Healthcare companies large and small are gathered in San Francisco this week for the annual JP Morgan Chase & Co.’s conference, including Triangle representatives. A big year is expected for biotech deals this year, and the CEO of Durham-based Chimerix, when was one of several Triangle firms to go public in 2013, says his fellow CEOs are “cautiously giddy.”

This year’s event is expected to be the biggest in its history, reflecting the record year left behind and optimism for the year ahead.

Ken Moch, CEO at Chimerix which is a developer of antiviral drugs, said he expects attendees to be “cautiously giddy.”

“I’ve been going a long time and I’ve been through moods where everybody wants to kill themselves and everybody is giddy,” Moch said. “Everybody wants to see how this year starts off.”

The Triangle and North Carolina make up one of the nation’s largest biotechnology industry clusters. And the collective eyes of the state’s industry are aimed westward this week.

Joanne Rhode of Raleigh-based startup Axial Exchange, told WRALTechWire that the conference “becomes center of universe for a week, so I’m able to meet customers, potential partners and investors all in one spot.”

Entering the New Year, healthcare companies with deep pockets and shallow product pipelines are poised for a busy year of acquisitions, with biotechnology firms likely to be among the most prominent targets even as they trade at record highs, according to Bloomberg News.

300+ Companies

More than 300 companies will present to thousands of investors about the year ahead. Meanwhile, business development executives will be meeting in hotels surrounding the conference that began Monday.

Large drugmakers from Merck & Co. to Bristol-Myers Squibb Co. are dealing with patent expirations on top medicines and cutting researchers as they refocus their product development strategies. At the same time, prices on targets are expected to stabilize after last year’s run-up, said Jeff Stute, JPMorgan’s head of health-care investment banking.

“We see M&A in the health-care sector being up materially in 2014 at all size levels and across all subsectors,” Stute said in a telephone interview. “Buyers and sellers will get comfortable with the new reality of where assets are priced.”

Biotechnology companies in particular had a standout 2013, with the Nasdaq Biotechnology Index gaining 66 percent, topping a 30 percent increase for the Standard & Poor’s 500, and closing yesterday at a record high of 2,449.25. The industry saw the most IPOs since 2000, as investors were drawn to the prospects of revenue growth in an industry seeing a record number of new drug approvals over two years.

Generic Competition

That’s against a backdrop of patent expirations at some of the industry’s biggest companies. More than $60 billion in revenue was lost by the pharmaceutical industry to cheaper generic competition from 2010 to 2012, according to research by analysts at Bloomberg Industries. Another $50 billion may be lost in the next five years.

In response, companies have cut jobs, reorganized units and, in some cases, sold them to save money. That’s boosted cash in hand for many, opening the way for acquisitions.

Deal activity has already taken off in 2014. This week, General Electric Co. agreed to pay about $1.06 billion for medical equipment businesses from Thermo Fisher Scientific Inc., while Forest Laboratories Inc. said it will buy Aptalis Pharma for $2.9 billion to add treatments for gastrointestinal ailments and cystic fibrosis. New York-based Forest’s stock rose 18 percent, the most in at least 33 years.

“Based on the strong stock price reaction to strategic M&A announcements, shareholders are telling companies they want them to do M&A,” Stute said. “Companies are feeling pressure to evaluate M&A opportunities more aggressively in part because their stocks have underperformed competitors who have engaged in material strategic acquisitions.”

Adding $85 Billion

Perhaps the most dramatic example is Gilead Sciences Inc.’s purchase of hepatitis C drug maker Pharmasset Inc. for $11 billion. Since the deal was announced in November 2011, Gilead’s stock has almost tripled, adding almost $85 billion in market value and making the Foster City, California-based drugmaker the biggest biotechnology company in the world. The drug Gilead gained in the deal, Sovaldi, was approved by the U.S. Food and Drug Administration in December and is projected to generate $2.5 billion in revenue this year.

Sovaldi’s approval capped a year of 27 clearances at the FDA that included several under a new “breakthrough therapy” designation prioritizing reviews of promising medicines. That followed a record 2012 in which 39 novel drugs were approved, the most in 15 years.

FDA Shift

“The regulatory environment has shifted to being somewhat more accommodating than it was before,” Ron Cohen, chief executive officer of Acorda Therapeutics Inc., said in a telephone interview. “The feeling is the FDA is not being as much of a drag to progress, and in some cases they may actually be potentiating bringing innovation to market.”

Cohen cited the breakthrough therapy track as an example of the FDA’s willingness to speed important drugs through the approval process, part of a movement on the agency’s part to give patients and their physicians more of a say in weighing medicines’ risks and benefits.

Cancer drugs helped boost 2012 approvals to their record and were among those granted breakthrough designation last year, including Johnson & Johnson and Pharmacyclics Inc.’s Imbruvica and Roche Holding AG’s Gazyva, both for blood cancer.

Medicines for oncology as well as for rare diseases are among the most coveted by acquirers, Stute said. The drug industry’s biggest companies are seeking ways to plug revenue holes left by patent expirations on some of their top products, including New York-based Pfizer Inc.’s Lipitor and Merck’s Singulair.

Looking to Buy

Bristol-Myers, which had $6.3 billion in cash as of Sept. 30, has said it will be aggressive in dealmaking, looking for purchases in cancer, virology and specialty drugs. Merck, the second-largest U.S. drugmaker, also has said it plans to invest heavily in M&A. With $18.2 billion in cash and equivalents as of Sept. 30, the company recently overhauled its research and development activities, cutting programs and saying it would look externally to fill its pipeline.

Other areas of health-care are also likely to see more deals, including diagnostics, Stute said.

“I actually don’t think there’s a subsector within health care that is likely to be quiet,” he said. “We expect M&A is going to be the theme that people are talking about more than anything this year” at the JPMorgan conference.