Latest / CareTalk: Healthcare. Unfiltered. / Takeaways from the 2024 JPM Healthcare Conference

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Takeaways from the 2024 JPM Healthcare Conference · CareTalk: Healthcare. Unfiltered.

• 0:00
  Well, the rain was falling in San Francisco last week, but somehow inside the JPN healthcare conference, it was sunny or at least a lot sunnier than the gloom and doom of 2023 when biotech was in a free fall.
• 0:13
  So is the industry in for a rosy 2024 or will it be back to negativity again soon?
• 0:28
  Welcome to Care Talk, America's home for incisive debate about healthcare business and policy.
• 0:32
  I'm David Williams, president of Health Business Group.
• 0:35
  And I'm John Driscoll, the president of Walgreens Health.
• 0:37
  David, JP Morgan usually is the launching gun, the launch of the healthcare industry's kind of a private sector view.
• 0:48
  It brings together...
• 0:50
  All of the biotech companies, the big pharma companies, all the healthcare services businesses, technologies, there are estimates as many as 20,000 healthcare executives, everything from Chinese pharmaceutical distribution companies to nonprofit hospitals to high tech companies are all converge on Union Square in San Francisco to peddle their wares, make connections, raise money, spend money, and generally talk up healthcare.
• 1:19
  What's your impression of the state of the healthcare economy post the JP Morgan San Francisco Jamboree?
• 1:28
  John, it actually came out as a fairly optimistic as I speak to people who were there.
• 1:33
  I wasn't actually there.
• 1:35
  People are feeling pretty positive about it.
• 1:36
  There were some deals announced.
• 1:38
  We mentioned one at the start of our show last week.
• 1:41
  There were a few more that happened.
• 1:43
  And I think it's actually the kind of macroeconomic factors that are really beyond the industry's control.
• 1:48
  that could be a plus or a minus.
• 1:50
  That number one is really about interest rates, John.
• 1:53
  If interest rates go down, it's good for biotech, which is a long bet if they go up as they had been doing.
• 1:58
  It's bad.
• 1:59
  I don't think there's gonna be a lot happening in healthcare policy this year that's gonna make much of a difference.
• 2:04
  But overall, it was a reasonably sunny mood.
• 2:07
  Well, yeah, I was out there and I definitely felt now money people are always optimistic about investing money.
• 2:16
  So.
• 2:16
  You had, again, all the private equity funds that were interested in health care, as well as most of the major banks and investment banks.
• 2:23
  But I think in general, we should feel pretty good about, as an industry, health care is going to continue to grow.
• 2:30
  Now, whether it's actually delivering on value for patients is another matter.
• 2:35
  The other big theme coming out of JPMorgan is obesity is a fast and fat market that is growing really fast.
• 2:46
  the lilies and the Novo Nordics, those who control ozempic and wagovi and monjaro, those transformational weight loss drugs, they're going to have some competition in the category.
• 3:00
  I don't know whether you read anything about that while you were sleeping through your week in Boston.
• 3:06
  John, well, the thing is, they say it's something like a $150 billion market.
• 3:11
  And it's made a difference, apparently, like the whole country of Denmark.
• 3:16
  affected because Novo is fat and happy.
• 3:19
  And Indianapolis, I haven't been out there.
• 3:21
  I'm not sure if you could notice a big difference with Lilly, but there is just a huge riches.
• 3:27
  It's sort of like striking oil or opening up a casino or something like that.
• 3:32
  And so the other companies that are in the space, really in pharma in general, are looking to license in new products because weight loss is just such a big area.
• 3:42
  And in fact, It's not even exactly well known how these drugs work and if they'll work for the long term or not, they're still mostly injected, they're expensive.
• 3:53
  And so yeah, there's still a lot of room to go.
• 3:56
  And that is where a lot of the action still is, John.
• 4:01
  Well, I think actually we do have a pretty good idea of how they are supposed to work, you know, working on the agis.
• 4:09
  And perhaps we do a separate episode on that so that we can educate you, David.
• 4:13
  on how it works.
• 4:14
  But effectively, it is not only an appetite suppressant, but it has a lot of cardio metabolic advantages that are beyond the fact that people lose 10 to 20 percent of their excess, of their weight in total and most of their excess weight, largely because it is satiating you.
• 4:33
  You know that word, David, it's when you're actually, you don't feel like you need to eat anymore.
• 4:39
  But that...
• 4:40
  that impact also affects addictive behaviors, appears to around things like alcoholism.
• 4:46
  So, I think we're, and it has an independently verified cardiometabolic positive and where, you know, heart disease is the second largest killer, whatever, probably number one in the US.
• 4:59
  I think these drugs are big and getting bigger and it doesn't surprise me that others are trying to get in.
• 5:06
  The other thing I noticed at...
• 5:08
  at in addition to the optimism and the focus on obesity is there's a lot of talk but not yet a lot of delivery on the applications of advanced technology and AI.
• 5:20
  You've been using chat GPT to do most of your work, David.
• 5:24
  What did you hear about artificial intelligence and healthcare?
• 5:29
  John, the good thing about taking these weight loss drugs is I can sit around eating bonbons and just type into chat GPT while you're...
• 5:37
  You're out galvan thing around and you know i'll talk about a in a second i think about these weight loss drugs what's unclear exactly is you say you lose fifteen to twenty percent of your excess weight it's all your weight including muscle.
• 5:48
  And so you have people that have been but they can't necessarily climb the stairs so more to come before you get too excited about that height now is another category so i'm video.
• 5:59
  I wish it could use a few more i guess it has enough vowels in the name of some how it's kind of a weird name gave a presentation which was met with.
• 6:07
  as an ovation, I don't know if it was a standing ovation or a seated ovation, but they're really talking about how AI could usher in, call it, you know, digital biology, going from a science to engineering, which is sort of inherently scalable.
• 6:21
  David, cutting through the baloney on the talk, let's get into that, but let's give people some context here.
• 6:27
  NVIDIA is a chip maker, probably the most important chip maker in AI because it makes powerful high capacity chips that allow you to do massive amount of computations.
• 6:43
  Artificial intelligence, particularly the models that are driving or actually substituting for your work, require a lot of data and a lot of compute that in many ways would never have been capable of being calculated and deliver the results that like a chat GPT.
• 7:03
  it looks simple and it's not, are based on these massively powerful chips.
• 7:10
  And so I thought it was really interesting that a hard technology company, an Nvidia would be comparable to an Intel or a TSMC, the Taiwan semiconductor company, but Nvidia has created the most powerful chips that they would be actually leaning into trying to replace basic biology.
• 7:29
  But okay, now that we understand what that is.
• 7:33
  What does that even mean, David, to kind of like, what are they clapping for?
• 7:39
  Well, you know, money talks and losers walk or take another shot of those MPEG.
• 7:43
  And in this case, Nvidia actually has a $1 trillion market cap.
• 7:47
  So it rivals these other big players even more so.
• 7:50
  And so there's gonna be an interest in what they're doing.
• 7:53
  In technology, people get excited about Moore's law, which is talking about how fast the number of transistors on a chip doubles and continues to do so over time.
• 8:02
  And that's led to these really huge gains in productivity and efficiency over time.
• 8:07
  Now in drug development, they have something else called Eroom's Law Jod.
• 8:11
  And that one you won't find in the dictionary, but that's Moore's Law spelled backwards.
• 8:14
  And that's because what seems to happen is the more technology that's applied and the more money that's applied to drug development, the slower things go.
• 8:22
  And so there is the excitement is about whether Eroom's Law could become more like Moore's Law in drug development.
• 8:29
  And that's what Nvidia is promising.
• 8:31
  Now.
• 8:32
  I think the analogy here is with high throughput screening, which was maybe 20, 25 years ago, when we're going to have this huge amount of productivity.
• 8:40
  The thing is, you have a lot of screening going on.
• 8:42
  It hasn't resulted in a lot more drugs on the market.
• 8:45
  The question is whether artificial intelligence is actually going to unblock this whole process or whether it's just going to move the bottleneck somewhere further along.
• 8:58
  Yeah.
• 8:58
  I mean, it's really unclear to me, David.
• 9:01
  why drugs take millions of dollars to produce.
• 9:05
  And I think my suspicion is that the fact that there's no real hard market for pricing, particularly in the US, which is the most important market, and we allow pharma to price what it wants, that there would logically be a lot of inefficiency built into the process.
• 9:26
  But I think that the Moore's law means that the power of the computer basically doubles every year or two.
• 9:35
  If you look back over the last 30 years, it takes longer and costs more, dramatically so in pharmaceuticals to build drugs.
• 9:45
  In pretty much every other area of general production, productivity has increased where it's the inverse with pharma.
• 9:56
  I don't know for a...
• 9:58
  an industry that's got that culture of time and expense and infinite ability of price, that you're going to see that kind of step change improvement.
• 10:08
  I mean, the promise of computing has been for the last 20 years that more computing, looking at more carefully and discreetly at the results of clinical trials.
• 10:22
  and the exploration before phase one, phase two, and phase three, which are the development cycles of drugs, that you'd be able to, one would be able to, a company would be able to take that data and reformulate it and either find drug compounds or biologics that could perhaps target a different set of diseases or a subset of the people who were in the clinical trials.
• 10:48
  But it hasn't really worked out that way.
• 10:50
  In fact, it's E-ROM to your inelegant phrase, it's begun the opposite direction.
• 10:58
  I think that the power of AI and large computing may just simply be in simplifying and reducing workflow as opposed to novelty and drug development.
• 11:10
  But gosh, if we could get there, it'd be amazing.
• 11:13
  John, if you look at where technology has been useful for improving productivity and maybe a comparably complex process.
• 11:20
  the manufacturer you know they make cars and used to have wind tunnels and you put a physical model in there that you know you would you would set up and you'd measure the drag and so on that can be simulated on a computer now.
• 11:31
  The issue with drug development is that you're not actually doing the simulation is not replacing clinical trials you still need large scale clinical trials a lot of people over a long time period and so there's only so much productivity you're going to bring to that especially if there is more of a focus on safety.
• 11:49
  And if you're looking at long-term results, it just takes a long while and you've got a competition to get actually to get people into the clinical trials.
• 11:58
  So the bottleneck is, I would say, mostly elsewhere.
• 12:01
  But I mean, if people were applauding, I'm sure there's a lot that can be done.
• 12:04
  It's still a very inefficient process.
• 12:07
  I just wouldn't expect that's gonna make all the difference in the world.
• 12:11
  You know, John, I wanna ask you about hospitals because it's supposed to be a biotech conference, but the hospitals were out there flogging their wares.
• 12:19
  And we talk about optimism versus pessimism.
• 12:22
  Weirdly, when I hear hospitals talk outside of the bubble, it's all negativity.
• 12:27
  They're losing money.
• 12:31
  They don't get enough reimbursement.
• 12:33
  And yet somehow, it was a sunny story inside the Westin Hotel in San Francisco.
• 12:38
  Explain that difference.
• 12:40
  Well, I think that the way to think about hospitals is they serve different audiences, and they're going to.
• 12:49
  sell to the audience that they're in front of.
• 12:51
  And in the case of hospitals, a lot of their financial resources are in bonds and bonds that they can issue that to deploy the capital they want.
• 13:02
  And a lot of those bond holders, again, all the money people are at the JP Morgan Conference in San Francisco in the hopelessly dated Weston Hotel on Union Square.
• 13:15
  And when you're...
• 13:18
  when you're talking to the bondholders, you're really selling stability and the not losing money.
• 13:28
  That's different than I think the conversation hospitals would likely have with their nonprofit fiduciaries and the communities they serve and the regulatory authorities that establish the price for which they're – whether it's a – a test or a surgery, how they get paid.
• 13:50
  I mean, the reality is even though those bonds will be paid back because they – hospitals are very good credits in the sense that they have the – federal and state government is probably their largest customers and for the employers, they're typically paying more.
• 14:14
  They are struggling.
• 14:16
  Their margins have been compressed.
• 14:18
  I think a lot of the staff has burnt out and you've got a relatively limited capacity of doctors and nurses and you've got a baby boom, 10,000 people hitting Medicare age every day.
• 14:30
  That's going to put pressure on a system that can't really endlessly expand its doctors and nurses.
• 14:36
  And I do think that that's a, you know, that's a, you can actually walk and chew gum at the same time, David.
• 14:45
  Well, not I can't.
• 14:47
  The bondholders need to know that they're not going to lose all their money and that the credits and that they're going to get paid back evenly over time.
• 14:55
  And I think for investors and regulators that we've got to take seriously the challenges that hospitals have that they're about how sustainable they are in the current reimbursement regime and frankly, how stable labor is.
• 15:08
  I think if there's one place where, again, I know you don't like artificial intelligence, you don't even like using computers.
• 15:14
  But they, that if you could automate and simplify a lot of the back office work for hospitals, and if you could automate a lot of the sharp work that nurses and doctors have to do, you'd have a dramatic lift in productivity within the hospitals.
• 15:31
  And I think you'd also have less burnout and people quitting their jobs.
• 15:37
  John, it's a fair point that, you know, the hospitals are selling stability, and that's because they're selling debt.
• 15:43
  not equity they're not saying we're gonna take your money to organic you know make it five extra hundred x on the other hand the biotech side they that is what they try to promise that they might lose it all they admit that as well equity that is especially ones that are doing initial public offerings to go on the stock exchange for the first time and it is notable that after.
• 16:13
  not a lot of companies were going public last year.
• 16:16
  There's a couple that have filed actually since the JP Morgan conference and there were a few that had maybe had originally registered last year and in early January actually filed to go public and that is that's probably the biggest sign of optimism that there you could find.
• 16:31
  Yeah, I don't know whether I buy that David.
• 16:33
  I think sometimes people are filing because they just don't really have another.
• 16:38
  I mean there's a growth and of companies going public and articles about wealth and great new companies.
• 16:54
  I think there's also the reality that an IPO is largely a financing event.
• 16:58
  It's a way to shift from a private to public shareholders and the story and the narrative have to be differently.
• 17:04
  Your mix of shareholders differs when you go public.
• 17:10
  the long hiatus and the uncertainty in the markets, the long hiatus that really only– there's only been for the last year when interest rates popped and valuations got complicated because when interest rates go up, how much you pay for a growth asset typically goes down.
• 17:30
  And so, that uncertainty closed the IPO window, the public offering window, or made it really hard to get the valuation or the mark, the value.
• 17:40
  that you wanted.
• 17:41
  And so I think some of these companies that are going public, they just, this is a necessary financing event.
• 17:47
  I think what's going to be a mark of whether the market for IPOs is truly healthy, whether this massive source of financing for growth companies is healthy, will be how these companies fare when they go out.
• 17:59
  I mean, if you recall, the market crash was sort of punctuated by a public offering for a high tech, high growth enterprise.
• 18:14
  Yeah.
• 18:14
  Those ugly looking plastic shoes that you insist on wearing.
• 18:19
  I mean, who thought that was a great idea?
• 18:20
  Well, I think the reality is public offerings are, in many cases, an important financing event.
• 18:25
  And I think that the fact that people are filing is a good sign of the health of the marketplace and perhaps that prices have stabilized.
• 18:32
  But I don't necessarily think the- The window is completely opening.
• 18:37
  I think the window for IPOs is blinking at us, but it's unclear whether it's going to stay open and stay large enough for a lot of companies to see it as a valid source of capital.
• 18:47
  Well, it may be a brief little, you know, opening in the midst of the winter.
• 18:51
  But if you look at the kind of companies that are filing, there's the ones that filed before JPM, there's a couple oncology companies, there's a gene editing company, they really are showing some exciting technology, if it were to work, that would make a major difference.
• 19:05
  for patients much more than the Crocs might.
• 19:07
  And the two that just filed, one is also neuroscience is that's bringing precision medicine to the brain.
• 19:12
  There's a lot of neurological diseases, psychiatric diseases that because of bad biomarkers, you know, you've had good drugs that haven't made it to market.
• 19:22
  They're gonna take another swing at that.
• 19:23
  You've got cavernotherapeutics, which is focused on autoimmune disease, which has become much more prevalent.
• 19:28
  So if...
• 19:29
  I think it's positive that you've got companies that are innovative, they're addressing real problems that I think we agree if they are successful using science, mostly not artificial intelligence.
• 19:39
  All some of it is that if they could be successful, it's going to make a big difference for patients and a good financial return for investors.
• 19:45
  What's wrong with that?
• 19:46
  That's really what JP Morgan was focused on is selling the story that the markets, public and private, are ready to support innovation.
• 19:55
  I'm not convinced.
• 19:56
  I'm glad you are, but then you didn't even go.
• 19:59
  Yeah, I didn't go John.
• 20:00
  Are you glad you went?
• 20:02
  I am.
• 20:02
  I am because I think you one always learns a few things, meets some old friends, and you know, it always, you know, I always come back with more questions and thoughts than I went with.
• 20:12
  It's a bit of a, it's a bit tough right after the Christmas break and when you want to really be starting your business.
• 20:18
  But no, I think it was worth doing and I think you should consider going next year, David.
• 20:23
  Great.
• 20:23
  Well, one way or another, it is good to start off the year looking ahead and And Care Talk is a good way to do that.
• 20:31
  And I hope actually people will join our LinkedIn page where they get to interact with us and read up about all the latest healthcare news.
• 20:38
  In any case, I'm David Williams, President of Health Business Group.
• 20:41
  And I'm John Driscoll, the President of Walgreens South.
• 20:43
  If you liked what you heard or you didn't, we'd love you to subscribe on your favorite service and leave us a review and make a huge difference in spreading the word on Care Talk.