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Healthcare IT from the Investor’s Chair 1/8/10

January 8, 2010 News 4 Comments

Ask the Chair


All these HCIT companies have been issuing press releases lately informing us that they are going to present at the 28th annual J.P. Morgan Healthcare Conference. What is that and should I even care?

The J.P. Morgan Healthcare Conference is the biggest healthcare-focused investor conference of the year.

Now, almost all the large and middle market banks have conferences for their institutional investing clients to meet with public companies, hear their pitches, chat with management, and hobnob in general. While most of them are sector-specific (be it healthcare, gambling — which is probably a fun conference, energy, consumer goods, etc). J.P. Morgan is truly the mother of all healthcare investing conferences.

Formerly known as the H&Q Conference until JPM acquired Hambrecht and Quist, the conference is held every January in San Francisco (home of H&Q), by tradition at the Westin St. Francis in Union Square. All next week, CEOs and other officers of healthcare companies and their hangers-on will converge on the City by the Bay.

It’s important to know that HCIT is just a small part of the fun and often lost in the excitement of pharma, biotech, managed care, medical device, and healthcare service companies all showing up to tell their stories. I’ve often thought that if the next big San Francisco Earthquake occurs during this week, healthcare costs would drop by a meaningful percentage!

But why the flurry of press releases? Under SEC Rule FD (for Fair Disclosure), because the companies participating might say something material to their stock price, the fact that they’re presenting needs to be disclosed in advance, and presentations are usually Web-cast, too. Note that back before this rule was adopted, companies would often disclose information only in this type of setting (i.e., only for institutional investors to act on).

Making the conference even more interesting (and widely attended), in addition to the public company presentations, banks invite up and coming private companies to present in a separate track. This allows both private (i.e., venture or PE) investors to look for investment opportunities for their portfolios and public investors to have access to private companies that might not be on their radar yet – giving them a chance to check out what’s coming down the IPO path someday, likely to compete with a public company they hold in their portfolio, or increase their knowledge of the industry as a whole. More importantly, it allows the bankers to show some love to prospective clients by giving them a forum and an audience.

What’s particularly interesting about the JPM conference (and H&Q before it) is the size of the crowd it draws. Because so many companies and investors are in one place, others follow (Metcalf’s Law in action, perhaps). Not only are J.P. Morgan bankers on hand, healthcare investment bankers from its competitors can be found in the vicinity of Union Square as well, in addition to a bevy of others who service the industry (including me), a practice commonly known as “poaching”. The city fills up with not only the companies and investors invited, but companies, investors, and assorted others who weren’t invited and won’t be attending anything official.

As a result, the week becomes a mammoth series of meetings, receptions, and the like hosted by PE and venture funds and even competing banks. It’s like the joke about why the atheist goes to temple: “Meltzer goes to talk to God, I go to talk to Meltzer”. To me, the H&Q Conference (as many still call it) is second only to HIMSS as a time to have 3+ days worth of consecutive meetings with clients, prospects, and old friends. Just like at HIMSS, you can be at a coffee shop or street corner waiting for a meeting to start and run into people you’ve known for years.

Does the non-investing HIStalk reader need to care? Well, unless you’re wondering where everyone went, but truly, not a whit. However, since the question was asked, and Mr. HIStalk has asked for the “insider view”, I thought this might provide some interesting color on explaining the recent press release action.

My next post (coming soon), will discuss the hows and whys of QuadraMed and Amicas’ announcements last month that they were escaping the slings and arrows of the public equity markets into the waiting and eager arms of private investors. In the meantime, please keep those interesting questions coming.

Ben Rooks
The Chair

Ben Rooks is the founder of ST Advisors, a strategic consultancy offering long-term and project-relationships to companies and financial sponsors. He earned an MBA in healthcare management from The Wharton School of the University of Pennsylvania, has done healthcare IT equity research, and has worked as an investment banker in over 25 successfully closed healthcare and medical technology transactions valued from $40 to $365 million.

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Currently there are "4 comments" on this Article:

  1. I thought this was about patient care and not making $millions at the patient’s expense.

    Hey Mr. Rooks, do you think there is any insider trading in the industry?

    Mr. H will probably disallow such an intrusive question

  2. Thanks Inotroped,
    Aside from a few notable exceptions (like a public company CEO dumping his stock before missing the quarter in 2001), I don’t think this sector has more or less insider trading than any other. It’s just a factor of the public markets (and part of why I tend to own index funds, btw).

    As for your first observation, America is a land of entrepreneurship – be it software, services or practice of medicine. For every software hcit entrepreneur who makes millions, I’ll wager there’s a fair number of doctors or hospital execs who make more by providing patient “care”. Did you read Gawande’s article on entrepreneurial medicine? I’ll wager Neale or Judy have created more “value” than any ten cosmetic surgeons.
    Just my $0.02. Thanks for the comment.

    BTW, Day 2 of J.P. Morgan concludes with about 20 meetings (and 4-5 random encounters) as well as an outstanding who’s who at Health Evolution Partner’s soiree (especially impressive as it ran back to back with no less than 3 PE and one Ibanking cocktail event.

    Ben Rooks

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