Delegates are currently gathering in London for the annual Jefferies healthcare conference. There is still a day to go, but already there are a number of themes that look set to impact healthcare and life sciences deal making in 2024.

With more macroeconomic headwinds than anticipated, 2023 has turned out to be a reset year after the challenges (and boom) of the pandemic years. Many companies have spent the year focusing on their cash position and operational performance, ahead of a predicted (if perhaps modest) uptick in 2024.

There was a general sense that strategic corporate investors have begun to return to the market in a more active way. Innovative science has continued to be acyclical, with a number of high quality deals still getting done in 2023 despite interest rates and general pricing misalignment.

The recent downturn in biotech venture investment has had ripple effects for private equity investors. This decrease has led to fewer clinical trials, which in turn has seen fewer deals in the CRO and CMO market (a favourite of private equity healthcare). However, looking forward, there was optimism about investment into early stage companies as venture/growth funds in the space have been successfully fundraising and now have significant dry powder to deploy.

Much of the commentary on interest rates has focused on private equity. However, higher borrowing costs now make it less appealing for pharma and med device manufacturers to hold onto underperforming assets. These sorts of operational turnaround may prove happy hunting ground for technically minded private equity funds, particularly in the manufacturing process.

One factor that may also re-awaken the capital markets is that a number of listed biotechs are expecting phase 2 and phase 3 data in 2024. Assuming positive results, issuers may finally feel justified in holding out for pricing to improve.

For PE buyout funds, generally 2022 and 2023 have been years where they have deployed below average amounts of capital as a result of the macroeconomic headwinds. Some of those headwinds have been stabilising, but pricing needs to reset and so far there has been a gap between buyer and seller price expectations. That gap is beginning to narrow.

According to Jefferies, there is a large backlog of assets ready to be put on the market. Investors will need to be selective about the assets they want to focus on and sellers will need to careful about when they go to market so as not to get lost in an abundance of available opportunities.

Overall, definite optimism that 2024 could be a more 'normal' year for levels of investment/M&A, but still a lot of cautiousness about calling when the tipping point of the market will be.

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