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January 23, 2020

Notes from the 38th Annual J.P. Morgan Healthcare Conference

MHT Partners  | Healthcare Investment Bank

Last week healthcare executives, service providers and investors descended upon San Francisco for J.P. Morgan’s (“JPM”) 38th annual Healthcare Conference. In a rare turn of events, the skies in San Francisco were relatively clear after several years of biblical rainstorms during JPM week.

MHT Partners’ Healthcare Services Team was in attendance, hosting several events and numerous meetings with healthcare firms and financial sponsors (thanks to all of you who made the trek over to 101 Montgomery). The general mood of the conference was upbeat, perhaps due to the weather, but a bit more subdued than in prior years. Investors’ appetite for high-quality healthcare businesses, which solve important problems facing the industry (access, cost containment, interoperability, etc.) remains strong.

Here are a few notable observations stemming from our interactions at JPM:

  • There’s still meaningful interest in physician practice deals – Healthcare investors will continue to put dollars to work in the physician practice management space in 2020. Maturing sectors such as dermatology and vision will see slowing deal velocity. Platforms in these sectors will continue to seek quality add-ons while pricing for add-ons stabilizes. It’s likely that we’ll also see several sponsor-backed platforms trade hands. We anticipate increased interest in and deal momentum for third-wave specialties such as ENT, Urology, Podiatry, GI, and Orthopedics. These specialties pair well with ambulatory surgery centers (“ASCs”), which offer acquiring groups attractive, diversified streams of revenue.
  • Women’s health and fertility services groups are garnering attention – As fertility rates have declined, more women are open to seeking treatment, translating into rapidly growing global demand for fertility services. At the same time, a growing number of U.S. states have adopted a commercial payor coverage mandate for fertility services. Many financial investors are looking to invest in these trends.
  • Behavioral healthcare remains an active area of focus for many investors – Autism, Psychiatry, and Substance Abuse deals captured their fair share of headlines in 2019. We expect this trend to continue in 2020, as commercial and government payors expand coverage to address a wide range of mental health issues in the U.S. A scarcity of mental health professionals and a desire to build new and existing platforms will fuel private equity investment in behavioral health.
  • Demographic tailwinds lifting home health and hospice businesses continue to entice investors – An aging U.S. population and a need to provide cost-effective care outside of a hospital setting has provided many private equity groups with strong theses for investment in businesses that can deliver home-based care. Home-based care, regardless of the context, is highly local and presents unique recruiting and scaling challenges.
  • Everyone loves technology-enabled healthcare services – The promise of technology to reduce the cost of healthcare and improve health outcomes was a recurring theme in many of our conversations at JPM. Companies that can solve interoperability challenges, extend or manage the continuum of care, or provide novel insights into care delivery or drug development will receive significant investment interest.
  • Significant capital has been earmarked for healthcare services’ investments in 2020 – Many healthcare-focused private equity firms have raised new funds and are actively looking for platform investments across a variety of industry sub-verticals. Based on conversations at the conference, MHT expects the healthcare deal market to be robust, with an emphasis and focus on high-quality assets in 2020.

MHT Partners, a leading healthcare services investment bank, would love to be a resource for you as you consider the rapidly evolving healthcare landscape and the implications for your business. If you would like to learn more about MHT’s healthcare services advisory practice, please e-mail Taylor Curtis (tcurtis@mhtpartners.com) or Alex Sauter (asauter@mhtpartners.com).

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