Healthcare & Life Sciences Industry Overview

Our Latest Insights | 30K Feet: Key Takeaways from MDM West 2020

MDM West brings together engineers, executives and investors from across the globe to swap ideas, find inspiration, overcome challenges and source products for their engineering projects.

In this article series, Harris Williams senior professionals from our Healthcare & Life Sciences (HCLS) Group explore the key takeaways from MDM West 2020.

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M&A Environment

There have been a little over 320 M&A transactions in the HCLS industry since the beginning of 2020, worth roughly $6.3 billion, compared with approximately $233 billion for all of 2019.

Notable recent transactions include the acquisition of Dermira Inc. (NasdaqGS:DERM) by Eli Lilly and Company (NYSE:LLY), InTouch Technologies Inc. by Teladoc Health (NYSE:TDOC) and Decision Resources Inc. by Clarivate Analytics Plc. (NYSE:CCC).1

Public Company Performance

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%).

Industry wide stock prices have experienced slight decreases as a whole; however, the HCLS Composite Index showed a mild decrease over the past 12 months 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%).1

Industry News

The coronavirus stimulus package that passed last month to support hospital networks includes billions of dollars in windfall subsidies and other spending unrelated to defeating the COVID-19 pandemic. In addition to funds directed to the COVID-19 pandemic, the industry will also receive billions of dollars in additional funding to the pandemic, in some cases because Congress agreed to  reverse scheduled cuts in the rates paid by Medicaid and Medicare. For instance, hospitals that treat an outsized number of Medicaid or uninsured patients will share an additional $8 billion windfall, and hospitals will be able to earn $3 billion more because of a suspension of cuts in Medicare fees.

Kaiser Permanente is offering its members free access to Livongo’s mental health app, myStrength, which offers a portfolio of self-care tips and tools, offering members personalized support across their behavioral health needs. MyStrength is the behavioral health solution within Livongo’s integrated chronic condition management platform and is designed to improve users’ sleep and mood. The app now has features related to the COVID-19 pandemic and isolation as more people are under stay-at-home orders. Features include coronavirus-specific modules to manage heightened stress, tips for parenting during challenging times and ideas to manage social isolation, according to Livongo. Primary care physicians also are shouldering an outsize portion of mental health care, and digital solutions can extend and supplement a physician’s care.

Over the past month, the adoption of telemedicine shifted into hyperdrive with virtual healthcare interactions on pace to top 1 billion by year’s end. With March telehealth visits surging 50%, telemedicine providers such as Teladoc reporting record video requests, estimated coronavirus-related virtual visits could top 900 million this year. Right now, accommodating the new flood of patients seeking virtual care remains a challenge for both small practitioners and larger telemedicine providers alike. Ironically, those logjams are putting telemedicine very much on the same footing as in-office visits, for which patients often experience long waits to get appointments.

1. FactSet

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

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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

Policy | COVID-19 Bonanza: Stimulus Hands Health Industry Billions not Directly Related to Pandemic

The coronavirus stimulus package that passed last month to support hospitals and health networks includes billions of dollars in windfall subsidies and other spending unrelated to defeating the COVID-19 pandemic. While the $2 trillion legislation includes more than $100 billion in emergency funds to support hospitals and other providers, the industry will also receive billions of dollars in additional funding not directly related to the pandemic, in some cases because Congress agreed to reverse scheduled cuts in the rates paid by Medicaid and Medicare. During this time, hospitals have won widespread praise as their doctors and staff have been on the front line battling the virus. Not surprisingly, the industry emerged as a winner in the stimulus negotiations. The new legislation allows hospitals to draw on the allocated $100 billion to stem their losses and cover other costs, and they also will see a boost in revenue as Congress overturned some planned rate cuts. For instance, more than 3,000 hospitals that treat outsize number of Medicaid or uninsured patients, will share in an $8 billion windfall through the stimulus provision that reverses cuts in their Medicaid payments for 2020 and 2021. Additionally, hospitals will be able to earn $3 billion more because of a temporary suspension of a cut in Medicare fees. The infusion of cash also benefits doctors, nursing homes, home health companies and others.

Read the article.

Tech | Kaiser Permanente Offers Members Free Access to Livongo's Mental Health App

"Kaiser Permanente is offering its members free access to Livongo's mental health app myStrength. The partnership with Livongo, known for its digital diabetes management solution, will add the myStrength app to the health systems' portfolio of self-care tips and tools and offers members personalized support across their behavioral health needs. After a yearlong evaluation process, Kaiser Permanente mental health professionals and members evaluated and chose Livongo’s myStrength based on many factors, including a high-quality member experience, clinical effectiveness and interactive programming, both organizations said. 'Everyone can benefit from caring for their emotional well-being, particularly in times of increased stress and anxiety, and myStrength can make it easier to do that,' said Don Mordecai, M.D., psychiatrist and national leader for mental health and wellness at Kaiser Permanente. MyStrength is the behavioral health solution within Livongo's integrated chronic condition management platform and is designed to improve users' sleep and mood. The app now has features related to the COVID-19 pandemic and isolation as more people are under stay-at-home orders. Features include coronavirus-specific modules to manage heightened stress, tips for parenting during challenging times and ideas to manage social isolation, according to Livongo. Primary care physicians also are shouldering an outsize portion of mental health care, and digital solutions can extend and supplement a physician's care. Mental health specialists also can use myStrength to assign 'between-session homework, with in-app nudges and reminders, to help people stay on track and make progress on self-care goals,' Hoffman said."

Read the article.

Health | Telehealth Visits are Booming as Doctors and Patients Embrace Distancing Amid the Coronavirus Crisis

Over the past month the adoption of telemedicine shifted into hyper-drive with virtual health-care interactions on pace to top 1 billion by year’s end. With March telehealth visits surging 50%, according to research from Frost and Sullivan consultants, and telemedicine providers such as Teladoc reporting record video requests, estimated coronavirus-related virtual visits could top 900 million this year. Based on current projections for COVID-19 infections in the U.S. analysts now expect general medical care visits to top 200 million this year; up sharply from their original expectation of 36 million visits for all of 2020. Health insurers and hospitals have made a strong push for patients who have milder symptoms to use their telehealth platforms during the crisis to help alleviate the strain on emergency rooms and doctors’ offices. The Trump administration also reduced a major cost barrier for telemedicine adoption by smaller physician practices as it declared Medicare and Medicaid would pay the same rates for virtual visits as for in-office appointments. The administration also temporarily eased regulations to allow the use of their mobile devices for virtual visits. For smaller practices, telehealth reimbursement rates rules will be a big factor in determining whether they continue with the trend. There may be pressure on Washington to maintain higher rates for telehealth once the emergency has passed. Right now, accommodating the new flood of patients seeking virtual care remains a challenge for both small practitioners and larger telemedicine providers alike. Ironically, those logjams are putting telemedicine very much on the same footing as in-office visits, where patients often experience long waits to get appointments.

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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