A ‘healthcare prognosis’–from an investor POV

Healthcare investor Venrock took a survey of ‘friends’ on healthcare business and regulatory trends for 2024. Your Editor is surprised (a bit) at what the ‘super smart healthcare friends’ had to say. But keep in mind that the opinion of ‘friends’ even if ‘super smart’ can be just that–opinions that don’t pan out, like Derby horse bets. 

  • No repeat performances of a severe communicable disease like Covid-19–93%
  • Back to office is it for 24 to 33%. No negative effects on recruitment–13%. In this, your Editor sees a certain amount of wishful thinking and frankly, hedging as the top is only one-third. The question only touched the surface, for instance not including hybrid and flexible hours.
  • GLP-1 drugs originally for type 2 diabetes, now for weight loss, will be the hottest thing in pharma in 2024. 70% of the friends believe that a DTC war among brands reminiscent of ED drugs will break out. 63% believe that Medicaid spending to cover GLP-1 drugs will exceed 10% which will be difficult for states to finance.
  • 76% believe that Medicare drug price negotiations will lead to commercial price decreases, with 64% believing that Medicare prices will be lower net of rebate prices
  • While 70% believe that Mr. Market will be up, the picture for digital health funding is split down the middle. 58% believe it will be up over $10.7 billion, the remaining 42% below that. This Editor is with the latter group, believing that the newly adopted DOJ/FTC Merger Guidelines will bite into deals for the rest of the year, with Q1, which typically has carryover, as the peak.
  • 51% believe that IPOs may start to open up with a ‘small group of aging companies’. 41% believe that more than five will go public.
  • 42% believe that M&A will be driven higher by distressed sales, with only 16% believing that there will be good outcomes for sellers. 27% believe M&A will be flat.
  • On the hit list to be acquired: Carbon Health (primary and urgent care, 28%), Omada(virtual chronic care, 24%), Komodo (data mapping) and Accolade (corporate care navigation, both 21%)
  • Unicorns are losing their horns, with 27% believing that 11 to 15 will sink in valuation below $1 billion and 45% 6 to 10.
  • UnitedHealth Group’s antitrust troubles do not seem to trouble these friends, with 42% believing that remedies will be targeted and largely not disruptive to their business. 36% believe that it will be footballed around but die in the courts. Only 9% believe that UHG will be broken up.
  • Will the new policies from DOJ and FTC mean that private equity takeover will be slowed? 44% believe not with 30% noncommittal, but then again these friends are interested in the same.
  • On the legacy PBM issue, 49% believe that the Johnson & Johnson ERISA class action will not have any effect, as switching is expensive with low prices from the majors. 30% are noncommittal.
  • No surprise that 74% believe that more cyberattacks will happen and be successful.
  • 79% think AI in health tech will see material growth–again no surprise–but the jury is split on regulation. 35% believe that there will be Federal regulations, but only after something bad happens, and that overregulation will happen. 42% believe there will be some “light” regulation mainly for political reasons with an additional 23% believing that absolutely nothing will happen.

Venrock is an investor in Devoted Health (health plans), Included Health (telehealth/virtual care), Aledade (VBC and ACOs), Virta (diabetes care), athenahealth, and other medical device and biotech companies.  Venrock’s Healthcare Prognosis 

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