Philadelphia-based Janney Capital Markets has added a bio industry analyst and investment banking team, hiring two investment bankers and three stock analysts from bankrupt rival ThinkEquity.
The firm had pulled back from the sector in the mid-2000s. Why return now? "Philadelphia and the surrounding area is a hub for healthcare companies," and "it's an area of investment banking where collectively think we can compete with the right team," said Chris White, head of investment banking at Janney, an arm of customer-owned Penn Mutual Life Insurance Co.
Where's he looking for deals? "Big pharma companies have really outsourced their new product development to biotech companies. They're reducing R&D budgets and letting somebody else do the hard work in clinical development." Those smaller firms -- which have proliferated as university researchers have started small firms in suburban office centers along US 202 west of Philadelphia and US 1 north of Princeton -- are potential deals for Janney.
"This was a decent year for IPOs in this sector; there've been 13 IPOs in healthcare, as we define it. A couple of biotech companies, nine specialty pharmaceutical comanies. About 12% of all (U.S.) capital raises and IPOs have been for healthcare companies, which is roughly the same proportion as healthcare in the S&P 500," White said. By contrast, "oil and gas is only about 8 percent of the volume. Biotech is doing well."
The 2010 Obama healthcare reform initially "stifled" investment in some healthcare sectors, but now that "we have some clarity" on how it's going to work, hospitals and other drug and therapy customers are expected to boost spending again, White said. And "new drug development and new device development" grinds on.
Janney bulked up its investment banking and research arms after the 2008 recession, when Wall Street firms laid off and consolidated. How's that going? "Our fixed income group had a great year. Investment banking had an okay year," though some transaction closings -- and banker paydays -- have been delayed to 2013 or later, White acknowledged.
The firm is weighing further expansion. "We're opportunistic," White said. "Penn Mutual, as our owner, is patient," which lets Janney invest "while everyone else is coming apart." The opportunity to recruit a whole team from ThinkEquity made expansion easier: "It would be very difficult if We had tried to do this piecemeal. We got a unified team that worked well together for a couple of years."
The team includes:
- Spencer Nam, medical devices, diagnostics research. Past head of research at Summer Street Research Partners before ThinkEquity, the Harvard grad is based in Boston.
- Jim Molloy, specialty pharma. Previously an Oppenheimer analyst, he's also based in Boston.
- Dr. Kimberly Lee, biotech. A former Ob/Gyn practicioner and orthopedic researcher, the Stanford U grad and Jeffries veteran will work from San Francisco
Janney also picked up a couple of New York-based Think Equity investment bankers. Josh Muntner also worked at Oppenheimer, Pru and CIBC. Richard Page, a Haverford College grad, did "pharmaceutical product partnering " at JSB-Partners, among other past posts.