Healthcare & Life Sciences Industry Overview

Our Latest Insights | Post-Acute Care: Five Traits of Growth-Ready Providers

With growth on the horizon, post-acute care is attracting the attention of strategic buyers and investors.

In this article, James Clark, a managing director in the firm’s Healthcare & Life Sciences Group, draws upon recent client experience—including the sale of AccentCare—to identify five key traits of growth-ready post-acute care providers.

Read the article.

M&A Environment1

There have been a little over 670 M&A transactions in the healthcare & life sciences (HCLS) industry since the beginning of 2019, worth roughly $168.1 billion, compared to $241.7 billion for all of 2018. 143 of these deals were executed by private equity groups.

Notable recent transactions include the acquisition of Genomic Health (Nasdaq: GHDX) by Exact Sciences Corporation (Nasdaq: EXAS), Waystar, Inc. by EQT Partners, Hu-Friedly Co. by Cantel Medical Corp, and Bayer AG’s Dr. Scholl’s Business by Yellow Wood Partners.

Public Company Performance1

Stock prices increased for many HCLS companies during the past three months. In fact, the Harris Williams HCLS Composite Index increased 4.8%, while the S&P increased 1.2%. Notable sector increases include assisted living (increased 26.6%), specialty managed care  (increased 19.3%), and home care, hospice, and home infusion (increased 17.4%).

Over the past 12 months industry-wide stock prices have experienced slight increases as a whole, however the HCLS Composite Index shows a mild decrease of 8.2%. At the category level, products and devices grew by 9.8% on average over the past 12 months, followed by provider-based services at 3.1%, and payor, provider and pharmacy support stock prices at 0.3%. Specific stock price growth leaders over the past year include long-term care (44.3%), home care, hospice and home infusion (37.1%), medical devices and products (24.6%), and durable medical equipment (17.4%).

Industry News

Drug companies are still raising prices for brand-name prescription medicines, just not as often or by as much as they used to. Now, companies are taking more of their increases in January, reaping the extra revenue all year and forgoing early summer hikes. The industry’s restraint comes as lawmakers of both parties in Congress and the Trump administration are advancing measures to try and curb costs, a concerted effort not seen in Washington for years. Meanwhile, insurers are expanding their Affordable Care Act plan offerings for next year, with the once-troubled business now generating profits, even as the overall individual-insurance market has shrunk. The insurers’ moves reflect the business’ improved finances after sharp rate hikes in previous years helped revenues catch up to claims costs.

Allscripts Healthcare Solutions Inc. has reached a tentative $145 million agreement to resolve civil and criminal federal investigations into the business practices of one if its recently acquired companies. The federal investigations revolve around Practice Fusions Inc.’s software certifications, compliance with anti-kickback regulations and related business practices, according to security filings. Health-care information-technology company Allscripts acquired the electronic-health-records company last year.

M&A Overview1

Announced Healthcare & Life Sciences M&A

screen_shot_2019-08-23_at_4.59.52_pm.png

Healthcare & Life Sciences M&A Trends

screen_shot_2019-08-23_at_5.00.48_pm.png

Announced Private Equity M&A Activity

screen_shot_2019-08-23_at_5.02.32_pm.png

Debt Markets Overview

Key Credit Statistics2

screen_shot_2019-08-23_at_5.03.28_pm.png

Select Healthcare & Life Sciences Debt Offerings3

(by deal amount)

screen_shot_2019-08-23_at_5.04.20_pm.png

Public Markets Overview1

Key Trading Statistics

screen_shot_2019-08-23_at_5.05.19_pm.png

Public Company Sector Performance

(12-month % change in stock price)

hcls1.png

Equity Markets Overview

Healthcare & Life Sciences Industry Stock Performance1

screen_shot_2019-08-23_at_5.07.31_pm.png

Top Equity Offerings4

(by proceeds)

screen_shot_2019-08-23_at_5.08.43_pm.png

M&A Transactions

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

screen_shot_2019-08-23_at_5.10.03_pm.png

screen_shot_2019-08-23_at_5.10.54_pm.png

screen_shot_2019-08-23_at_5.11.31_pm.png

What We’ve Been Reading

Finance | Brand-Name Drug Prices Rising at Slower Pace, Lower Amounts

"Drug companies are still raising prices for brand-name prescription medicines, just not as often or by as much as they used to, according to an Associated Press Analysis. After years of frequent list price hikes, many drug makers are showing some restraint, according to the analysis of drug prices provided by health information firm Elsevier. In the first seven months of 2019, drug makers raised list prices for brand-name prescription medicines by a median of 5%, down from about 9% or 10% over those months the prior four years. Drug makers for years have raised list prices on brand-name medicines up to three times annually, sometimes 10% or more each time. Now, companies are taking more of their increases in January, reaping the extra revenue all year and forgoing early summer hikes. The industry’s restraint comes as lawmakers of both parties in Congress and the Trump administration are advancing measures to try and curb costs, a concerted effort not seen in Washington for years."

Read the article.

Health Policy | Health Insurers Set to Expand Offerings Under ACA

"Insurers are expanding their Affordable Care Act plan offerings for next year, with the once-troubled business now generating profits, even as the overall individual-insurance market has shrunk. Insurers including Anthem, Cigna Corp., Bright Health Inc., Molina Healthcare Inc., Oscar Insurance Group and Centene Corp., the biggest seller of ACA plans, plan larger footprints next year. The insurers’ moves reflect the business’ improved finances after sharp rate hikes in previous years helped revenues catch up to claims costs. Premium increases for 2020 so far appear likely to be moderate in many markets, after rates were relatively flat or even down this year, analysts and insurers said. While plans sold through the ACA’s marketplaces, or exchanges, was around 10.6 million in the first quarter, the overall number of people with individual insurance has dropped to 13.7 million in the first quarter of this year, down from 14.4 million and year earlier. The lack of overall growth in the ACA market is likely one reason large national insurers that pulled out in past years are remaining on the sidelines for 2020, said Deep Banerjee, an analyst with S&P Global Ratings. Also, they are likely able to get stronger results from other lines of business, he said. UnitedHealth Group Inc. said it expects next year to be in the same three ACA markets as this year. CVS Health Corp.’s Aetna and Humana Inc. both said they had no plans to offer ACA products in 2020."

Read the article.

Risk & Compliance | Allscripts Reached Tentative Agreement Over Federal Probes

"Allscripts Healthcare Solutions Inc. has reached a tentative $145 million agreement to resolve civil and criminal federal investigations into the business practices of one if its recently acquired companies. The federal investigations revolve around Practice Fusions Inc.’s software certifications, compliance with anti-kickback regulations and related business practices, according to security filings. Health-care information-technology company Allscripts acquired the electronic-health-records company last year. Practice Fusion, under the terms of the tentative agreement with the Justice Department, would enter into a deferred prosecution agreement and civil settlement agreement in addition to paying $145 million, according to an Allscripts securities filing. Allscripts booked the $145 million charge in the quarter ended June 30, but company president Richard Poulton said in a conference call with analysts that the company expects to offset at least a portion of that amount through third-party recoveries. Failure to reach an agreement or comply with final settlement documents, Allscripts noted, could result in substantial penalties, possible criminal prosecution and Practice Fusion being excluded from Medicare, Medicaid and other federal health-care programs."

Read the article.

Public Comparables

Payor, Provider, & Pharmacy Support Services1

screen_shot_2019-08-23_at_5.15.33_pm.png

screen_shot_2019-08-23_at_5.15.57_pm.png

screen_shot_2019-08-23_at_5.16.19_pm.png

Products & Devices1

screen_shot_2019-08-23_at_5.17.31_pm.png

screen_shot_2019-08-23_at_5.18.00_pm.png

Provider-Based Services1

screen_shot_2019-08-23_at_5.18.40_pm.png

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

screen_shot_2019-08-23_at_5.19.10_pm.png

*Figures are adjusted for minority interest.

1. FactSet

2. S&P

3. PNC Debt Capital Markets

4. Company Filings

 

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.