Kimberly Young

Kimberly Young, Global Head for Life Sciences, Citi Commercial Bank

Thor Perplies

Thor Perplies, Team Leader Treasury Sales, Healthcare and Nonprofit, Citi Commercial Bank

Life Sciences companies are unique not only in how quickly they scale, but also how early they go public in their life cycle. Listing on a stock exchange is usually a momentous milestone for a business, and for months leading up to it, attention understandably turns almost exclusively to the IPO process, investor roadshows, and ringing the opening bell. What often gets overlooked is the importance of an automated, efficient treasury setup. Getting this right not only delivers a major boost for a healthcare company&rsquo;s operations in general, but in many cases is necessary to meet the increased expectations and scrutiny that comes with being a public entity.
Once the bell rings, expectations from investors, regulators and other key stakeholders become significantly higher, essentially overnight. However, the internal transformation needed to meet these heightened expectations cannot always happen as quickly. Ideally, a life sciences company should begin preparations up to a year before the IPO is anticipated. Key to these preparations is a review of treasury operations and the creation of a system that facilitates the strong governance, transparency, and accountability that&nbsp;stake holders expect.
<h3>Governance: Laying the Foundations</h3>
All companies, public or private, have a policy that sets out the rules (or governance) for each team across the organization and how that organization functions. It is acceptable and understood that the governance structure of a private company is more fluid than that of a public one, especially for healthcare or life sciences companies that are often growing rapidly, and in a decentralized way. Once that company takes on public funding, however, it is held to a higher standard in order to protect investors, and the same fluidity is no longer tolerated. New infrastructure and processes may be required to fulfill key tasks.
Understanding the scope of the changes that need to be made before an IPO can be daunting. Many of the requirements associated with becoming a public company are prosaic but absolutely critical in order to ensure best practices. If the firm has a bank that understands the journey, they can jointly conduct a detailed survey of their treasury practices across multiple areas; answering questions early on &ndash; even the seemingly mundane ones &ndash; will have a beneficial impact at later stages. For example:
<ul>
<li>Encryption: At a basic level, companies must establish security encryption protocols for payments, setting out whether they intend to encrypt connectivity to their bank or both connectivity and payment files. The bank can help the company decide what makes the most sense in its specific circumstances.</li>
<li>Authorized Signers: Especially when a healthcare company has multiple overseas subsidiaries, it may have a variety of practices related to authorized signers. To ensure proper controls, healthcare companies should keep their signer list updated, and consider a centralized structure that leaves room for local signatories where relevant. The bank will be able to provide detailed guidance on issues such as authorized signatory requirements in various jurisdictions.</li>
<li>Investment Policy: Raising cash is the primary objective of an IPO, but many firms fail to build a plan for how to manage that cash once it arrives, with some maintaining balances in a demand deposit account. The asset management arm at the bank can work with the company to understand its priorities and develop an investor policy statement and strategy that balances risk and return with any strategic projects such as investment in new facilities and research and development. <a href="https://www.citigroup.com/global/insights/commercial-bank/youve-raised-the-funds-now-what" target="_blank" rel="noopener" data-link-source="tiny">Explore this topic further here</a>.</li>
<li>Cash Deployment: Proceeds from Healthcare IPOs may be used to fund subsidiaries to expand operations, conduct clinical trials, and repay debt. Separate from the investment policy for any excess balances, a healthcare company should think about how it will deploy cash for these various purposes in the most efficient way. A centralized banking operation streamlines funding at the headquarters rather than individually at each subsidiary, enabling greater visibility and control.</li>
</ul>
Some banks might be able to help their clients automatically implement their governance policies, such as the authorization process for electronic payments. Authorization at the ERP level when releasing file payments is the most common, but banks can support additional authorizations as well. FX transactions, for example, may be more sensitive than regular payments, and so Healthcare companies can have defined processes and employees to input and authorize those particular transactions. Such procedures and processes make it easier to ensure robust governance.
<h3>Transparency: The Key to Building Trust</h3>
In addition to necessitating stronger governance, accessing the capital markets requires increased financial reporting capabilities to ensure greater transparency for stakeholders. Treasury has an obligation to consolidate and report ongoing financial data relating to key trial developments. If the company cannot easily synthesize information across the organization and provide granular reporting, it should consider building the infrastructure upfront to avoid wasting time later on.
The international nature of the life sciences and healthcare sector complicates this further; companies often expand rapidly to conduct clinical trials in Asia and Europe in order to commercialize products to these key markets. Similarly, companies may launch operations in a new market to benefit from R&amp;D credits or tax incentives in places such as Australia. If companies work with multiple providers or correspondent banks in different countries, they will need to negotiate a variety of processes, formats and reports, increasing complexity and making it harder to consolidate the necessary information.
Working with a global bank that can easily scale with the company can solve some of these problems. Consolidation provides much greater control over the data that companies receive into their ERP system, making reporting fast and accurate even as they add incremental countries. Relevant data can then be efficiently mapped for each project or drug.
<h3>Accountability: Oversight is Critical</h3>
The importance of accountability cannot be overstated: accurate reporting to Wall Street is essential. The treasury policies and procedures put in place as part of the governance structure described earlier can help with accountability and regulatory compliance, but much more is required.
For instance, companies must adhere to the target capital structure that they communicate to stakeholders. Company management will define the ideal debt/equity ratio, but it is the treasury team that takes responsibility for the actual execution of the plan and management of the day-to-day flow of cash, by repaying debt and partnering with capital markets bankers to ensure an appropriate funding structure is in place.
In terms of compliance, being publicly listed transforms the regulatory burdens placed on companies. Following an IPO, a company must be in compliance with a number of regulations, which can have significant treasury and operational implications. For example, some regulations require companies to perform audits on their bank account balances or to report their tax compliance status, FX exposure, and interest rate exposure. A company&rsquo;s bank should have the infrastructure to enable this.
The collation of such information, which is documented in MT940 and other message types as well as cash management statements, is significantly easier if a company works with a single bank. Similarly, a bank can provide simplified reporting of FX and interest rate exposure that can be fed into the company&rsquo;s ERP system, automatically populating accounting statements.
<h3>Conclusion: Preparation is Essential</h3>
An IPO is a marquee event in a healthcare company&rsquo;s growth trajectory, and many factors need to go right in order for it to succeed. With an IPO on the horizon, treasury preparation should not be overlooked: it is an enabler of the company&rsquo;s efficiency and controls after the bell rings. Because this kind of financial transformation can take time, refining a company&rsquo;s treasury setup should start well before the bell. Choosing the right banking partner will make it easier to establish an appropriate treasury foundation that can support an organization as it scales, from a private start-up to public company, and from the clinic to commercialization.
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/64834692ef207e3f74ae09e1.PNG" alt="VIEW ALL INSIGHTS 2023.PNG">

Life Sciences companies are unique not only in how quickly they scale, but also how early they go public in their life cycle. Listing on a stock exchange is usually a momentous milestone for a business, and for months leading up to it, attention understandably turns almost exclusively to the IPO process, investor roadshows, and ringing the opening bell. What often gets overlooked is the importance of an automated, efficient treasury setup. Getting this right not only delivers a major boost for a healthcare company’s operations in general, but in many cases is necessary to meet the increased expectations and scrutiny that comes with being a public entity.

Healthcare IPOs: Treasury's Role Before the Bell

We believe AI will transform healthcare; the change will be gradual but profound. In the long term, it could automate not only diagnosis, but also vast swathes of administrative work. And in the end, it will fundamentally change the doctor/patient relationship. The first of five reports on AI in healthcare, by Adam Spielman of Citi Global Insights, provides a timely sketch of the current scene, looking at what’s happening and what may lie ahead. Artificial Intelligence in Healthcare © 2023 Citigroup Inc. No redistribution without Citigroup’s written permission. Source: Citi Global Insights Here are some of the report’s key takeaways: So far AI’s impact on healthcare has been relatively modest, with some interesting developments in radiology, BioPharma, and in a handful of health-specific admin systems. These products are mostly point solutions that address the needs of the pre-existing players in their pre-existing workflows. In the next few years AI is likely to automate a good deal of health administration, relieving workers of mundane tasks, saving both money and time, and thereby improving clinical outcomes. This sort of AI will integrate the different parts of the system, for example the payers and providers, much more tightly. We also expect AI to profoundly affect the BioPharma industry. The transformer technology that can understand ordinary languages (like English), and which is driving innovations like ChatGPT, can also be used to analyze large molecules like DNA and proteins. In the long term, we believe AI will fundamentally change the relationship between clinicians and patients. We believe diagnoses will become increasingly automated. We expect that family doctors will become more like health coaches and hospital specialists will become more productive, attempting more personalized and ambitious interventions. We therefore think AI will trigger a significant change in the way healthcare is delivered. Mike Guarino is the global head of health technology at Citi’s investment bank, and he believes AI will be a central driver in the future of health. “AI is going to be a critical component of healthcare moving forward,” he says. “We believe it will accelerate trends that we have been seeing in the market, which include a focus on increased value through improved clinical outcomes and cost efficiencies, enhanced patient experience, and workflow simplification.” This first report in the series is designed to be an overview. Subsequent reports will contain more examples of the exciting work companies are doing in this space, bringing the story of AI in healthcare to life. For the full report, if you are a Velocity subscriber, please login here Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.

We believe AI will transform healthcare; the change will be gradual but profound. In the long term, it could automate not only diagnosis, but also vast swathes of administrative work. And in the end, it will fundamentally change the doctor/patient relationship.
The first of five reports on AI in healthcare, by Adam Spielman of Citi Global Insights, provides a timely sketch of the current scene, looking at what&rsquo;s happening and what may lie ahead. &nbsp;
&nbsp;
Artificial Intelligence in Healthcare
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/64479caadae0d47cb948aae9.png" alt="" width="757" height="575" />
&copy; 2023 Citigroup Inc. No redistribution without Citigroup&rsquo;s written permission. Source: Citi Global Insights
Here are some of the report&rsquo;s key takeaways:
<ul>
<li style="text-align: left;">So far AI&rsquo;s impact on healthcare has been relatively modest, with some interesting developments in radiology, BioPharma, and in a handful of health-specific admin systems. These products are mostly point solutions that address the needs of the pre-existing players in their pre-existing workflows.</li>
</ul>
&nbsp;
<ul style="text-align: left;">
<li>In the next few years AI is likely to automate a good deal of health administration, relieving workers of mundane tasks, saving both money and time, and thereby improving clinical outcomes. This sort of AI will integrate the different parts of the system, for example the payers and providers, much more tightly.</li>
</ul>
&nbsp;
<ul style="text-align: left;">
<li>We also expect AI to profoundly affect the BioPharma industry. The transformer technology that can understand ordinary languages (like English), and which is driving innovations like ChatGPT, can also be used to analyze large molecules like DNA and proteins.</li>
</ul>
&nbsp;
<ul>
<li style="text-align: left;">In the long term, we believe AI will fundamentally change the relationship between clinicians and patients. We believe diagnoses will become increasingly automated. We expect that family doctors will become more like health coaches and hospital specialists will become more productive, attempting more personalized and ambitious interventions. We therefore think AI will trigger a significant change in the way healthcare is delivered.</li>
<li style="text-align: left;">&nbsp;</li>
</ul>
Mike Guarino is the global head of health technology at Citi&rsquo;s investment bank, and he believes AI will be a central driver in the future of health. &ldquo;AI is going to be a critical component of healthcare moving forward,&rdquo; he says. &ldquo;We believe it will accelerate trends that we have been seeing in the market, which include a focus on increased value through improved clinical outcomes and cost efficiencies, enhanced patient experience, and workflow simplification.&rdquo;
This first report in the series is designed to be an overview. Subsequent reports will contain more examples of the exciting work companies are doing in this space, bringing the story of AI in healthcare to life.
&nbsp;
For the full report, if you are a Velocity subscriber, please <a href="https://www.citivelocity.com/cv2/go/MarketBuzz/X19GUl9fqntvl02g8ken" target="_blank" rel="noopener" data-link-source="tiny">login here</a>
&nbsp;
Citi Global Insights (CGI) is Citi&rsquo;s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click <a href="https://ir.citi.com/6A3IURUaezPxFLppsgdBkqidjLaLn558JwHISYaDZcTfE9XMRB1isDDDVorqrxpR%2fTnEi4RUCl8%3d" target="_blank" rel="noopener" data-link-source="tiny">here</a>.
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Artificial Intelligence has the power to revolutionize healthcare. A new report from Citi Global Insights, the first in a five-part series, surveys the rapidly shifting scene, providing a timely overview of recent developments and their implications. 

AI in Health: What’s Happened and What’s Coming? 

For medical imaging technology, AI time has already arrived. Seven years ago, there were almost no AI-enabled devices being approved. Since then, they’ve grown roughly in a straight line. Now about 40% of all radiology devices being approved are AI enabled, as the first chart below shows. As a result, sales of AI diagnostic devices are likely to grow rapidly. The consensus forecast is for 33% compound growth over the next five years. This means there’s a big opportunity for start-ups and established players. In some areas, AI has now become a necessary cost of doing business. In others it is possible to carve out a niche providing AI as a service particularly when serving the BioPharma industry. The path won’t be completely smooth, however, according to the CGI report, because many doctors are reluctant to embrace AI-enabled devices. The full report has more on that. AI-enabled devices as a % of all radiology devices approved by the FDA Source: FDA Predictability of Reimbursement for Digital Devices Source: BCG and UCLA Biobank The FDA has tried to encourage innovation, and as a result AI-driven devices are now typically launched in the U.S. By contrast the EU’s new safety-first approach has made it much harder to introduce products there. Many companies now say they will delay their European launches, if they do so at all. In the U.S. the most important barrier to the use of new types of medical devices now revolves around “reimbursement” rather than “approval”. The FDA, or its equivalents overseas, may approve an AI-enabled device, but health providers will buy it only if they believe payers will reimburse its use. Unfortunately, the second chart above shows companies find it extremely hard to predict whether there will be reimbursement for new digital medical devices, both in the U.S. and in Europe. Despite these issues, however, AI-enabled medical devices are growing rapidly – which means MedTech is likely to be the first area within health where AI will have a significant impact. The number of AI-enabled medical devices approved by the FDA has grown steadily, as the first chart below shows, from close to zero before 2015 to 72 in 2H21 (the last six-month period we have full data for). The growth is impressive, and there is no sign that the rate increase will slow down. However it’s important to put it in context: the second chart below shows that AI-enabled devices still represent only about 5% of all Class II medical devices being approved. Figure 7. Number of AI devices approved by FDA (# per 6-month period) Source: FDA Figure 8. AI-enabled device approvals as a % of all FDA Class II approvals Source: FDA About three quarters of all the AI products that have been approved are in radiology, in other words in medical imaging, with cardiovascular devices a distant second. Almost 90% of those radiology devices are for diagnosis and that the main techniques in the field – CT, Ultrasound, MRI, X-Ray – are all well represented. Only 11% of AI-enabled radiology devices are dedicated to the therapeutic side of radiology – which typically involves using radiation to kill cancer cells, often in the earlier stages of cancer. The full report looks in greater depth at how AI is being monetized in healthcare and covers several examples and case studies of AI in action across the sector. To read it in full, if you are a Velocity subscriber, please see Smart Thinking on AI in Healthcare: Part 2 – Medical Devices: AI is increasingly disrupting radiology (6 April) Citi Global Insights (CGI) is Citi’s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click here.

For medical imaging technology, AI time has already arrived. &nbsp;
Seven years ago, there were almost no AI-enabled devices being approved. Since then, they&rsquo;ve grown roughly in a straight line. Now about 40% of all radiology devices being approved are AI enabled, as the first chart below shows.
As a result, sales of AI diagnostic devices are likely to grow rapidly. The consensus forecast is for 33% compound growth over the next five years.
This means there&rsquo;s a big opportunity for start-ups and established players. In some areas, AI has now become a necessary cost of doing business. In others it is possible to carve out a niche providing AI as a service particularly when serving the BioPharma industry.
The path won&rsquo;t be completely smooth, however, according to the CGI report, because many doctors are reluctant to embrace AI-enabled devices. The full report has more on that.
&nbsp;
AI-enabled devices as a % of all radiology devices approved by the FDA
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/64808d2c8c88e95cfe692602.png" width="514" height="345" />
Source: FDA
&nbsp;
Predictability of Reimbursement for Digital Devices 
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/64808d89ef207e3f74ade3d0.png" />
Source: BCG and UCLA Biobank 
&nbsp;
The FDA has tried to encourage innovation, and as a result AI-driven devices are now typically launched in the U.S.
By contrast the EU&rsquo;s new safety-first approach has made it much harder to introduce products there. Many companies now say they will delay their European launches, if they do so at all.
In the U.S. the most important barrier to the use of new types of medical devices now revolves around &ldquo;reimbursement&rdquo; rather than &ldquo;approval&rdquo;. The FDA, or its equivalents overseas, may approve an AI-enabled device, but health providers will buy it only if they believe payers will reimburse its use. Unfortunately, the second chart above shows companies find it extremely hard to predict whether there will be reimbursement for new digital medical devices, both in the U.S. and in Europe. &nbsp;
Despite these issues, however, AI-enabled medical devices are growing rapidly &ndash; which means MedTech is likely to be the first area within health where AI will have a significant impact.&nbsp;
The number of AI-enabled medical devices approved by the FDA has grown steadily, as the first chart below shows, from close to zero before 2015 to 72 in 2H21 (the last six-month period we have full data for).
The growth is impressive, and there is no sign that the rate increase will slow down. However it&rsquo;s important to put it in context: the second chart below shows that AI-enabled devices still represent only about 5% of all Class II medical devices being approved.
&nbsp;
Figure 7. Number of AI devices approved by FDA (# per 6-month period)
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/64808e02ef207e3f74ade3d3.png" />
Source: FDA
&nbsp;
Figure 8. AI-enabled device approvals as a % of all FDA Class II approvals
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/64808e38141fa96b32804303.png" />
Source: FDA
&nbsp;
About three quarters of all the AI products that have been approved are in radiology, in other words in medical imaging, with cardiovascular devices a distant second.
Almost 90% of those radiology devices are for diagnosis and that the main techniques in the field &ndash; CT, Ultrasound, MRI, X-Ray &ndash; are all well represented. Only 11% of AI-enabled radiology devices are dedicated to the therapeutic side of radiology &ndash; which typically involves using radiation to kill cancer cells, often in the earlier stages of cancer.
The full report looks in greater depth at how AI is being monetized in healthcare and covers several examples and case studies of AI in action across the sector.
To read it in full, if you are a Velocity subscriber, please see <a href="https://www.citivelocity.com/t/r/eppublic/2iauM" target="_blank" rel="noopener" data-link-source="tiny">Smart Thinking on AI in Healthcare: Part 2 &ndash; Medical Devices: AI is increasingly disrupting radiology</a> (6 April)
Citi Global Insights (CGI) is Citi&rsquo;s premier non-independent thought leadership curation. It is not investment research; however, it may contain thematic content previously expressed in an Independent Research report. For the full CGI disclosure, click <a href="https://ir.citi.com/6A3IURUaezPxFLppsgdBkqidjLaLn558JwHISYaDZcTfE9XMRB1isDDDVorqrxpR%2fTnEi4RUCl8%3d" target="_blank" rel="noopener" data-link-source="tiny">here</a>.
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&nbsp;
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A recent report by Adam Spielman of Citi Global Insights the second in a series on AI in healthcare looks at how AI is already having an impact on medical devices, and in particular on radiology and imaging. 

AI in Healthcare: Medical Devices 

Key topics discussed: • Areas in which AI will act like healthcare professionals • The extent to which AI will augment the work of doctors and other clinicians • The impact on consumers / patients • What it means for healthcare professionals and for the wider healthcare system • Expected regulation • Potential business models

Key topics discussed:
&bull; Areas in which AI will act like healthcare professionals
&bull; The extent to which AI will augment the work of doctors and other clinicians
&bull; The impact on consumers / patients
&bull; What it means for healthcare professionals and for the wider healthcare system
&bull; Expected regulation
&bull; Potential business models

In conversation with Munjal Shah, CEO - HippocraticAI.

AI in Healthcare: How will AI Change the Role of Clinicians?

READ HERE

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The 2024 Citi Commercial Bank Sector Snapshot Report on Emerging Healthcare &amp; Life Sciences, with data taken from PitchBook, takes a closer look at emerging frontiers in healthcare with a focus on biotech digitalization, AI, telemedicine, fitness and wearable tech, and&nbsp;assesses market conditions, industry shifts, and key trends&nbsp;in investment.
This raises a number of interesting questions:&nbsp;
<ul>
<li>Can venture financing in healthcare and life sciences remain resilient despite economic volatility?</li>
<li>Will investment remain focused&nbsp;on healthtech, biotech, and advances in hardware and software?</li>
<li>And will the future see an increase in the estimated $9.8 trillion global healthcare spend in 2021?</li>
</ul>
These are some of the areas covered in the report which delivers valuable insights and will unlock opportunities.
Read the full report <a href="https://www.citibank.com/icg/sa/flippingbook/2024/Sector-Snapshot-Key-Trends-in-Dealmaking-Emerging-Healthcare/2/" target="_blank" rel="noopener" data-link-source="tiny">here.</a>
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<div>Nauman Ansari Global Healthcare Sector Head Citi Commercial Bank</div>
</div>
</div>

Key Trends in Dealmaking

The 2024 Citi Commercial&nbsp;Bank Sector Snapshot Report on Emerging Healthcare &amp;&nbsp;Life Sciences, with data taken from PitchBook, takes a closer&nbsp;look at emerging frontiers in healthcare with a focus on biotech&nbsp;digitalization, AI, telemedicine, fitness and wearable tech, and assesses market conditions, industry shifts, and key trends&nbsp;in investment.
&nbsp;

Sector Snapshot: Emerging Healthcare & Life Sciences

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The average global citizen born today will live almost 30 years longer than one of their forebears born in 1950, one of humanity&rsquo;s most astonishing achievements.
But the global healthcare system&rsquo;s vital signs have deteriorated recently. Life expectancy in many western countries has stalled over the past 15 years, worsening through the pandemic. And a shocking rise in population obesity and an expected rapid increase in dementia is storing up future pain.
A rapidly aging population is already driving healthcare system costs to potentially unsustainable levels, and in many advanced economies the cost of healthcare as a proportion of GDP has more than doubled in the past 30 years.
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/664b45d77efdbd75e99fa209" alt="" width="800" height="403">
The Oxford Prescription draws on the insights and expertise of 17 leading Oxford University professors, looking at ways in which global healthcare can be improved, examining population health, the balance between primary and secondary care, and how new data and technologies could revolutionize the delivery of healthcare.
The fact is healthcare today still largely works by treating problems after symptoms become serious. The core of The Oxford Prescription is to use newly developed techniques to address medical issues as early as possible, not after symptoms appear.
The science behind these techniques &mdash; like polygenic risk scoring and liquid biopsies &mdash; is not 100% settled. But things look promising.
The Oxford Prescription demands a significant reorganization of healthcare delivery and drug development, as well as better use of digital technologies. It also calls for more aggressive use of public health measures.
The basic tenets of The Oxford Prescription are:
<ul>
<li>Address medical issues as early as possible</li>
<li>Reorganize how healthcare is delivered</li>
<li>Leverage digital technology</li>
<li>Focus drug development on large populations</li>
<li>More aggressive public health measures, particularly on obesity</li>
<li>Ensure we&rsquo;re prepared for future outbreaks and pandemics</li>
</ul>
The Oxford Prescription does not rely on major new breakthroughs: it is mostly about applying and developing what we already know. That said, major developments in medicine are likely in the coming decades &mdash; there&rsquo;s no reason to expect science and progress to stall.
The report covers a huge range of topics, from drug discovery to biomedical engineering, public health and nutrition to genetic studies, immunology to tropical &amp; infectious diseases, and much more. It is essential reading for anyone interested in the future of the global healthcare system.
To read the full report,&nbsp;<a style="box-sizing: border-box; color: rgb(37, 91, 227); text-decoration-line: underline; cursor: pointer; transition: color 0.2s cubic-bezier(0.6, 0, 1, 1) 0s; font-family: Citi-Sans-Text-Regular; font-size: 18px; white-space: normal; background-color: rgb(255, 255, 255);" href="https://ir.citi.com/gps/MNKTSpX7j6trP%2BkGcP9kqDMkSszK%2BxtCXnx3j8SvywFATgD4bT%2B4eaGFqrzUBB%2B7" target="_blank" rel="noopener" data-link-source="tiny">click here.</a>
&nbsp;

The Oxford Prescription

The average global citizen born today will live almost 30 years longer than one of their forebears born in 1950, one of humanity&rsquo;s most astonishing achievements.

Future of Healthcare

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The healthcare industry continues its rapid evolution as emerging and disruptive technologies transform the health and wellness space. This in turn is impacting how treasury organizations are supporting strategic objectives. Today&rsquo;s healthcare industry is more globalized than ever before, leading to an increase in merger and acquisition (M&amp;A) activity, particularly in biopharma, which is projected to see health-tech investments of approximately $1.2 Tn through 2025.
Treasury organizations are under pressure to explore future payment models in order to meet the evolving needs of their businesses.
To learn more about how businesses can navigate their treasury and commercial journeys in this rapidly evolving industry,&nbsp;<a href="https://www.citigroup.com/rcs/citigpa/storage/public/a_prescription_ for_healthcare_treasury.pdf" target="_blank" rel="noopener" data-link-source="tiny">download</a>&nbsp;the full report to read more.

A prescription for healthcare treasury

TRANSCRIPT

Following the Covid pandemic, the world has experienced a sharp rise in global digital interactions, from remote working and learning, to online shopping and telemedicine.&nbsp;
In this episode of Good Things Happen we look at what these shifts mean for healthcare around the world, including health equity and access, healthcare systems and long-term wellbeing.
Dr Harshit Jain, Founder and CEO of Doceree - one of the world&rsquo;s leading healthcare marketing platforms - joins the podcast to discuss the role of technology in global health and the formidable success his company has had connecting pharmaceutical companies with physicians in real-time, with the support of Citi.
Joining Harshit is Nauman Ansari, Head of Healthcare for Citi Commercial Bank. He spotlights the behavioural shifts the world has seen since the pandemic, including the rise of wellbeing in the workplace, work life balance and the increasing autonomy people are seeking over their own health. Ansari explains the focus of Citi Commercial Bank&rsquo;s Healthcare Industry team and the opportunities that are arising as part of the health tech revolution.
Citigroup (&ldquo;Citi&rdquo;), and Doceree are not affiliated and are independent companies, though Doceree has a relationship with Citi through Citi&rsquo;s Commercial Bank. The speakers&rsquo; views are their own and may not necessarily reflect the views of Citi or any of its affiliates. All opinions are subject to change without notice. Neither the information provided, nor any opinion expressed constitutes a solicitation for the purchase or sale of any security. The expressions of opinion are not intended to be a forecast of future events or a guarantee of future results.
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Dr Harshit Jain is the Founder and Global CEO of Doceree, the First Global Network of Physician-only Platforms for Programmatic Marketing. Founding Doceree in 2020, Harshit is aiming to address the acute problem of rising cost of healthcare by bringing in efficiency and effectiveness in marketing to Physicians by pharma brands on digital platforms with methodical use of data and creativity.
A healthcare innovator, he is driving health transformation across the globe, delivering life changing, creative and sustainable ideas. Recognized as Elite 2020 Disrupter Award by premier global PM360 Magazine for his venture, Dr Harshit has addressed some of the biggest health challenges &ndash; Immunization, Vitamin D deficiency, Diabetes by creatively and innovatively using data. In his over 16 years of professional journey, he weaved together his domain expertise of medicine and his marketing acumen to come up with out-of-the box ideas and campaigns in the healthcare space.&nbsp;
For his pathbreaking work, he has been conferred with eminent industry awards and accolades -- Cannes lions Grand Prix for Good, India&rsquo;s first Black Pencil at D&amp;AD Awards, One Show&rsquo;s first ever Best of Discipline Award in Health, Wellness &amp; Pharma category, 40 under 40 APAC marketing-communications achievers, 2017 Most Influential Global Marketing Leaders of the Year by the World Marketing Congress to name a few. An accomplished speaker Harshit played a key role in making India win the first ever Black Pencil &ndash; the highest honor at D&amp;AD Awards through the Immunity Charm campaign, a brainchild of his.
He cut his teeth at big advertising agencies, including McCann where he held a series of positions including Country Head, Marketing Director &amp; Innovation Lead in Asia, Europe and Americas. Besides being a qualified physician &ndash; an MD from Chicago&rsquo;s Northwestern University, Dr Harshit holds an executive MBA from Indian Institute of Management, Lucknow and has also published a textbook in medicine.

Dr. Harshit Jain, Founder and CEO, Doceree

Nauman Ansari is a Managing Director and Global Head of Healthcare at Citi Commercial Bank. Nauman&rsquo;s career in banking spans over 20 years, and has been primarily focused on the Healthcare industry, where he has led a number of market-leading, transformative deals and developed a breadth of relationships across the sector. He joined Citi in 2023 from Evercore where he led the EMEA Corporate Debt Advisory team.&nbsp; Nauman is focused on leading a global team of bankers who provide banking services and solutions to mid-sized corporates across healthcare verticals. Services include but are not limited to advisory and execution on access to capital, mid-market M&amp;A advisory services, FX, domestic and international treasury management as well as trade and working capital solutions. After starting his banking career as a Medical Technology Healthcare Equity Analyst in New York, Nauman worked across multiple banking products and specializations, while gaining the majority of his experience in Leveraged and Acquisition Finance, at HSBC, Morgan Stanley and Bank of America. Earlier in his career Nauman was focused on North America, and over the past 15 years he spent the majority of his time with EMEA and Global clients, and on cross-border, often trans-Atlantic, transactions. Nauman has a BA from Boston College, an MBA from NYU&rsquo;s Stern School of Business and a Master&rsquo;s Degree in International Economics from Columbia University in New York. He is based in London.

Nauman Ansari, Head of Healthcare, Citi Commercial Bank

Read the latest Citi GPS report on the&nbsp;<a style="font-size: 14px;" href="https://www.citigroup.com/global/insights/citigps/future-of-healthcare" target="_blank" rel="noopener" data-link-source="tiny">Future of Healthcare</a>.&nbsp;
The average global citizen born today will live almost 30 years longer than one of their forebears born in 1950, one of humanity&rsquo;s most astonishing achievements. But the global healthcare system&rsquo;s vital signs have deteriorated recently.

Citi GPS: Future of Healthcare

Season 4

Following the Covid pandemic, the world has experienced a sharp rise in global digital interactions, from remote working and learning, to online shopping and telemedicine.&nbsp;

Good Things Happen, E7: The Health Tech Revolution

Adam Spielman, Head of Health, Citi Global Insights with &nbsp;Michael Farrell, CEO at ResMed and Carlos Nunez, CMO,&nbsp; discuss the impact of GLP-1s on Sleep Apnea companies.
Key topics:
<ul type="disc">
<li style="font-size: 16px;">How do sleep apnea patients who use GLP-1s behave differently from non-users?</li>
<li style="font-size: 16px;">How does this affect companies providing solutions for obstructive sleep apnea</li>
<li style="font-size: 16px;">To what extent is ResMed changing its strategy because of GLP-1s?</li>
<li style="font-size: 16px;">If GLP-1s do reduce obesity long term, what impact would there be?</li>
</ul>

Adam Spielman, Head of Health, Citi Global Insights with &nbsp;Michael Farrell, CEO at ResMed and Carlos Nunez, CMO,&nbsp; discuss the impact of GLP-1s on Sleep Apnea companies.
&nbsp;

Future of Healthcare & Wellness: The Impact of GLP-1s on Sleep Apnea

Adam Spielman, Head of Health and Consumer, Citi Global Insights and Dr. Jon Bloom, Founder and CEO, Podimetrics discuss the transformation of health and the move to business models that focus on prevention.
Key topics:
<ul type="disc">
<li>How can the U.S. healthcare system provide economic incentives for preventative care?</li>
<li>How does the &ldquo;Prevention as a Service&rdquo; business model work?</li>
<li>What the best way to genuinely help hard-to-reach people? Why are they hard to reach? &nbsp;</li>
<li>How does Podimetrics manage the tensions between &ldquo;consumer products&rdquo; and &ldquo;medical products&rdquo;.</li>
</ul>

Adam Spielman, Head of Health and Consumer, Citi Global Insights and Dr. Jon Bloom, Founder and CEO, Podimetrics discuss the transformation of health and the move to business models that focus on prevention.
&nbsp;

Future of Health & Wellness: New Business Models for Preventative Care

GLP-1 &lsquo;wonder-drugs&rsquo; have crashed into the collective consciousness in recent months. Claims about easy weight loss have clogged our social media feeds. A tribe of followers has emerged. A hype cycle has developed.
What&rsquo;s the substance behind the hype around these drugs--which have in fact been around for several years? And what impact could they have on the global battle against obesity and beyond, in places you might not have thought about yet?
In this Citi GPS report we&rsquo;ll look at some of these questions, laying out the scale of the global obesity problem, describing how GLP-1 drugs work, and examining their potential to be part of the long-term solution.&nbsp;
And we&rsquo;ll sketch out potential usage profiles and the resultant impacts across a range of sectors including healthcare, food and beverages and fashion.
We&rsquo;ll also hear from several experts to help present a rounded view of current thinking around GLP-1s and the way ahead.
It&rsquo;s clear that GLP-1s also have many profound medical benefits beyond reducing obesity.
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/6720fec253125d78914b4f79.png" alt="image of two infographics about GLP1: GLP-1s cut calorie intake leading to weight loss and GLP-1s help fight many deseases" width="834" height="325">
There is evidence that they can help with a range of chronic diseases, including cardiovascular and kidney disease. There are also suggestions they could have a role to play in treating dementia, and addictive behavior such as alcohol and nicotine abuse.&nbsp;
For some the jury is out on the long-term viability and desirability of GLP-1 drugs. This report is designed to bring academic rigor and insight, with an eye on commercial implications and impact, to this healthy debate.
&nbsp;

Download the full report on Obesity and Beyond now. 

The surprising reach of GLP-1s

GLP-1 &lsquo;wonder-drugs&rsquo; have crashed into the collective consciousness in recent months. Claims about easy weight loss have clogged our social media feeds. A tribe of followers has emerged. A hype cycle has developed.
What&rsquo;s the substance behind the hype around these drugs--which have in fact been around for several years? And what impact could they have on the global battle against obesity and beyond, in places you might not have thought about yet?
In this Citi GPS report we&rsquo;ll look at some of these questions, laying out the scale of the global obesity problem, describing how GLP-1 drugs work, and examining their potential to be part of the long-term solution.&nbsp;
&nbsp;

Obesity and Beyond

A new Super-Sector Analysis from a Citi Research team led by biotech analyst Yigal Nochomovitz offers an overview of antibody conjugates (ADC), which have become critical weapons in the war against cancer. ADCs combine the potency of chemotherapy with the precise cancer-targeting capabilities of monoclonal antibodies, resulting in a safer and more effective package. Sales of currently FDA-approved ADCs are seen growing to some $18 billion in the U.S. by 2030, up from around $5 billion in 2023.
That&rsquo;s impressive growth, but we think ADCs are still in their infancy. Technological advancements in ADC components are overcoming key limitations, allowing for further innovations, and big pharma companies are investing heavily through deal-making: in 2023 Pfizer acquired Seagen in a $43 billion deal, while Merck and Daiichi struck a $22 billion deal to collaborate.
An overview of ADCs
Introduced in the 1940s, chemotherapy offers a potent way to kill cancerous cells. But it&rsquo;s a very imprecise and toxic way to attack cancer, causing significant damage to noncancerous areas in the body. Monoclonal antibodies emerged in the 1980s as an advance in immunotherapy: the idea of using the body&rsquo;s immune system to attack cancer cells. Monoclonal antibodies are Y-shaped proteins that bind to cell surface markers primarily found on cancer cells and then can activate and guide the immune system straight to the cancer. The problem is that they don&rsquo;t offer direct, intrinsic cancer-killing capabilities.
Enter ADCs, which are monoclonal antibodies with very small amounts of highly potent chemotherapy chemically attached to them via a &ldquo;linker.&rdquo; (This attachment process is called &ldquo;conjugation,&rdquo; hence the name antibody drug conjugate.) Once locked onto a target protein, an ADC enters a cancer cell via a process called internalization. Its linker is then clipped by enzymes, freeing the cytotoxic payload and killing the cancer cell. The stability of the linker is a critical factor in ADC design: An unstable linker can release its payload prematurely, resulting in less drug reaching the tumor and more systemic toxicities.
<img src="/rcs/v1/media/citigpa/akpublic/storage/retrieveMediaFile/66e8140252652c711a1df32e.jpg" alt="" width="850" height="498">
&nbsp;
Target selection for ADCs is critical to avoid systemic toxicities. Another important consideration of target selection is internalization dynamics &mdash; higher ADC internalization rates mean larger amounts of cytotoxic payload delivered into tumor cells.
Typically, ADCs carry cytotoxic payloads too potent to be safely dosed systemically in their free form. These payloads are in the range of 100 to 1,000 times more potent than those used in small-molecule chemotherapies; a small amount of drug delivered directly to a target cell should be sufficient to induce cytotoxicity. In theory, ADCs can be far safer than chemotherapy and offer a wider &ldquo;therapeutic window&rdquo; in which dosages fall between ineffectiveness and excess toxicity.
ADCs&rsquo; potential
Since 2011, 11 ADCs have been approved and are currently on the market. Many approved and discontinued ADCs faced significant safety challenges, mainly due to limitations in the engineering of proteins, linkers, conjugation and chemo payloads. But all these technologies have improved dramatically in recent years, allowing for more stable ADCs and increased efficacy and safety. These improvements have advanced ADCs&rsquo; promise and accelerated research and investment interest from biotech and pharma. Eight of the 11 available ADCs were approved between 2018 and now, highlighting this acceleration.
A key commercial advantage of ADCs is their design complexity. They include multiple components, each with its own intellectual property, and so may be difficult for generic competitors to replicate. This could give ADCs long, uninterrupted commercial lives in comparison with easier-to-replicate oncology agents. Pfizer cited this dynamic as a key reason for the price it paid to acquire Seagen, and we expect ADCs to be a growing contributor to big pharma topline revenues.
R&amp;D efforts around ADCs remain very robust, with continued innovations. Hundreds of ADCs are now in development for oncology, and we believe continued innovation will be driven by substantial M&amp;A activity around them, as well as by collaborations and partnerships such as that between Merck and Daiichi. Other variations of ADCs are being rapidly commercialized and clinically developed, such as radiopharmaceuticals that use radioactive isotopes instead of cytotoxic payloads; immune-stimulating ADCs; and ADCs for use outside of cancer, such as treatment of autoimmune or infectious diseases.

Our new report, Citi&rsquo;s Global Healthcare Conference Innovation Series &ndash; Edition 1: Antibody Drug Conjugates, also includes a list of our favored ideas for investors seeking exposure to ADCs and an exploration of upcoming catalysts. It&rsquo;s available in full to existing Citi Research clients <a href="https://www.citivelocity.com/t/eppublic/3I6U7" target="_blank" rel="noopener" data-link-source="tiny">here</a>.

Citi’s Global Healthcare Conference Innovation Series

Antibody drug conjugates (ADCs) are becoming critical new weapons in the war against cancer. Ahead of December's Global Healthcare Conference, Citi Research kicks off a series of looks at healthcare innovations with an overview of ADCs, which combine the potency of chemotherapy with the precision of monoclonal antibodies in a single therapeutic package.

Antibody Drug Conjugates

In this episode, healthcare analysts Geoff Meacham and Joanne Wuensch chat with Lucy Baldwin about developments in their respective sectors.<o:p></o:p>

E17: Dawn of a Healthcare Revolution?

A series of Citi's thematic content around healthcare.&nbsp;

Healthcare 

As we prepare for our 2024 Citi Global Healthcare Conference in Miami on December 3–5, we review key topics across our collective healthcare coverage.<o:p></o:p>Key Takeaways:<o:p></o:p><ul style="list-style-type:disc;"><li>GLP-1s are just getting started, with both positives and negatives across subsectors<o:p></o:p></li><li>Trump 2.0 could have a big impact on Health Tech and Distribution via tariffs, drug pricing changes, and government insurance payor mix implications<o:p></o:p></li><li>The outlook is generally favorable for M&amp;A and capital raisings, with a few caveats<o:p></o:p></li></ul><h2>GLP-1 market still in the early innings<o:p></o:p></h2>Weight loss of 10% to 15% in non-diabetic populations could drive dramatic uptake of GLP-1 drugs. Based on our conversations with endocrinologists, not all patients are going to need as significant a weight response as is typical from GLP-1 tirzepatide, especially in the overweight category (body mass index between 25 and 30). While we still see a robust market for weekly injectables such as tirzepatide, drugs taken orally could be a “game changer” according to those we spoke to. Orforglipron is being developed by Lilly, with Phase 3 clinical trial data coming in mid-2025, and offers broad commercial potential.<o:p></o:p>The total addressable market (TAM) for obesity and diabetes is large: We model ~$100 billion by 2030 in aggregate across Lilly’s portfolio (tirzepatide and orforglipron), while the 2030 Bloomberg consensus estimate for Novo Nordisk’s Ozempic and Wegovy is at ~$42 billion. We think this market is still in its nascency, and undervalued by Wall Street.<o:p></o:p>Ultimately, we see GLP-1 as still in its early innings, with strong script growth and continued debate around availability, a multitude of upcoming potential approvals for indication expansions such as sleep apnea and heart failure, and several other indications — such as Alzheimer’s disease and hypertension — in-clinic or potentially on the docket.<o:p></o:p><h2>Secondary implications from GLP-1s<o:p></o:p></h2><h4>Mixed for MedTech<o:p></o:p></h4>Moving to secondary implications, MedTech investors have dealt for more than a year with questions about GLP-1s’ potential impacts on device utilization and TAMs. But today most of our conversations about GLP-1s are limited to diabetes stocks, a sign that potential headwinds to medical-device utilization have been put into proper perspective. Data about GLP-1s supported a change in the obesity-treatment paradigm, but not a sea change in medical devices used for progressive disease states. That fits our view that GLP-1s might in fact be beneficial in getting patients into surgeries that might not have been possible at higher BMIs.<o:p></o:p>Ultimately, we see diabetes devices as most exposed to GLP-1 adoption, but don’t anticipate GLP-1 therapies will have any material impact on makers of continuous glucose monitors (CGMs) or insulin pump manufacturers. GLP-1s delay the time to progression of type 2 diabetes, but don’t stop the progressive nature of the disease. Even a delay to insulin therapy still leaves a very large patient pool to transition to adopting insulin pumps. We also see CGMs as remaining an important part of the diabetes-treatment puzzle.<o:p></o:p>Another area where we’ve heard worries about GLP-1 impacts on device adoption is orthopaedics, with some thinking that patient weight loss might have a negative impact on the number of orthopaedic procedures. But data suggest a potential positive impact: GLP-1s can bring patients back into the surgical pool by lowering BMIs, osteoarthritis isn’t cured by weight loss, and patients who lose weight may become more active, potentially increasing sports-related injuries.<o:p></o:p><h4>Mostly positive for Health Tech and Distribution<o:p></o:p></h4>Diversified drug distributors’ revenue and operating income are directly tied to GLP-1 sales, with distributors making money by buying in bulk from manufacturers at a discount and selling to pharmacies and providers at less of a discount. That said, GLP-1s are highly priced branded drugs, making the spread between the buy-side and sell-side discounts very thin, with our estimate at 0.2%. GLP-1s are also more expensive to distribute than typical branded drugs as they require higher-cost cold-chain (temperature-controlled) distribution. This has led to a limited impact on distributors’ operating income.<o:p></o:p>Looking ahead, GLP-1s will be much more impactful once the supply/demand imbalance starts to correct and new products are introduced, likely starting in 2026 at the earliest. At that point, manufacturers will start to care about the channel and be willing to give up some margin so that low-margin mail distribution doesn’t dominate distribution. On the downside, rapid adoption of GLP-1s could potentially constrain home health markets, significantly reducing the incidence/prevalence of diabetes and obstructive sleep apnea, limiting demand for supplies and equipment.<o:p></o:p><h2>An IRA refresher — stifling of innovation the biggest concern&nbsp;<o:p></o:p></h2>In looking at the impacts of the Inflation Reduction Act (IRA), over the past year we’ve seen the industry accelerate R&amp;D capital allocation away from chemically derived small molecule drugs — comprising most available medications — toward biologics derived from living sources, as well as rare disease areas, vaccines and new therapeutic modalities. For some context on this trend, as we pointed out in an August 2023 report:<o:p></o:p>The IRA allows the U.S. government for the first time to set price through “negotiation”, beginning in 2026. Small molecules synthesized through medicinal chemistry will be up for negotiation with at least a 25% list price reduction once they have been on the US market for 9 years with larger discounts applied for drugs that have been on the market for longer. Negotiations for biologic drugs can begin after 13 years on the market.<o:p></o:p>Our analysis points to the Medicare Part D price cuts announced in August and to be implemented in 2026 as baked into consensus. The next round of negotiations is unlikely to be easier given what the government has learned from the first round. Applying these price cuts to the likely 2027 drug list implies group revenue pressures ranging from around 1% to around 10% for affected companies, which we see as a mostly manageable negative. The key debate will be what level of offset (positive for drug manufacturers) emerges from (1) lower rebates, (2) Medicare coverage gap, or “donut hole”, discounts abating, and (3) increased utilization given patient out-of-pocket costs are to be capped at $2,000. But most concerning is the long-term impact of the IRA on innovation.<o:p></o:p>As for the effects of the U.S. election, Trump has indicated that many aspects of the IRA, including drug price negotiations, could be repealed under his second administration. But we note that he hasn’t been vocal on this topic and his campaign articulated no position on such negotiations. Repealing this aspect of the IRA would be a politically unfavorable move given the support it enjoys among Republican constituents. The Republic party platform lists affordable healthcare and lowering prescription-drug prices as key commitments, and Trump advocated for international reference pricing during his first term.<o:p></o:p><h3>Post-election implications for Health Tech &amp; Distribution<o:p></o:p></h3>Sticking with election implications, the Health Tech &amp; Distribution names we cover tend to be well insulated from political vagaries. Within Health Tech, there tends to be bipartisan support for making healthcare more efficient via technology, transparency and new payment modalities. Within distribution, drug utilization is more dependent on demographics and drug innovation than on specific policies.<o:p></o:p>That said, there are three areas where Trump 2.0 policies could have an outsized impact on our coverage: tariffs, drug pricing and payor mix.<o:p></o:p>1. Tariffs on China will have the most direct impact on distributors that manufacture private-label products in China or partner with original equipment manufacturers in China to do so. That said, we expect the effect to be minimal given the strengthening of supply chains post-pandemic to avoid being overindexed to one geography.<o:p></o:p>2. Two potential changes to the IRA — Medicare Part D benefit design changes and Medicare drug-price negotiations — could affect distributors. The IRA’s cap on out-of-pocket costs may encourage increased utilization of high-priced specialty drugs, which would be positive for distributors. On the subject of Medicare drug-price negotiations, lower list prices are generally negative for distributors, whose discounts are based off these prices.<o:p></o:p>3. Regarding payor mix, Republican administrations have traditionally been positive for Medicare Advantage and negative for Medicaid and Affordable Care Act (ACA) exchanges. Potential policy changes could encourage accelerated Medicare Advantage enrollment, while the granting of more state waivers to impose work requirements for Medicaid eligibility could further constraint Medicaid enrollment. Enhanced ACA exchange subsidies are expected to expire at the end of 2025; not extending them would slow enrollment in the exchanges.<o:p></o:p><h2>Healthcare could see a pickup in M&amp;A<o:p></o:p></h2>We expect the Healthcare sector to benefit from economic tailwinds associated with lower interest rates and inflation and the likelihood that few major changes emerge to healthcare policy. The possibility of new leadership at the Federal Trade Commission means we wouldn’t be surprised to see a step-up in business development and M&amp;A activity, particularly for companies in “hot” markets such as metabolic disease, or those with disruptive potential in large therapeutic categories such as Immunology &amp; Inflammation and hematology/oncology.<o:p></o:p>From the standpoint of Health Tech and Distribution, we expect a more favorable M&amp;A/antitrust environment in 2025, which will lead to moredistributor verticalization (i.e., companies take ownership of the process for greater supply-chain control) and Health Tech consolidation. Distributors have been busy acquiring stakes in management services organization (MSO) assets as they seek to integrate into the profitable community-provider channel, and we think Trump’s victory lessens the probability of antitrust issues here. We also expect distributors to acquire biopharma solutions to better serve upstream partners such as drug manufacturers.<o:p></o:p>Employers, health plans and providers remain awash in health-tech point solutions and are looking to consolidate their vendor relationships — this underpins our expectations for M&amp;A in that space.<o:p></o:p><h2>Capital market activity should pick up, too, with some political risk<o:p></o:p></h2>Capital markets began to see improving sentiment for small/mid-cap biotech late this year with a bout of successfully launched IPOs. Before the election, this seemed to bode well for 2025, but post-election volatility related to Trump’s nomination of Robert F. Kennedy Jr. as secretary for the Department of Health and Human Services adds some risk to the capital-markets outlook, particularly if this volatility extends into the new year. We anticipate that 2025 should deliver an increase in activity in small/mid-cap biotech capital markets; the question is: How much?<o:p></o:p>Capital markets have dried up for health tech, with only two IPOs and nine follow-ons since 2022. We do expect a meaningful pickup in activity in 2025, but believe the market will still demand profitability or a clear path to it with a demonstrable ability to scale. Newer companies that are further away from profitability will likely find the market less receptive and stay private longer or exit via M&amp;A.<o:p></o:p>We expect sentiment to improve for Biopharma sector M&amp;A, with IPOs the biggest swing factor: There’s still a backlog of private companies that have been on the back burner heading into 2025, which could spur some momentum in those markets. However, long-term rates are likely higher given potential tariffs and policies that could give rise to inflation; this could make it more difficult for some smaller biotechs to raise capital despite this healthy backlog.<o:p></o:p><h2>The China outlook — early signs of stimulus impact, but 2025 visibility limited<o:p></o:p></h2>We see Life Science Tools as the most China-sensitive healthcare sector; much of the recent focus for investors in this sector has been the broader China outlook, with questions about the level of activity seen in the quarter, equipment exposure and the trajectory/timeline of an expected recovery into Trump’s second term.<o:p></o:p>Details of China’s stimulus program have driven some incremental confidence about its economic recovery; moving closer to year end, some companies have begun to see an increase in requests for proposals, orders and tenders related to the stimulus program, though they remain cautious about fiscal 2025 given prior market volatility and stimulus uncertainties.<o:p></o:p>We don’t expect a major escalation in trade conflicts via retaliatory tariffs under Trump 2.0. We see Trump’s talk of a 60% tariff as more of a bargaining chip than a real risk, with ~15% a more realistic assumption; this would shave ~1.5% off China’s GDP. If China focuses more on consumer-related stimulus, sentiment could improve along with general economic spend, which could impact Biopharma and Biotech sector sentiment. Life sciences companies broadly manufacture products in China that are sold there, with limited exposure to imports from the U.S.<o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p><o:p></o:p>

Our new report, Citi’s 2024 Global Healthcare Conference: Key Debates Across the Healthcare Universe, also includes analysis of key trends’ implications for companies we cover, as well as a review of our most- and least-favorite names. It’s available in full to existing Citi Research clients <a href="https://www.citivelocity.com/t/eppublic/3RTx1">here</a>.<o:p></o:p>

As we prepare for our 2024 Citi Global Healthcare Conference in Miami on December 3–5, we review key topics across our collective healthcare coverage.<o:p></o:p>

Citi’s 2024 Global Healthcare Conference: Key Debates

Transcript

Citi’s Global Healthcare Conference is under way, and there’s no shortage of topics for discussion. In this episode, healthcare analysts Geoff Meacham and Joanne Wuensch chat with Lucy Baldwin about developments in their respective sectors, including policy implications from the incoming Trump administration, new indications for GLP-1 drugs, upbeat outlooks for innovation and M&amp;A, demographics as a driver of demand, and the impact of China.This podcast contains thematic content and is not intended to be investment research. Nor does it constitute financial, economic, legal, tax or accounting advice. This podcast is provided for information purposes only and does not constitute an offer or solicitation to purchase or sell any financial instruments. The contents of this podcast are not based on your individual circumstances and should not be relied upon as an assessment of suitability for you of a particular product, security, or transaction. The information in this podcast is based on generally available information and, although obtained from sources believed by Citi to be reliable, its accuracy and completeness are not guaranteed. Past performance is not a guarantee or indication of future results. This podcast may not be copied or distributed, in whole or in part, without the express written consent of Citi. © 2024 Citigroup Global Markets Inc. Member SIPC. All rights reserved. Citi and Citi and Arc Design are trademarks and service marks of Citigroup Inc. or its affiliates and are used and registered throughout the world.

Lucy Baldwin is a Managing Director and Global Head of Citi Research. She is responsible for managing Citi’s global independent research across all asset classes. Lucy joined Citigroup in April 2021 from Credit Suisse, where she was Global Head of Equity Sales. Prior to Credit Suisse, she was at Bank of America as Head of European Equity Sales (2015-2019), and at Goldman Sachs as a Director of European Equity Research and in a variety of research analyst roles (2006-2015). Lucy started her career at Cazenove as an equity research analyst covering the building materials sector. She graduated from the University of Birmingham in Economics. Lucy serves as a member of Council for the University of Birmingham and sits on the Investment Sub-committee. Additionally, she is a member of the Advisory Council for the Mossavar-Rahmani Centre for Business and Government at the Harvard Kennedy School.

Lucy Baldwin, Head of Citi Research

Geoff Meacham, Ph.D., is a Managing Director at Citi Research, covering both the U.S. Pharmaceuticals and Biotechnology sectors. Prior to joining Citi in September 2024, Geoff covered the Pharma / Biotechnology sectors for 20+ years at Bank of America and Barclays, as well as JP Morgan Chase and UBS. Prior to joining Wall Street, he conducted R&amp;D at Solvay Pharmaceuticals. Geoff has a Ph.D. in Molecular and Cellular Biology from University Alabama-Birmingham (UAB) and a B.S. in Biology/Microbiology from the University of Georgia.

Geoff Meacham, Pharmaceuticals & Biotechnology Analyst

Joanne Wuensch is a Managing Director at Citi Research covering Medical Technology and Hospital Supplies companies. Prior to joining Citi in January 2020, she spent 18 years at BMO Capital Markets covering MedTech with a focus on the cardiology, diabetes, orthopaedic, ophthalmology and respiratory sectors. She also spent time at ABN Amro, ING Barings, UBS Securities and JP Morgan. Joanne has a MPA from New York University focusing on public finance including hospital finance and a BA degree in psychology from the University of Delaware.