JP Morgan Health Care Conference sets the tone for the industry each year, what has 2024’s conference told us so far?
This week San Francisco has played host to the JP Morgan Health Care Conference, an annual event that brings together over 500 healthcare companies and over 8,000 professionals. It’s a week that tends to set the tone of the healthcare sector and the industry’s overall performance for the subsequent year. 2024’s conference is coming on the heels of a historically poor performance year for healthcare stocks. US healthcare companies underperformed the S&P 500 by the widest margin since 1999. Investors in the sector went into the conference looking for a shift in tone towards positivity.
Paul MacDonald says we’ve seen signs of that tonal shift. The CIO and portfolio manager at Harvest ETFs manages Canada’s largest US healthcare ETF and says he’s seen enough positive news from key healthcare subsectors at the conference to inform a more positive outlook for healthcare investors in 2024. While we haven’t seen many large-scale transformative M&A announcements come out of the conference so far this year, what we have seen from the participants has been enough to make MacDonald more optimistic about what Healthcare might do for investors in 2024.
“It is the tonal setting place for the year, and when we think about that tone being set we have to look at it in where sentiment was last year, where is it in the very short term, and what’s the tone being set now in the middle of this conference,” MacDonald says. “We’re seeing the green shoots of positive sentiment that popped up late last year now being validated by very specific financial guidance. That’s giving us more comfort that growth trends are normalizing and more clarity is available.”
Much of what we’ve learned so far from the healthcare conference is specific to certain subsectors. MacDonald notes that medical device companies, which had struggled in 2023, are now showing that the recoveries they began to experience late last year should continue.
MacDonald cites updated guidance being given by certain companies at the conference, notably Intuitive Surgical, as positive for the subsector. He notes that Boston Scientific has also announced a $3.2 billion acquisition, which is relatively small by the standards of this conference, but represents a positive step for a previously weaker subsector.
Pharmaceuticals always play a major role in the conference and so far the outlook from big pharma names is bifurcated according to MacDonald. He notes that many companies are approaching a patent cliff at the end of the decade for key drugs. Some of those same companies have failed to execute on any meaningful new research or on acquisitions in emerging spaces. MacDonald cites the example of Pfizer, which has struggled somewhat as patent expiries loom without much to fill in the space.
There is plenty of positivity in the pharmaceutical space, however. Much of that comes from companies like Eli Lilly which have already rolled out diabetes drugs that have the potential to combat obesity. MacDonald sees the rollout of these drugs, which use a glucagon-like peptide called GLP-1 to restrict the appetite, as a potential $100 billion industry, and says that so far we’ve seen more small companies at the conference rolling out their own versions of similar drugs. We’ve also seen positivity outside of weight loss, with oncology drug results announced by Merck that have been greeted as highly positive. MacDonald believes there is significant growth potential in the pharmaceutical space, but investors need to be cautious.
As 2024 is an election year in the US, sometimes healthcare stocks can be subject to greater volatility or downside pressure on the risk that the industry falls into the political crosshairs. This year, however, MacDonald says he’s hearing less noise about politics, as most of the relevant issues around healthcare and drug pricing have either already been resolved, or don’t seem like issues either major party wants to tackle.
Following a weak year for performance, MacDonald sees the news so far from this conference as broadly positive without any massive fundamental catalysts. That sets a backdrop, he believes, for healthcare to return to its position as one of the typically stronger sectors of the stock market.
“Given the relative sentiment, the relative performance, and the visibility that we've talked about, the sentiment shift that we're seeing over kind of the past couple of months that's being validated now by corporate commentary,” MacDonald says. “I think that sets up healthcare for a relative and absolute good year.”