5 Trends For Life Sciences And Private Equity Following JPM


The industry faces several macroeconomic challenges and political uncertainty. Still, there’s cautious optimism that dealmaking, especially in pharma, may rebound.

Deirdre Baggot, Dr. Marie-Lyn Horlacher-Hecht, Marc Tomassi, Michael Muldoon, and Kevin Wistehuff

4 min read

It’s a ritual that’s been happening for 42 years. Every January, thousands of healthcare leaders, investors, and other industry stakeholders take over San Francisco for the J.P. Morgan Healthcare Conference. It is an opportunity for healthcare organizations — health systems, retail chains, pharmaceutical companies, and digital players — to lay out their operational and strategic plans for the coming year.

We were on the ground in the City by the Bay in early January to be part of the conversations. After digesting our notes and getting away from the news-of-the-day email blasts, we’ve pinpointed five major trends, particularly in life sciences and private equity, to watch in 2024. Here are our insights:

There’s cautious optimism despite challenging market conditions

The industry is confronting several macroeconomic challenges and political uncertainty. In the US, the Centers for Medicare and Medicaid Services is, for the first time, negotiating price caps on select drugs, a key provision in the Inflation Reduction Act. Prices will be posted in September and take effect in 2026. Private insurers will likely follow suit. On top of that, US antitrust regulators are scrutinizing deals more closely and, of course, it is an election year, which creates another layer of uncertainty. In Europe, new pricing regulations in Germany and updated rebate schemes in the UK coincide with high inflation. Meanwhile, China’s economic growth has stagnated.

Despite all of this, JPM 2024 was marked by cautious optimism that the worst could be over. Positive indicators include sizeable deals closing at the end of 2023. In fact, six of the 10 largest biopharma deals came in the fourth quarter and four happened during the final five weeks of 2023. Additionally, global private equity dry powder — unallocated capital that’s committed for investment — reached $2.59 trillion in 2023 (USD). Large pharmaceutical companies also have sizeable amounts of dry powder heading into 2024. Early milestone approvals for new technologies, including gene editing, are also cause for optimism (more on this below).

Expect an uptick in M&A activity

Large companies seem to have an appetite for external innovation and, as noted above, plenty of cash for merger and acquisition activities. At the same time, many biotechs need funding due to raised lending costs and limited IPO opportunities. Noticeable at JPM this year was the growing importance of China as a M&A market and more diversified tactics of strategic buyers for dealmaking with Chinese innovators.

M&A may also come into play as companies aim to replenish expected revenue declines stemming the loss of patent exclusivity in the coming years, along with price pressures resulting from the IRA and drug price negotiations.

Three therapeutic areas to watch

Neurology, obesity, and oncology will be hot areas for dealmaking in 2024. There continues to be activity and interest in targeted cancer therapies, especially antibody-drug conjugates technology. Bristol Myers Squibb, Merck, and Pfizer made major bets in this area last year with the acquisitions of SystImmune, Daiichi, and Seagen respectively. We expect continued focus on ADC technology in 2024. Neuroscience is also a dynamic area with lots of hope on better therapies for psychiatric disorders, including schizophrenia. Bristol Myers Squibb late last year spent $14 billion to acquire Karuna Therapeutics, which has a schizophrenia drug — KarXT — in Phase 3 clinical trials.

Finally, enormous growth of the GLP-1 market makes it a must-watch category, too. Market leaders Novo Nordisk and Eli Lilly are taking off with their weight management products whose success is currently only limited by supply shortages. This is not going unnoticed by competitors who want to capture market share. Continued deal activity is expected in the GLP-1 space for 2024. As we noted in this Oliver Wyman article, private equity can play a major role in helping organizations on the provider side — both start-ups and incumbents — develop effective strategies for the use of GLP-1s.

Cell and gene therapy markets will accelerate

The US Food and Drug Administration approved seven cell and gene therapies last year, a record number for the agency. The European Union also approved a new therapy. Those approvals, coupled with good market trajectory for some previously approved therapies, position the space for deals in 2024. Regulatory approval of Vertex, the first CRISPR-based therapy, sparked broader interest in gene editing. Besides the therapies themselves, there is a major focus on innovative delivery technologies. And the expansion of cell and gene therapies beyond ultra rare indications requires more efficient manufacturing approaches, which should drive technology deals.

Successful use of AI will spur growth

Artificial intelligence continues to mature and we now see numerous use cases across the value chain. For advanced AI applications, the focus will shift to integration and convergence with other technologies — big data, robotics, the Internet of Things, to name a few. Less advanced but still hot is AI in drug discovery and the race for the first successful drug discovered by AI is on. Several major deals have been inked between big pharma and tech companies despite recent setbacks. While AI will likely bring major efficiencies and possibly produce new drug candidates, industry leaders at JPM said that the human expertise and analytical power remain critically important for good decision-making.

Other areas to watch

Beyond life sciences and private equity, providers and insurers make news at JPM. Some trends we plan to monitor following the conference include:

  • The impact of interest rates normalizing, company valuations leveling out, and the gap between buyers and sellers’ expectations narrowing
  • Activity by health systems, private equity, and payviders acquiring physician practices. Investors will likely shift to cash-based businesses such as pain management and fertility as reimbursement pressure continues throughout the industry
  • Continued consolidation in the digital health sector
  • Building new use cases for technology, including AI, to address ongoing labor shortages

We’ll have more analysis on many of these trends throughout 2024 in Oliver Wyman Health.