Healthcare & Life Sciences Industry Overview
Our Latest Insights | Healthcare IT: Five Segments Attracting Buyers
Software solutions designed to improve clinical and administrative processes have been widely adopted by healthcare services providers. Yet there’s still plenty of innovation happening around these technologies, with several specific sectors standing out as interesting investment opportunities
In this article, Harris Williams professionals Sam Hendler, Dan Linsalata, and Nick Owens share their insights on the current landscape of healthcare technology solutions and vendors, as well as the opportunities this market presents for strategic buyers and private equity investors.
There have been a little over 263 M&A transactions in the healthcare & life sciences (HCLS) industry since the beginning of 2019, worth roughly $124.9 billion, compared to $241.7 billion for all of 2018. 73 of these deals were executed by private equity groups.
Notable transactions include the acquisition of WellCare Health Plans, Inc. by Centene Corp., the acquisition of Brammer Bio LLC by Thermo Fisher Schintific, Inc., and the acquisition of Verano Holdings LLC. by Harvest Health & Recreation, Inc.
Public Company Performance1
Stock prices increased for many HCLS companies during the past three months. In fact, the Harris Williams HCLS Composite Index increased 5.5%, while the S&P rose 14.0%. Notable sector increases include acute care hospitals (increased 30.0%), contract research organizations (increased 28.1%), life science tools (increased 21.9%), dental products (increased 21.7%), and durable medical equipment (increased 21.4%).
Over the past 12 months industry-wide stock prices have remained relatively flat, with the HCLS Composite Index showing a mild decrease of 1.7%. At the category level, provider-based services stock prices grew by 15.8% on average over the past 12 months, followed by products and devices at 15.1% and payor, provider and pharmacy support services at 11.0%. Specific stock price growth leaders over the past year include long-term care (60.9%), home care, hospice and home infusion (58.7%), contract research organizations (34.5%), and medical devices and products (27.1%).
Urgent need for new revenue streams will shape providers’ strategies as 90% of hospital and health system executives surveyed indicated this was an urgent priority. Health system operating margins hit 10-year lows in 2018 as costs outpaced revenue, pushing hospitals in search for sustainable financial footing to explore alternative revenue-generating and cost-cutting measures. Deloitte and Google Cloud announce plans to collaborate on a suite of advanced solutions as health systems, payers, and hospitals searching for differentiation, cost reduction, and improved user experience are increasingly using advanced analytics tools to extract insights from data. Deloitte and Google Cloud hope that the solutions would help accelerate the pace of biomedical research, improve healthcare access, optimize operations, and modernize the management of health data.
Senate Republicans and Democrats unveil healthcare plans which aim to increase coverage and decrease healthcare spending. The Republicans’ tailored plan would prohibit insurers from charging higher premiums to patients with pre-existing conditions and bars them from excluding coverage of treatments for those individuals, one of the most popular elements of the ACA. Senator Bernie Sanders of Vermont, introduced a bill at the same time that would extend government-run health insurance to every American, dubbed Medicare for All.
Announced Healthcare & Life Sciences M&A
Note: Transactions based on publicly available information
Healthcare & Life Sciences M&A Trends
Announced Private Equity M&A Activity
Debt Markets Overview
Key Credit Statistics2
Select Healthcare & Life Sciences Debt Offerings3
(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 Offerings4
Announced U.S. Healthcare & Life Sciences M&A1
What We’ve Been Reading
Finance | Urgent Need for New Revenue Streams Will Shape Providers’ Strategies
Building alternative revenue streams will play a bigger role in healthcare providers’ strategies, a new study suggests. The study looked at 1,400 novel revenue streams, defined as any revenue that is not based on traditional reimbursable medical services, government support or non-operating investments, across 74 academic medical centers in large health systems. It broke the alternative revenue streams into three categories: bringing care model innovations to market; transforming cost centers into profit centers; and increasing royalties from drugs, devices and diagnostics. The portfolio of alternative revenue streams should also distribute risk, return, and timing which requires well-equipped personnel who can juggle consumer marketing, automated data analysis, and venture capital management while keeping healthcare’s broader mission in perspective. Health system operating margins hit 10-year lows in 2018 as costs outpaced revenue and while it is uncertain whether that pressure will subside in 2019, hospitals will likely have to implore both cost-cutting and revenue-generating measures as they seek sustainable financial footing.
Policy | Senate Republicans and Democrats Unveil Health-Care Plans
A group of Senate Republicans unveiled a narrowly tailored proposal which would preserve some of the most popular elements of the Affordable Care Act. The plan prohibits insurers from charging higher premiums to patients with pre-existing conditions and bars them from excluding coverage of treatments for those individuals. Republicans hope the plan will blunt the Democrats’ perceived political advantage on healthcare before the 2020 election. At the same time, Sen. Bernie Sanders of Vermont, introduced a bill that would extend government-run health insurance to every American, dubbed Medicare for All. Sanders claims the plan would lower overall spending on health care in the US while studies suggest the program could cost the government more than $30 trillion over 10 years, shifting the way Americans pay for healthcare to higher taxation rather than insurance premiums.
Technology | Google Cloud, Deloitte Partner on Healthcare Solutions
Deloitte and Google Cloud announced plans to collaborate on a suite of advanced solutions for the life science and healthcare industries. The joint release stated that the solutions would help accelerate the pace of biomedical research, improve healthcare access, optimize operations, and modernize the management of health data. In a time when health systems, payers, and hospitals are all struggling with the challenges of digital transformation, including better use of data analytics to drive value-based care, the partnership could prove most effective. Healthcare organizations are increasingly using advanced analytics tools such a machine learning and AI to extract insights from data that drive differentiation, cost reduction, and improved user experience. Data management and advanced data insights are expected to be major healthcare tech development trends this year as the amount and types of healthcare data grow and become increasingly complex to manage.
Payor, Provider, & Pharmacy Support Services1
Products & Devices1
3. PNC Debt Capital Markets
4. Company Filings
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