Tommy Erdei is Joint Global Head and European Head of Healthcare Investment Banking at Jefferies. He joined the firm in 2009 as a Managing Director for Jefferies Healthcare Team and is based in London. Erdei spearheaded the organization of Jefferies’ annual Global Healthcare Conference and hosts the annual Healthcare Temperature Check.
Last year’s London Healthcare Conference came amid significant market and geopolitical uncertainty. Inflation was well above the Fed’s two percent target, and rate cuts were still ten months off.
Still, participants spoke of the sector’s resilience. Supply chain pressures were easing, capital markets reopening, and sponsors and corporates were positioning for a rebound in dealmaking.
Now, as third-quarter data shows growth in transactions, the quiet confidence of last year’s conference appears to be paying off. A fresh rate-cut cycle and record dry powder are paving the way for more dealmaking, while innovations in AI and GLP-1s continue to excite investors.
Ahead of this year’s conference, Jefferies Insights caught up with Tommy Erdei, Joint Global of Healthcare Investment Banking, for his outlook on the healthcare sector and the months ahead.
Healthcare’s Momentum Builds
Even in a tough macro environment, healthcare proved uniquely resilient. Private equity activity has remained steady, relative to other sectors. There are robust pipelines of innovation. And industry leaders are sitting on large cash reserves, supporting strategic M&A.
“Healthcare is a defensive sector,” Erdei shared. “The ups and downs are much narrower than you see in other sectors such as technology or consumer sectors, for example. In broad strokes, things are typically good or great in healthcare.”
Now, the outlook for the sector is moving from resilient to strong, Erdei explained, as some of its key challenges begin to abate.
First, bid-ask spreads are narrowing. For two years, buyers dealt with significantly higher capital costs, while sellers clung to old valuation expectations. Now, as rate cuts begin, sellers adapt to the new normal, and their companies continue to grow into the valuation expectations from a year or two ago, both parties are increasingly aligned. This will spur growth in transaction activity, especially of PE-owned companies.
Second, equity capital markets (ECM) are gradually opening up—particularly in sectors like biotech—allowing more companies to raise capital.
“Healthcare is a broad sector, but in key areas, equity markets have been really active in 2024. There’s been a lot of buzz around M&A by large-cap pharmaceuticals of biotech/pipeline focused companies, particularly earlier in the year. This is always good to supporting funding of earlier-stage Biotech companies, as those investors look forward to a large payday from such takeovers as their product pipeline matures. And so we’ve seen the equity capital market for biotech open back up nicely, after a challenging couple years for fundraising,” Erdei said.
The biotech IPO market slowed significantly in 2022 and 2023 but has seen a gradual reopening in 2024: 7 Biotech IPOs have priced over the past two months, the most active two-month stretch since 2021. In total, there have been 17 IPOs in 2024 compared to 11 and 10 in 2022 and 2023 respectively.
Meanwhile, the follow-on market has seen near record activity in 2024 buoyed by an active M&A backdrop and strong data readouts igniting investor interest and returns. The 2024 market is the 2nd most active year ever for biotech follow-on issuance by proceeds raised.
“In healthcare, all these forces are connected,” Erdei explained. “With more M&A deals, financing will find their way to to new and exciting biotech pipeline opportunities, via IPOs, follow on offerings or from VC private investments. And with more capital, trying to find opportunities in the biotech sector, we will see further strength for biotech companies raising capital.”
GLP-1 and AI: Key Themes in Healthcare Innovation
Last year’s conference was dominated by talk about GLP-1 drugs as semaglutide treatments showed remarkable effectiveness in also addressing obesity in addition to its traditional market of diabetes. As the two major commercialized innovators, Novo and Eli Lilly, drove very strong growth , companies across the supply chain positioned themselves to capitalize on the growth opportunities.
Analysts project that early leaders Novo Nordisk and Eli Lilly will maintain a two-thirds share of the semaglutide market through 2031, thanks to their first-mover advantage. However, up to $70 billion of the GLP-1 market is still up for grabs, according to a recent report by Morningstar and PitchBook.
“GLP-1s were new at last year’s conference, but excitement remains high as results continue to exceed expectations,” Erdei shared. “The market isn’t limited to the peptide space—it impacts companies across the supply chain. There’s a race in several subsectors to seize this opportunity.”
This year, excitement also extended to artificial intelligence. A record $11.4 billion in venture capital is expected to flow into healthcare AI in 2024, as companies and investors explore potential applications of these technologies.
“Healthcare is such a broad sector, and AI opportunities vary across categories,” Erdei added. “AI in drug discovery and pharmaceutical supply chains is a big focus this year. There’s also growing interest in AI’s potential to optimize provider services workflows—logistics, electronic health records, diagnostics.”
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As the effects of a rate-cutting cycle and more stable equity markets begin to ripple through healthcare, the sector is poised for stronger deal activity, innovation, and investment. However, this isn’t a rebound from a downturn—healthcare showed resilience throughout the recent storm.
For deeper insights into the market, and more from Tommy Erdei and the Jefferies team, check out the 2024 Healthcare Temperature Check and follow coverage of this year’s Global Healthcare Conference.
