for money. The smell of the street further burned that contrast into the brain. One couldn’t help but think about the mental health issues plaguing society – and wondering how many companies were working in these needed areas. Not enough, clearly. One bright spot worth mentioning were the wonderful generous efforts by some, like the STAT news team with Lava Mae and UCB Ventures with PRC ,to support the broader cause of homelessness and giving back to help.

Coming back to the topic of JPM itself, is this frenetic week in San Fran really that valuable? Why do we subject ourselves to this as an industry?  As STAT News opined right before the event, it’s likely because of FOMO: the fear of missing out.  Everyone is in San Fran, and if you aren’t you might miss something cool that’s happening out here. It’s cool to be out with the cool kids.

Yet, being completely honest, even as a networking meeting JPM is increasingly of limited value. The signal to noise ratio has dropped significantly with all the distractions and scale of the event and the satellite meetings. Given the speed-dating nature of most discussions, almost all JPM interactions are superficial at best. Constructive networking requires more than just a quick card exchange. Instead, many of these interactions at JPM are largely unproductive for us, and, despite the density and number of folks, it feels like an inefficient use of time.

Part of this may be the nature of our interests at Atlas Venture – we are a company creation focused investor.  We didn’t see “new deal flow” at JPM, and haven’t in probably over a decade. Instead, the primary meetings we have around JPM are with 25 or so larger biopharma companies, reviewing our portfolio over 45 minutes or so. These end up being very cursory engagements, rather than deep value-add dialogues about ways of working together. More of a touch base about whether they know our portfolio or not – and most of them do. As a practical alternative, we’d rather just host big biopharma leadership teams in our offices in Cambridge for 2-3 hours and do a deep dive on our portfolio or specific themes within it – which we already do with many of them. The JPM circus has always been superficial, like all rapid-fire meeting formats, but it felt more so this year than ever.

What might not be valuable for us, may obviously still be of real value to others. Companies raising money may find the density of investors useful. Companies presenting at the actual conference, or the Biotech Showcase, may find the format compelling.

However, for those that still believe a huge annual kickoff meeting for the industry is important, the conference week really should be moved to a more conducive location that can appropriately accommodate 15K+ people. The logistics of the current setup have massively outgrown the Union Square area of San Fran. There were numerous threads on this on twitter last week, especially under the #MoveJPM hashtag. If JPM won’t move, perhaps a group of other investment banks should set up a competitive event in a better and more scale-appropriate location (e.g., Miami, San Diego, Atlanta, Vegas, etc).  I’m very sympathetic to this #MoveJPM cause, and perhaps it would change the value vs cost equation for me and others.

But I’m also skeptical that this superficial, diffuse meeting is truly useful (and thus cost-effective) for the majority of folks who converge on San Fran every year.  Where is the tangible value-add of attending the meeting?  I enjoy seeing friends and the reception scene is fun (in moderate doses).  But that’s not enough of a reason to rationalize attending JPM in its current configuration.

I suspect that, true to form, FOMO around JPM has consistently over-promised and under-delivered for many.

We’ve concluded the game isn’t worth the candle at Atlas. It just isn’t worth a significant firm-wide presence in light of the excessive costs and limited real productivity of the meeting.

I’m looking forward to getting my week back next year.

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