Recently, we hosted a luncheon discussion, led by the Healthcare Investment Banking group at Wells Fargo Securities, with executives from several life science companies. The primary topic was the outlook for Life Science Capital Markets in 2017. Geoffrey Goodman, Managing Director of Equity Capital Markets at Wells Fargo, and Filippo Petti, Vice President of Healthcare Investment Banking at Wells Fargo, led the discussion.
Below are our key takeaways from the discussion.
Despite some optimism, the outlook remains cloudy. This lack of clarity is driven by several factors, most of which lead back to Washington D.C., notably key Trump administration priorities. ACA reform, tax reform, and drug pricing continue to be three large considerations in the life science market. With a lack of clarity in the resolution of these issues, many expect the market will continue to see trepidation with investors, especially generalist investors. If clarity on the above issues is achieved, fund flows back into the life science market could accelerate, leading to a rapid rebound in financings.
Despite these issues, there are definite signs of life in financings, as transactions are getting done. Initial public offerings, including a few quite recently, and follow-on transactions are still being completed and life science returns are still positive for 2017.
Importantly, IPO and FO players primarily continue to be healthcare specialists, with a lack of generalists being present. Insider participation is needed to get these deals done. On the negative side, cross-over deals seem to have slowed considerably.
As mentioned earlier, a few things could possibly kick the market into a higher gear:
- Due to the large cash on hand overseas at many large companies, tax reform that includes repatriation of cash could be a huge factor in the acceleration of merger and acquisition activity, leading to price appreciation across life sciences.
- Clarity on healthcare could spur investors back into the space. Once the players know the rules, risk can be managed.
- As always, a string of positive clinical data could drive the market.
We at Westwicke Partners would like to thank the Wells Fargo team for their informative perspective. And for a conversation about how you can brighten your own healthcare firm’s prospects, notwithstanding market conditions, just reach out.