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JPM2023: Digital healthcare IPOs shrink by 97%, biotech mergers and acquisitions return

 Last Update: 2023-02-01
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How cold is the economy in 2022?

The just-concluded JPM2023 (the 41st J.
P.
Morgan Healthcare Annual Conference) released an equity capital research and development report: compared with the successful IPO of 310 projects (excluding SPACs) in the United States in 2021, a total of 151 billion US dollars in financing, the equity market directly blocked the waist, and only 20 projects were launched throughout the year, including 11 medical and health projects, raising 700 million US dollars, a decrease of 94%.

IPO trends in the US market from 2010 to 2022

(CREDIT: EQUITY CAPITAL MARKETS UPDATE 2022 Recap & 2023 Outlook; J.
P.
Morgan）

However, the data presented in this chart has another meaning, which emphasizes the resilience
of the medical and health track.
On the one hand, healthcare contributed 55% of the number of IPOs throughout the year, and on the other hand, the track demonstrated its ability to resist risks far beyond the industry
.
When S&P 500 earnings fell to -19%, the healthcare sector still maintained its value, delivering its best results outside the energy sector, on par with industrial manufacturing and C-end consumption
.

2021-2022 US market development trends by industry

(CREDIT: EQUITY CAPITAL MARKETS UPDATE 2022 Recap & 2023 Outlook; J.
P.
Morgan）

Despite the somewhat brutal statistics, 2023 is still worth looking forward to
.
This year's JMP finally broke through the spatial barriers set by the new crown epidemic and regained the In-Person communication mode; Domestic leaders once again went overseas, and BGI Intelligent Manufacturing, Junshi Biologics, Antengene, Innovent Biologics, Imena and other enterprises issued speeches one after another, accelerating the pace of
overseas market expansion.

In all the details, the wind of recovery seems to have already blown through the medical field
.

capital recovery,

A new round of cross-border mergers and acquisitions has begun

JPM is hailed as a beacon of global life sciences trends because it has always been able to attract the world's most important healthcare deals
.

JPM's 2019 acquisition spree was louder than any previous year, with Eli Lilly announcing its $8 billion acquisition of Loxo After Oncology, Bristol-Myers Squibb announced a $74 billion acquisition of Celgene Pharmaceuticals, directly pushing cancer therapy to the cusp of the times
.

In contrast, at the online Morgan conference in early 2022, none of the mergers and acquisitions exceeded $1 billion, and the most expensive was Medtronic's $925 million acquisition of heart ablation company Affera, which seems to have laid the groundwork for the subsequent dismal market in 2022
.

With the help of loose reasoning, we may be able to see the shadow of hope in JPM2023
.

On the first day of the conference alone, five companies have announced mergers and acquisitions
.
Among them, AstraZeneca's acquisition of CinCor Pharma totaled $1.
822 billion; Chiesi's acquisition of Amryt The combined value of $1.
48 billion in acquisitions far exceeds that of JMP2022, making a great start
for healthcare in 2023.
In addition, Novartis CEO Vas Narasimhan also said at the meeting that he is evaluating various M&A opportunities, and is optimistic about projects below $4-5 billion, in line with the company's strategy, that can really bring value
.

List of JMP Day 1 acquisitions

■ AstraZeneca acquires CinCor Pharma

AstraZeneca's acquisition of CinCor is a U.
S.
company
focused on developing new therapies for refractory hypertension and chronic kidney disease.
The two companies expect to close the acquisition
in the first quarter of this year.

Under the terms of the agreement, AstraZeneca agreed to acquire Cincor shares for $26 per share in cash and pay CinCor's contingent rights (CVRs)
for $522 million.
This makes the final total transaction value approximately $1.
8 billion, compared to CinCor The closing market value premium on January 6 was 206%.

At the heart of AstraZeneca's deal is CinCor's drug candidate, Baxdrostat, an aldosterone synthase inhibitor (ASI) primarily used to treat intractable hypertension
.

AstraZeneca's goal is to combine Baxdrostat with its developed diabetes drug Farxiga to further strengthen its cardiorenal drug pipeline capabilities
.

■ Ipesn acquires Albireo

Ipsen is a biopharmaceutical company headquartered in Boulogne-Billancourt, France, focused on advancing drug discovery
in oncology, rare diseases and neuroscience.
At JMP2023, Ipsen announced the acquisition of Albireo
in the United States.
The latter is a rare disease company specializing in acid modulators
for the treatment of cholestatic liver disease in children and adults.

Pursuant to the terms of the Agreement and the Merger Plan, Ipsen will initiate a tender offer through a wholly-owned subsidiary to acquire all outstanding shares of Albireo at a price of $42.
00 per share, with an initial estimate of 9.
52 $100 million plus CVRs
.

With this transaction, Ipsen can effectively enrich its rare disease product line and product portfolio
.
For example, Albireo is clinical-stage A3907, a novel oral systemic apical sodium-dependent bile acid transporter (ASBT) inhibitor that can be used to treat adult cholestatic liver diseases such as primary sclerosing cholangitis (PSC).

Albireo's A2342 also has great potential
.
This is an oral systemic sodium-taurocholate co-transporter peptide (NTCP) Inhibitors, which can be used to treat cholestatic disorders, are currently submitting IND trial applications
.

■ Chiesi acquires Amryt

Italy-based Chiesi Farmaceutici acquired Irish company Amryt for $1.
48 billion Pharma
。 Includes $1.
25 billion of prepaid consideration and potential consideration of approximately $225 million of CVRs
.
Subject to the satisfaction of all closing conditions, the transaction is expected to close
in the first half of 2023.

Chiesi Farmaceutici specializes in innovative therapeutic solutions in respiratory health, rare diseases and skilled care, while Amryt He specializes in the treatment
of rare diseases such as malnutrition and borderline bullous epidermolysis (EB).

■ Zeon acquires Edgge Precision Manufacturing

Japanese company Zeon Corporation acquired U.
S.
-based miniature feature thermoplastic device maker Edge Precision during JPM2022 Manufacturing
。

ZEON'S OPTICAL MATERIALS COP (PRODUCT NAME ZEONEX® AND ZEONOR)® is known for its unique characteristics such as low autofluorescence, high light transmittance, low biomolecular adsorption, low impurities and low melt viscosity, and is widely used in microfluidic and biochemical analysis scenarios
.
Upon completion of the acquisition, Zeon will receive Edge Precision Manufacturing has a 100% stake to further complete its healthcare footprint
.

■ Novotech announces acquisition of EastHORN

US CRO company Novotech announced the acquisition at JMP2023 EastHORN
。 The latter is a European CRO company with clinical, medical and regulatory experts in several strategically important locations on the continent and has been working with
Novotech for 15 years.

The acquisition is part of Novotech's
expansion strategy.
Prior to the acquisition, Novotech was already the largest CRO company in the Asia-Pacific region and had planned to list on
the Hong Kong Stock Exchange.
With the acquisition, Novotech can expand its one-stop clinical CRO services to the European and U.
S.
markets, accelerating the global market commercialization process
.

Overall: the global economy is resuming its flow
at a considerable pace as external factors such as the coronavirus pandemic and the European energy crisis gradually become manageable.
But to reach pre-pandemic levels, one year may not be enough
.
On top of the conference, there are still a group of enterprises that have publicly expressed their wait-and-see attitude
.
For example, Gilead Chief Financial Officer Andrew Dickenson said he was less interested in large M&A deals and would consider smaller M&A
.

Overall optimism,

Biotechnology at home and abroad shows off muscles

In line with the M&A market trend, executives of multinational pharmaceutical companies are also quite optimistic
when talking about future layout, R&D and sales.
For example, Novartis forecasts that the company will achieve a compound annual growth rate of 4% from 2021 to 2017 and increase its core profit margin by 40% if possible; Pfizer demonstrated 19 new drug/supplement indications by 2024, aiming to generate $20 billion in revenue by 2030; Eli Lilly called 2023 the "year of new models and new drugs", and 5 new drugs are expected to be launched, covering Alzheimer's disease, immunity, oncology, weight loss and other tracks
.

In terms of domestic pharmaceutical companies, BeiGene will enter the era of drug discovery in the second decade after its establishment; Zai Lab sets a profit target by the end of 2025; CSP strives to be among the top 30 pharmaceutical companies in the world; Innovent has set a five-year revenue target
of 20 billion yuan.

To some extent, this positive sentiment is transmitted
quickly within the industry.
Many of the participating biotech companies for innovative therapies are also actively showcasing their pipelines through the seminar, and many projects have successfully listed on a single track, gaining a foothold in the highly competitive pharmaceutical field
.

■ Xenon Pharmaceuticals

In 2022, Xenon Pharmaceuticals successfully pushed its epilepsy treatment XEN1101 to phase III clinical trials
.
President and Chief Executive Officer Ian Mortimer shared the follow-up development plans
for XEN1101 at the meeting.
Specifically, the second phase III trial (X-TOLE3) of XEN1101 for the treatment of focal seizures (FOS) will be conducted in 2024 year to be initiated, and an NDA
is scheduled to be submitted after the first phase III trial (X-TOLE2).

XEN1101 is a novel potassium channel opener that inactivates
voltage-gated M currents.
In previous clinical studies, XEN1101 did not form pigment dimers with bluish side effects, so it is safer
than similar drugs.

In addition, XEN1101 is highly selective for the Kv7 channel, but inactive
against Kv7.
1 (cardiac channel).
Phase I studies suggest that XEN1101 is well tolerated, with decreased cortical excitability induced by transcranial magnetic stimulation
.
A phase II randomized, double-blind, placebo-controlled study initiated in June 2022 is ongoing to investigate whether XEN1101 can be used as an adjunct therapy
for focal drug-resistant epilepsy.

President and CEO Ian in the workshop Mortimer expressed high hopes for XEN1101, saying at the meeting that Xenon is taking a different development approach than previous epilepsy drugs, and plans to use XEN1101 for both indications, FOS and primary generalized tonic-clonic seizures (PGTCS).

■ PTC Therapeutics（PTCT）

Duchenne muscular dystrophy (DMD) is a rare, life-threatening inherited muscle disease characterized by weakness and atrophy of muscle fibers, with an incidence of live birth in male infants 1/3600
。 At present, the mainstream treatment drugs in Europe and the United States include Ataluren, Eteplirsen, Emflaza, Viltepso, and Vyondys, of which Ataluren, Eteplirsen, and Emflaza belong to PTCT.

At JPM2023, PTCT COO Matthew Klein opened with 2022 operating income: the company's total unaudited revenue was around 7.
1 DMD franchises contributed $507 million, a year-over-year revenue increase of more than 30%.

Matthew Klein is confident about the future and believes the company can sustain its growth rate and generate $940 million to $1 billion in revenue
by mid-2023.

At present, PTCT has five listed products: Translarna, Upstaza, Waylivra (all approved outside the United States), Emflaza, and Tegsedi In 2023, results from four ongoing clinical trials in the first half of the year are expected
.

■ BGI Intelligent Manufacturing

As a representative of Chinese enterprises, Rade, chief scientist of BGI Intelligent Manufacturing Drmanac came to the scene
with a series of products based on the DNBSEQ platform.
DNBSEQ sequencing technology can increase the copy number of the DNA to be tested by rolling ring amplification technology, thereby enhancing the signal strength and having a repeat rate (Duplicate Outstanding advantages
of low rate and high effective data utilization.
Secondly, BGI Intelligent Manufacturing Sequencer adopts regular array chips, which can produce uniform and regular signals compared with irregularly arranged chips, has high chip utilization, low cost, and performs well
in WGS (whole genome sequencing)/WES (exome sequencing) and other applications.

At JPM2023, BGI launched sequencing products covering low-throughput to high-throughput for users in the United States, enhancing the sequencing capabilities of users in various fields and promoting scientific research and application transformation
.
These include the all-round desktop sequencer MGISEQ-2000, DNBSEQ-T7 ultra-high-throughput gene sequencer, DNBSEQ-T10x4, one of the world's most customizable gene sequencers, and DNBSEQ-E25
, the flagship model of BGI's E-series sequencer.

With the launch of a full line of products for sale in the United States, BGI Intelligent Manufacturing has opened an important step
for a global foothold.
BGI's overseas customer experience centers have been put into use in Australia, Japan, Latvia, the United Kingdom, and Germany, and with the gradual landing of the European and American markets, BGI will theoretically have a relatively strong growth
.

Bottom-down digital health,

2023 sees hope

2022 is very unfriendly
to digital health.
The overall investment environment is already barren, and the IPO of biotech has further squeezed the financing space
of digital health.
J.
P.
According to Morgan's research data, the five digital healthcare-related tracks of Medtech, Dx, tools, HCIT and Services accounted for 46% of healthcare financing in 2021, totaling $20.
24 billion, and by 2022, this proportion will shrink to 27%, only $550 million
.

Composition of US IPO projects in 2021-2022

(CREDIT: EQUITY CAPITAL MARKETS UPDATE 2022 Recap & 2023 Outlook; J.
P.
Morgan）

After a quiet year, digital health seems to have finally gained momentum
in early 2023.

Under the epidemic, telemedicine is one of the few enterprises
that can develop in the meantime.
At this year's JPM, more focused on remote intensive care Health, Phreesia, which focuses on the construction of doctors, patients, and pharmaceutical companies, came to the scene, and is a representative enterprise
in this field.

In the past few years, MoreHealth's telemedicine platform has benefited from its leading advantages in compliance and professionalism, in addition to its own telemedicine business development, it has continuously expanded to specialties, rare diseases and other fields, covering 180 countries around the world, and has also used the telemedicine platform as a product SaaS, becoming a digital partner
of many American hospitals and enterprises.

At the conference, MoreHealth said it was considering raising capital through multiple channels, including a possible IPO
.
Currently, MoreHealth has completed meetings
with JPM's investment banking team and JPM's clients.

For the industry, MoreHealth's IPO or further fundraising and market expansion will be a positive signal for the digital health industry, or will help investors regain confidence
in this track.

In addition, digital therapeutics (DTx) is also a topic
that has been repeatedly mentioned at this JPM conference.

Although the FDA and NMPA have approved the listing of many digital therapeutics products, and the in-depth development of artificial intelligence has also strengthened the usability of DTx, because most prescription rules can only serve the prescription of drugs, they are usually not well applied to DTx
.

In order to cope with the challenges of commercial interaction, many DTx in the United States have tried to integrate their own products into the category
of durable medical equipment (DME).
This can avoid some legal issues and get to market
faster.
As a price, DTx can only receive a relatively low reimbursement
.

A better way to do this would be to lobby regulators to get Medicare and Medicaid to expand payer coverage
.
This is what DTx companies in the United States will focus on this year, but to go global and face the complex and different prescription regulatory rules of various countries, DTx still has a long way to go
.

Recovery 2023?

Looking at JPM2023 as a whole, we can summarize the trends
at both the macro and micro levels.

Macro level

In 2022, the global economy was down, but the healthcare sector declined less, so it received more financing
.
With Antoine, Chairman and Managing Partner of Sofinnova Partners Papiernik said; "Companies in biotech and healthcare are still in a better position
than they were a decade ago.
"

● COVID-19 despite the continued presence of the SARS-CoV-2 virus The impact of the pandemic has waned
in countries around the world.
After three chaotic years, fear is waning around the world, communication between industries is gradually recovering, and the cost of sales is becoming manageable
.

● Digital health is experiencing a global cold, but with the development of offline communication, part of the construction will be restarted with economic growth, and partial recovery
is expected in 2023.

● As a major clinical trial country second only to the United States, China's reopening is expected to help accelerate drug development worldwide
.

● The EU energy crisis has passed, the energy market has returned to calm, and capital may flow more to healthcare
.

Micro level

● Multinational pharmaceutical companies are out of the haze of 2022, the form of cooperation between enterprises is reduced, mergers and acquisitions may increase, Pfizer, Novartis, Eli Lilly and others have handed over clear strategic plans, and the next round of integration is expected to start
in 2023.

● Chinese pharmaceutical companies are accelerating their overseas expansion, but compared with overseas companies that have worked hard for a single track for more than a decade, innovative pharmaceutical companies still need time to stabilize their understanding
of the market.

After the bottom of 2022, the 2023 towards opening up is somewhat exciting
.
After the most difficult test in ten years, the surviving companies look forward to more brilliance
in the new year.

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