Healthcare & Life Sciences Industry Overview

Private Equity & Pets: Why Investors are Flocking to Animal Care

Seeing steady, recession-resistant growth in both pet ownership and consumer spending on pets, private equity investors have picked up the scent of a major opportunity.

Here, members of the Harris Williams Healthcare & Life Sciences Group and Consumer Group discuss surging private equity interest in animal health services and products, the specific areas winning the most attention, and what potential investors should prioritize.

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M&A Environment

There have been a little over 920 M&A transactions in the healthcare and life sciences (HCLS) industry since the beginning of 2020, worth roughly $606 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 healthcare and life sciences 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% 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

A deal to end surprise medical bills includes a major win for the provider industry, with lawmakers endorsing an arbitration method for settling out-of-network disputes. Leaders of several major House and Senate committees announced a deal Friday night to end a yearlong stalemate over how to end surprise medical bills. The deal is a win for providers that wanted an arbitration resolution for out-of-network charges and a loss for payers who endorsed a benchmark rate for such charges. The committee leaders said they “look forward to continuing to work together to finalize and attach this important new patient protection to the end-of-year funding package.” The deal would prohibit certain out-of-network providers from balance billing patients unless the patient is notified of their network status, according to a release on the deal.

Just when Gilead Sciences’ $21 billion acquisition of Immunomedics looked to be 2020’s biggest biopharma deal, AstraZeneca came up with an even larger one—and it involves one of the industry’s top takeover targets. AstraZeneca is splashing out $39 billion to buy Alexion in a cash-and-stock deal, the British pharma revealed Saturday. The deal is driven by AstraZeneca’s desire to build a stronger presence in immunology—and to give its top line an immediate boost. The deal values Alexion at $175 per share, a 45% premium to the Boston biotech’s closing price on Friday. As part of the cost will be paid in AstraZeneca shares, Alexion investors will own about 15% of the combined enterprise when the deal closes, likely in the third quarter of 2021. “Alexion has established itself as a leader in complement biology, bringing life-changing benefits to patients with rare diseases,” AstraZeneca CEO Pascal Soriot said in a statement.

Amazon's cloud division rolled out a new tool to make it easier for healthcare organizations to search and analyze data. Amazon HealthLake is a HIPAA-eligible service for healthcare and life sciences organizations that aggregates an organization’s complete data across various silos and disparate formats into a centralized Amazon Web Services (AWS) data lake and automatically normalizes this information using machine learning, the tech giant announced Tuesday. The tool makes it easier for customers to query, perform analytics and run machine learning to derive meaningful value from the newly normalized data, the company said.

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

Payor | House and Senate Panels Reach Provider-Friendly Deal to End Surprise Medical Billing

A deal to end surprise medical bills includes a major win for the provider industry with lawmakers endorsing an arbitration method for settling out-of-network disputes. Leaders of several major House and Senate committees announced a deal Friday night to end a yearlong stalemate over how to end surprise medical bills. The deal is a win for providers that wanted an arbitration resolution for out-of-network charges and a loss for payers who endorsed a benchmark rate for such charges. The committee leaders said they “look forward to continuing to work together to finalize and attach this important new patient protection to the end-of-year funding package.” The deal would prohibit certain out-of-network providers from balance billing patients unless the patient is notified of their network status, according to a release on the deal. The patient also has to have an estimate of any charges 72 hours prior to getting the out-of-network care. Out-of-network charges will be based on a negotiation between payers and providers. “There is no minimum payment threshold to enter [independent dispute resolution] and claims may be batched together to ease administrative burdens,” the release added. The parties have to submit an offer to an independent arbiter who will choose one of the amounts. After the process is completed, the payer or provider that initiated the dispute can’t take the same party “to arbitration for the same item or service for 90 days,” the release said. The deal effectively ends a yearlong stalemate between the House committees on Energy and Commerce, Ways and Means, and Education and Labor along with the Senate Health, Education, Labor and Pensions (HELP) Committee.

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Pharma | AstraZeneca Snaps up Alexion for $39B in a Leap Toward CEO's $40B Revenue Goal

Just when Gilead Sciences’ $21 billion acquisition of Immunomedics looked to be 2020’s biggest biopharma deal, AstraZeneca came up with an even larger one—and it involves one of the industry’s top takeover targets. AstraZeneca is splashing out $39 billion to buy Alexion in a cash-and-stock deal, the British pharma revealed Saturday. The deal is driven by AstraZeneca’s desire to build a stronger presence in immunology—and to give its top line an immediate boost. The deal values Alexion at $175 per share, a 45% premium to the Boston biotech’s closing price on Friday. As part of the cost will be paid in AstraZeneca shares, Alexion investors will own about 15% of the combined enterprise when the deal closes, likely in the third quarter of 2021. “Alexion has established itself as a leader in complement biology, bringing life-changing benefits to patients with rare diseases,” AstraZeneca CEO Pascal Soriot said in a statement. “This acquisition allows us to enhance our presence in immunology.” It also makes Soriot’s target of $40 billion in sales by 2023 more attainable. Last year, the biotech brought in sales of $5 billion, up 21% year over year, led by blockbuster rare disease med Soliris. And Alexion management has set a 2025 revenue target of about $9 billion to $10 billion. In comparison, AZ’s global sales hit $23.6 billion in 2019, a year-over-year boost of 12%. AZ is grabbing a prize that doesn't obviously fit with its own portfolio, but one that's been a frequent guest on industry watchers' lists of top takeover targets given its established portfolio and expertise in rare diseases. It’s also the No. 1 pick on Fierce Biotech's most recent biopharma acquisition target roster, compiled with Jefferies analyst Jared Holz. Holz previously noted that Alexion has been one of the cheapest stocks among mid- to large-cap biotechs based on its price-earnings ratio.

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Tech | Amazon Launches New Tool to Help Healthcare Organizations Standardize Data

Amazon's cloud division rolled out a new tool to make it easier for healthcare organizations to search and analyze data. Amazon HealthLake is a HIPAA-eligible service for healthcare and life sciences organizations that aggregates an organization’s complete data across various silos and disparate formats into a centralized Amazon Web Services (AWS) data lake and automatically normalizes this information using machine learning, the tech giant announced Tuesday. The tool makes it easier for customers to query, perform analytics and run machine learning to derive meaningful value from the newly normalized data, the company said. Organizations such as healthcare systems, pharmaceutical companies, clinical researchers and health insurers can use this service to help spot trends and anomalies in health data so they can make much more precise predictions about the progression of disease, the efficacy of clinical trials and the accuracy of insurance premiums, AWS executives said. The service identifies each piece of clinical information, tags and indexes events in a timeline view with standardized labels so it can be easily searched, and structures all of the data into the Fast Healthcare Interoperability Resources (FHIR) industry-standard format for a complete view of the health of individual patients and entire populations, according to Taha Kass-Hout, M.D., director of machine learning and chief medical officer at AWS, while speaking at the company's virtual AWS re:Invent event Tuesday. Healthcare organizations are making strides to apply analytics and machine learning to improve care, analyze population health trends and improve operational efficiency.

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Public Comparables

Payor, Provider, & Pharmacy Support Services1

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Products & Devices1

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Provider-Based Services1

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1. FactSet.

2. S&P

3. PNC Debt Capital Markets

4. Company Filings