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Takeaways from IPEM in Cannes

Last week HBI was invited to chair the first ever healthcare summit at its cousin company’s flagship event IPEM in Cannes. The private capital community gathered on the Cote d’Azur to kick-off the year under the much appreciated January sun. As the sector continues to prove a safe harbour for investors despite various macro challenges, interest from private capital continues to gather momentum. Here are a few takeaways from the summit which featured speakers from EQT, Jeito, Keensight, Dementia Discovery Fund, Fremman, Pictet, Weight Partners Capital, TechLife Capital, Palladio Partners and Indefi.

1. 2024 promises deals, but valuations won’t tumble.

The much anticipated pick-up in sponsor-to-sponsor transactions seen at the end of 2023 is expected to continue into 2024. Extended holding periods have created an enormous pressure for both buyers and sellers to both deploy capital raised, and to return capital to LPs. The bid-ask spread divergence that held up transactions or stopped deals coming to market are expected to narrow, but without the need for valuations to tumble. A combination of stabilising credit markets, innovative funding models and more focus on value creation will also help to push deals through.

2. Buy and build is still part of the playbook for European services

Europe remains full of highly fragmented sectors and opportunities to build national and international platforms, lowering costs and increasing service. A general rule of thumb is where there is a big government waiting list there is an opportunity for private equity to help drive the use of existing capacity and remove bottlenecks, think imaging, orthopaedics and ophthalmology. Despite the fear from some investors that high interest environments put pressure on margin expansion the sector remains relatively stable. Dermatology, where very little is covered by public payors or undertaken in large hospitals, looks to be the next outpatient roll-up for private equity.

3. Big Pharma has a lot of pocket money to spend at the sweet shop

The Pharma industry is facing a patent cliff of $300bn by 2030 and is scrambling to find the next drugs to replenish their commercial pipelines. Their pockets are very deep; the top 25 Pharma companies will have an estimated $1.4 trillion to spend by 2030. In a weak IPO environment, a former key exit strategy for biotech, this is really good news. And they are already splashing the cash, in January big pharma has spent almost $14bn including the c.$10bn sale of Cytokinetics to Novartis.

4. Where next after oncology?

The return on investment in oncology over the past 20 years has been enormous. A patient diagnosed with melanoma in 2010 has a survival rate of just 5% five years after diagnosis. By 2020, this survival rate had increased to 95% on the back of research and investment over the previous decade. There is still a long way to go in the diagnosis and treatment of cancer but investors are focusing their attention on the next big-breakthrough disease area.

Obesity which has been a success story of 2023 with GLP1s or ‘skinny-jabs’ being approved for wider use with public payors There is plenty more room for growth with the market estimated to reach $80-$100bn by 2030, as the treatments are expected to be used in combination with other technologies and therapies. Auto-immune, neurological and cardiac and metabolic diseases will also be attractive for biopharma investors. If you had to pick one of these areas to be the next success story we are told cardio has the best chances. We could see GPs start to focus their attention from a broader to a more focused approach to particular diseases.

5. Huge risk-reward with Dementia.

With no proven-treatments the cost of managing dementia through care services is $1 trillion, doubling to $2 trillion in the next 5 years. The typical risk associated with investing in drug discovery in this case is offset by the enormous potential that a successful drug has in the market. One investor stated that if just one of their investments was proven to work, it would be able to pay-back its entire fund. Expect increased attention in this biotech vertical, a couple of dedicated funds, Dementia Discovery Fund for early stage and EQT’s LSP for later stage already exist, perhaps we will see more market entrants.

6. Impact needs have a clear intention and a common framework

Does healthcare always make an impact? No, was the consensus from the room, but that in part is because the strategies lack intention. Impact requires a clear set of goals identified in the early stages of a deal and hardwired into the strategy.

When picking your intention it is also necessary to think about the perspective simply beyond the benefits to health systems and patients, but to also consider how an investment in a new technology, process or medicine impacts the providers and the clinicians – two stakeholders pivotal for adoption. You need multiple business cases.

But without a common framework, there is little ability to truly measure and evaluate the impact that you are making, because everyone is using a different lengthed yardstick. But calling for a common framework for the industry is far easier than developing one.

7. AI isn’t something that you can guarantee a return on, yet.

Is investing in or applying AI to your business something that you can guarantee a return on? Probably not. Speakers all agreed that it was an important part of the overall technology toolkit, but not something that in isolation would make you money. There continue to be concerns about the ‘blackbox’ nature of systems with ethnographic and gender data imbalances and an uncertainty of exactly how they can best be deployed. Beyond the hype of headlines this past year, investors are measured in their approach to their technology investing but not getting over-excited.

8. Specialisation and the war for ‘experts’

“Expert” was the word of the day, each GP expressed its importance both in their firms and in their portfolio companies. In a broad, complex and highly regulated market, investors success is built on the sector knowledge they are able to build. Like tech before it, healthcare is seeing an increasing amount of specialist investors, narrowing their focus, especially in the small to mid-market. LPs see track record as a key factor when evaluating GPs making it harder for new GPs to enter the market.

A lack of available top talent is not a concern for healthcare services, although publicly this workforce crisis may appear to be the most prevalent. Life Sciences and MedTech also face a war for talent, intensified by increased competition and exciting start-ups entering the market.


We would welcome your thoughts on this story. Email your views to Lee Murray or call 0207 183 3779.