Almost everyone who’s anyone in the world of healthcare attends a major conference hosted by JP Morgan in California in January. The event is now in its 42nd year. Sadly, your author was unable to jet over to the West Coast but was lucky enough to be able to participate in some of the event virtually, swapping the glamour and relative warmth of San Francisco for his PC and desk in freezing London. Three key topics stood out.

AI was front of mind for every business.

NVIDIA, arguably the poster child for the whole space, presented at the conference. Its key argument was that digital biology and generative AI would help to reinvent drug discovery, surgery, medical imaging and wearable devices. Sure, the healthcare businesses we heard speak at the event probably did feel that they needed to endorse the case for AI, as much as anything for fear of being seen as laggards. Nonetheless, NVIDIA highlighted that its healthcare customers already consume over $1bn of its computing annually, either directly or indirectly (through cloud partners). Intuitive Surgical CEO’s provided what to your author seemed like the fairest take on AI. He reminded conference listeners that Intuitive had been using AI for over seven years already – so it’s not a new theme. Future AI progress would be “powerful” for the industry, but also “messy.” By the latter term, we took him to mean non-linear. How AI insights get practically implemented by healthcare providers is also still highly open to debate.

The obesity treatment opportunity remains significant.

It was apparently standing room only at the presentations given by the Chief Executives of both Novo Nordisk and Eli Lilly. Dave Ricks, head of the latter business, noted the “huge addressable market” for obesity treatment given “large unmet needs”. Meanwhile, Lars Fruergaard Jorgensen, the Novo CEO, highlighted it was “just getting going.” Novo noted how there had been a step change in the industry in beginning to recognise obesity as “a real disease.” Through use of drugs such as Wegovy, healthcare systems would be able to potentially save large sums of money. Despite the significant runway ahead, both businesses did recognise the complexities attached to scaling production.

Innovation remains the lifeblood of the industry.

This was a consistent message we heard from every business at the conference. It was perhaps expressed most succinctly by Dave Ricks, who argued that “the only way” to outgrow relative to peers was through organic research and development. Lilly is “not chasing fads but chasing science.” This view was echoed elsewhere in different formulations: Novo seeks to try and be “early” with its innovation, Thermo Fisher has “a constant dissatisfaction with the status quo” and a deeply entrenched philosophy of continuous improvement, while Intuitive was emphatic in how it would continue to pursue its market opportunity. With the right innovations, its addressable market could expand threefold.

18 January 2024

The above does not constitute investment advice and is the sole opinion of the author at the time of publication. Heptagon Capital is an investor in Intuitive Surgical, Novo Nordisk and Thermo Fisher. The author of this piece has no personal direct investment in the business. Past performance is no guide to future performance and the value of investments and income from them can fall as well as rise.

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Alex Gunz, Fund Manager


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