Medical Device Daily

SAN FRANCISCO — As the JP Morgan Healthcare Conference kicked off its 25th edition here yesterday, Douglas Braunstein, Head of Americas Investment Banking for JP Morgan couldn’t help but wax nostalgic for the bygone days of the gathering and muse concerning how far the event has come in that time.

The inaugural 1983 edition of the conference featured what Braunstein laughingly referred to as a “rousing 21 companies presenting.” Of those first 21 presenters, he noted that five companies were still on hand to make their pitches at the 2007 event, including biotechnology stalwart Genentech (South San Francisco) and health insurance giant Humana (Louisville, Kentucky).

Continuing his journey via the “Way Back” machine, Braunstein said that the first gathering attracted all of 100 investors, allowing for considerably more elbow room at the Westin St. Francis than is now available. He noted also that there were no one-on-one meetings at the first meeting.

As for healthcare expenditures, they then totaled in the U.S. about $350 billion.

Fast forward to 2007, and Braunstein painted a picture of a much more vibrant event — with the reality of course much more crowded, the conference featuring hallways difficult to navigate as a result.

This year’s event features 330 companies presenting their cases for investor dollars. There are 5,000 public investors and 1,500 private equity and venture capital investors planning to attend this year, “a record attendance for us here at the healthcare conference of 6,500 professionals,” Braunstein noted.

Additionally, he pointed out that this year’s conference will feature 7,000 one-on-one meetings, Braunstein estimated, and that that the healthcare expenditures in the U.S. have leapfrogged in the last quarter century to more than $2 trillion.

Looking back over more recent times, Braunstein said that 2006 likely will be seen as a watershed year in the healthcare field.

“I’ve been involved with the healthcare industry for almost 20 years, and I can’t remember a year that was as active and had as much transformational activity in healthcare as 2006,” he said.

Some things that he said will mark the past year include issues associated with the Medicare Part B drug benefit; safety concerns associated with defibrillators and drug-eluting stents; and the largest ever go-private transaction in healthcare, with HCA (Nashville, Tennessee), an operator of hospitals and related healthcare entities, being acquired by an investor group including Bain Capital, Kohlberg Kravis Roberts & Co., Merrill Lynch Global Private Equity, HCA Founder Thomas Frist Jr, MD, and HCA management for $33 billion. That acquisition was first disclosed in July (Medical Device Daily, July 25, 2006).

So what attracted nearly 7,000 people to San Francisco’s Union Square, toting their thousands of fluorescent green bags furnished by JP Morgan this year?

Perhaps the most important thing about this year’s conference, noted Braunstein, is that more than 90% of the company presentations will be made by their CEOs, underlining, he said, the showcase importance that the industry places on being here.

“This conference has become the premier industry event,” said Braunstein, “because it really highlights the full breadth of healthcare across services, medical products, pharmaceuticals, biotech and devices and it represents the full array of companies from small to large.”

Braunstein said that while for the last seven years, the S&P has remained relatively flat, “investing in healthcare has doubled from a little over $1 trillion in 2000 to almost $2.3 trillion today.”

He noted that while in 2006 the healthcare climate generally experienced a cooling off period relative to the S&P, those public companies presenting at the conference enjoyed an average return rate of 14.4%, “exceeding the return of the S&P 500.”

And 2006 was also one of the biggest years for go-private transactions in recent memory. Besides the aforementioned HCA transaction, Braunstein also highlighted the recent $10.9 billion buyout of Biomet (Warsaw, Indiana) in December (MDD, Dec. 20, 2006).

On the contested transaction front, there was Boston Scientific’s (Natick, Massachusetts) $27 billion buy of Guidant (Indianapolis) after a fierce bidding war with rival Johnson & Johnson (New Brunswick, New Jersey) and Inamed’s (Santa Barbara, California) acquisition by Allergan (Irvine, California), which outbid initial suitor Medicis Pharmaceutical (Scottsdale, Arizona).

Additionally, Braunstein noted St. Francis Medical’s (Alameda, California) “dual track” transaction in which the company both went public in September and was acquired by Kyphon (Sunnyvale, California) for $525 million in December.

Braunstein said he expects the 2007 equity markets in healthcare to have a “very, very strong year,” and continue the positive trend evidenced in 2006.