Healthcare & Life Sciences Industry Overview
M&A Environment1
There have been a little over 100 M&A transactions in the healthcare & life sciences (HCLS) industry since the beginning of 2019, worth roughly $101.8 billion, compared to $241.7 billion for all of 2018. 27 of these deals were executed by private equity groups.
Notable transactions include the acquisition of Celgene Corp. by Bristol-Myers Squibb, the acquisition of Loxo Oncology by Eli Lilly, and the acquisition of Verity Health System of California by The KPC Group.
Public Company Performance1
Stock prices declined for many HCLS companies during the past three months, more so than the S&P 500 over the same period. In fact, the Harris Williams HCLS Composite Index declined 3.6%, while the S&P declined 0.3%. Notable exceptions to this trend include dental products (increased 13.2%), home care, hospice, and home infusion (increased 9.8%), long-term care (increased 9.3%), healthcare staffing (increased 9.1%), and life science tools (increased 8.2%).
Over the past 12 months industry-wide growth also saw declining prices, with the HCLS Composite Index showing a 3.2% decrease. At the category level, provider-based services stock prices grew by 15.2% on average over the past 12 months, followed by payor, provider and pharmacy support services at 7.2% and products and devices at 0.4%. Specific stock price growth leaders over the past year include home care, hospice and home infusion (71.5%), long-term care (59.0%), contract research organizations (21.5%), and specialty managed care (20.9%).
Industry News
The Urban Institute recently found that Medicaid and Medicare are more successful at limiting costs per-beneficiary than private insurers over the past ten years. Total spend for Medicaid and Medicare increased more than private insurance as the number of Medicaid and Medicare enrollments increased drastically. The Centers for Disease Control and Prevention recently announced that e-cigarettes were the primary driver of a 38% increase in the number of high school students using tobacco. E-cigarette use surpassed cigarette use among high school students in 2013 and the FDA is exploring new ways to limit sales to young people. Johnson & Johnson, a large health products manufacturer, announced that it would acquire Auris, a robotics surgery firm, for $3.4 billion. The deal is expected to close by the end of Q2 2019.
M&A Overview1
Announced Healthcare & Life Sciences M&A
Healthcare & Life Sciences M&A Trends
Announced Private Equity M&A Activity
Debt Markets Overview
Key Credit Statistics3
Select Healthcare & Life Sciences Debt Offerings4
(by deal amount)
Public Markets Overview1
Key Trading Statistics
Public Company Sector Performance
(12-month % change in stock price)
Equity Markets Overview
Healthcare & Life Sciences Industry Stock Performance1
Top Equity Offerings2
(by proceeds)
M&A Transactions
Announced U.S. Healthcare & Life Sciences M&A1
What We’ve Been Reading
Insurance | Medicare, Medicaid Contain Costs Better than Private Insurers, Study Says
A recent study by the Urban Institute found that Medicare and Medicaid are more successful at keeping spending per-beneficiary low. Over the last ten years, spending per-beneficiary for Medicaid and Medicare increased 2.4% and 2.1%, respectively, while spending increased 4.4% annually for private plans. However, because enrollment in Medicaid and Medicare increased drastically, overall spend for these programs increased more than the spend of commercial plans. The primary drivers of the increases were also different between Medicare and commercial plans. Spending on drugs was the primary driver of Medicare spend growth, while hospital care was the primary driver for commercial insurance.
Health and Science | CDC Blames Spike in Teen Tobacco Use on Vaping
The Centers for Disease Control and Prevention recently announced that the number of high school students using tobacco increased 38% over the past year and e-cigarettes were the primary driver of the increase. The use of e-cigarettes among high school students increased by 78%, while other tobacco products, such as cigarettes, remained flat. The use of e-cigarettes by high school students has grown sharply since 2011, and surpassed cigarettes in 2013. Surgeon General, Jerome Adams, declared the use of e-cigarettes an epidemic. The FDA is exploring new ways to address the problem and limit sales to young people. Potential regulations include penalties for manufacturers and retailers that violate sales and marketing policies and the FDA is also exploring limiting sales of e-cigarette products to age-restricted stores.
M&A | Johnson & Johnson to Buy Auris Health for $3.4 Billion
Johnson & Johnson, one of the world’s largest health products manufacturers, announced in February that it would acquire Auris Health for $3.4 billion cash. The acquisition of Auris, a robotics surgery firm, is part of a concerted strategy by J&J to improve performance through acquisitions and divestitures. J&J divested its LifeScan diabetes business in 2018 for $2.1 billion. The Company’s medical device business unit has underperformed recently, with sales down 4% to $6.7 billion in Q4 2018. The acquisition is part of an effort by J&J to build a digital ecosystem to guide surgeons and improve patient outcomes. The acquisition is expected to close by the end of the Q2 2019.
Public Comparables
Payor, Provider, & Pharmacy Support Services1
Products & Devices1
Provider-Based Services1
1. FactSet
2. Company Filings
3. S&P
4. PNC Debt Capital Markets
The information and views contained in this report were prepared by Harris Williams LLC (“Harris Williams”). It is not a research report, as such term is defined by applicable law and regulations, and is provided for informational purposes only. It is not to be construed as an offer to buy or sell or a solicitation of an offer to buy or sell any securities or financial instruments or to participate in any particular trading strategy. The information contained herein is believed by Harris Williams to be reliable but Harris Williams makes no representation as to the accuracy or completeness of such information. Harris Williams and/or its affiliates may be market makers or specialists in, act as advisers or lenders to, have positions in and effect transactions in securities of companies mentioned herein and also may provide, may have provided, or may seek to provide investment banking services for those companies. In addition, Harris Williams and/or its affiliates or their respective officers, directors and employees may hold long or short positions in the securities, options thereon or other related financial products of companies discussed herein. Opinions, estimates and projections in this report constitute Harris Williams’ judgment and are subject to change without notice. The securities and financial instruments discussed in this report may not be suitable for all investors and investors must make their own investment decisions using their own independent advisors as they believe necessary and based upon their specific financial situations and investment objectives. Also, past performance is not necessarily indicative of future results. No part of this material may be copied or duplicated in any form or by any means, or redistributed, without Harris Williams’ prior written consent.
Harris Williams LLC is a registered broker-dealer and member of FINRA and SIPC. Harris Williams & Co. Ltd is a private limited company incorporated under English law with its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales (registration number 07078852). Harris Williams & Co. Ltd is authorized and regulated by the Financial Conduct Authority. Harris Williams & Co. Corporate Finance Advisors GmbH is registered in the commercial register of the local court of Frankfurt am Main, Germany, under HRB 107540. The registered address is Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany (email address: hwgermany@harriswilliams.com). Geschäftsführer/Directors: Jeffery H. Perkins, Paul Poggi. (VAT No. awaited). Harris Williams is a trade name under which Harris Williams LLC, Harris Williams & Co. Ltd and Harris Williams & Co. Corporate Finance Advisors GmbH conduct business.