Healthcare & Life Sciences Industry Overview

Our Latest Insights | Behavioral Telehealth: Identifying Growth Assets in a Promising Segment

As compelling use cases continue to emerge across the healthcare value chain, companies focusing on using technology to improve patient care are poised for significant growth. That’s especially true for those pioneering the use of telecommunications technology to provide care remotely. In this article, senior Harris Williams professionals discuss current trends in what’s known as behavioral telehealth—the area of the broader telehealth sector that’s focused on mental health services—and the opportunities they create for strategic and financial buyers.

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M&A Environment1

There have been a little over 818 M&A transactions in the healthcare & life sciences (HCLS) industry since the beginning of 2019, worth roughly $187.5 billion, compared to $241.7 billion for all of 2018. 159 of these deals were executed by private equity groups.

Notable recent transactions include the acquisition of the Worldwide Rights to Otezla Celgene Corporation by Amgen, Inc. (NasdaqGS: AMGN), Takeda Pharmaceutical – Xiidra Business by Permira Advisors, BlueROck Therapeutics by Bayer Aktiengesellschaft (DB: BAYN), and Cavion LLC by Jazz Pharmaceuticals (NasdaqGS: JAZZ).

Public CompanyPerformance1

Stock prices increased for many HCLS companies during the past three months. In fact, the Harris Williams HCLS Composite Index increased 6.9%, while the S&P increased 4.9%. Notable sector increases include contract pharma manufacturing (increased 37.7%), assisted living (increased 30.2%), and specialty pharmacy (increased 26.9%).

Over the past 12 months industry-wide stock prices have experienced slight decreases as a whole, however the HCLS Composite Index shows a mild decrease of 10.8%. At the category level, products and devices grew by 8.2% on average over the past 12 months, followed by provider-based services declining 8.0%, and payor, provider and pharmacy support stock prices declining 9.6%. Specific stock price growth leaders over the past year include medical devices and products (24.4%), specialty managed care (20.6%), and home care, hospice, and home infusion (20.4%).

Industry News

Healthcare stocks rallied this month as strong earnings reports from UnitedHealth Group Inc. and Johnson & Johnson provided a much-needed shot of optimism for the sector. Both companies reported stronger-than-expected quarterly results and raised their forecasts, offering at least a brief respite for a sector that has been battered by political headwinds more than a year ahead of the 2020 election. Healthcare stocks have been among the worst-performing sectors in the S&P 500 this year, rising just 5.7%, compared with a nearly 20% gain for the index. Meanwhile, vowing to protect Medicare with “every ounce of strength,” President Donald Trump last week spoke to a cheering crowd in Florida. But his executive order released shortly afterward includes provisions that could significantly alter key pillars of the program by making it easier for beneficiaries and doctors to opt out. The bottom line: The proposed changes might make it a bit simpler to find a doctor who takes new Medicare patients, but it could lead to higher costs for seniors and potentially expose some to surprise medical bills, a problem from which Medicare has traditionally protected consumers.

Drugmakers fought hard against California’s groundbreaking drug price transparency law, passed in 2017. Now, state health officials have released their first report on the price hikes those drug companies sought to shield. Pharmaceutical companies raised the wholesale acquisition cost of their drugs by a median of 25.8% from 2017 through the first quarter of 2019, according to the Office of Statewide Health Planning and Development. Generic drugs saw the largest median increase of 37.6% during that time. By comparison, the annual inflation rate during the period was 2%.

M&A Overview1

Announced Healthcare & Life Sciences M&A

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Healthcare & Life Sciences M&A Trends

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Announced Private Equity M&A Activity

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Debt Markets Overview

Key Credit Statistics2

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Select Healthcare & Life Sciences Debt Offerings3

(by deal amount)

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Public Markets Overview1

Key Trading Statistics

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Public Company Sector Performance

(12-month % change in stock price)

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Equity Markets Overview

Healthcare & Life Sciences Industry Stock Performance1

 

Top Equity Offerings4

(by proceeds)

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Top Equity Offerings4

(by proceeds)

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M&A Transactions

Announced U.S. Healthcare & Life Sciences M&A1

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What We’ve Been Reading

Markets | Healthcare Stocks Get a Welcome Respite

"Healthcare stocks rallied this month as strong earnings reports from UnitedHealth Group Inc. and Johnson & Johnson provided a much-needed shot of optimism for the sector. Both companies reported stronger-than-expected quarterly results and raised their forecasts, offering at least a brief respite for a sector that has been battered by political headwinds more than a year ahead of the 2020 election. Healthcare stocks have been among the worst-performing sectors in the S&P 500 this year, rising just 5.7%, compared with a nearly 20% gain for the index. Although healthcare stocks are often considered defensive investments that tend to hold up during economic turmoil, they can be vulnerable to any perceived changes in government policy. Some of investors’ recent squeamishness coincides with a climb in the polls by the progressive presidential candidate Elizabeth Warren. Daniel Clifton, Strategas’s head of policy research, noted the stocks stabilized in late spring and early summer when former Vice President Joe Biden entered the race as the favorite but have since stumbled. Mr. Biden, who is considered a moderate Democrat, has supported building on the Affordable Care Act with a public health-insurance option, such as Medicare, which would compete with private insurers. Investors have to assess how likely it is that the major healthcare changes discussed in the Democratic primary will actually be made into law, said Amy Kong, senior portfolio manager at Fiduciary Trust Company International."

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Pharma | California’s New Transparency Law Reveals Steep Rise in Wholesale Drug Prices

"Drugmakers fought hard against California’s groundbreaking drug price transparency law, passed in 2017. Now, state health officials have released their first report on the price hikes those drug companies sought to shield. Pharmaceutical companies raised the “wholesale acquisition cost” of their drugs — the list price for wholesalers without discounts or rebates — by a median of 25.8% from 2017 through the first quarter of 2019, according to the Office of Statewide Health Planning and Development. Generic drugs saw the largest median increase of 37.6% during that time. By comparison, the annual inflation rate during the period was 2%. California’s new drug law requires companies to report drug price increases quarterly. Only companies that met certain standards — they raised the price of a drug within the first quarter and the price had risen by at least 16% since January 2017 — had to submit data. The companies that met the standards were required to provide pricing data for the previous five years. But policymakers need more data on how much insurers and consumers are spending on prescription drugs. For now, California’s new data is not likely to be of much help to consumers, but it might help state officials in their bid to overhaul the way the state purchases drugs for 13 million people served by Medi-Cal, the state’s Medicaid program for low-income residents."

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Policy | Trump’s New Order for Medicare Packs Potential Rise in Patients’ Costs

"Vowing to protect Medicare with “every ounce of strength,” President Donald Trump last week spoke to a cheering crowd in Florida. But his executive order released shortly afterward includes provisions that could significantly alter key pillars of the program by making it easier for beneficiaries and doctors to opt out. The bottom line: The proposed changes might make it a bit simpler to find a doctor who takes new Medicare patients, but it could lead to higher costs for seniors and potentially expose some to surprise medical bills, a problem from which Medicare has traditionally protected consumers. While the executive order spells out few details, it calls for the removal of “unnecessary barriers” to private contracting, which allows patients and doctors to negotiate their own deals outside of Medicare. It’s an approach long supported by some conservatives, but critics fear it would lead to higher costs for patients. The specifics will not emerge until the Department of Health and Human Services writes the rules to implement the executive order, which could take six months or longer."

Read the article.

Public Comparables

Payor, Provider, & Pharmacy Support Services1

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Products & Devices1

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Provider-Based Services1

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*DaVita Medical Group to be acquired by UnitedHealth in a $4.9 billion deal announced on December 6th, 2017.

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*Figures are adjusted for minority interest.

1. FactSet

2. S&P

3. PNC Debt Capital Markets

4. Company Filings

 

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