Healthcare & Life Sciences Industry Overview

Our Latest Insights | Consumer Healthcare: Creating Value by Crossing Industries

There’s substantial value to generate at the intersection of the consumer and healthcare worlds. From dental services to acupuncture, healthcare businesses are increasingly recognizing the value of proven consumer approaches. At the same time, a growing number of investors are seeing the cycle-agnostic potential of healthcare.

In this article, senior professionals from our Consumer Group and Healthcare & Life Sciences Group discuss five key criteria defining the consumer healthcare space, and explore the right blend of expertise to unlock its potential.

Read the article.

M&A Environment

There have been a little over 840 M&A transactions in the healthcare and life sciences (HCLS) industry since the beginning of 2019, worth roughly $230 billion, compared to approximately $240 billion for all of 2018. One hundred and seventy-five 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 (NasdaqcGS: JAZZ).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 ACA was signed into law on March 23, 2010, aiming to curb swelling healthcare costs, increase the quality of care and help insure the uninsured. The ACA established health insurance marketplaces where people could sign up for coverage and potentially qualify for federal subsidies. More than 20 million Americans gained health insurance under the ACA, and 37 states have expanded Medicaid. The ACA also banned insurers from charging rates based on gender, and prohibited insurers from denying coverage or charging more to people with preexisting conditions. The ACA, however, has largely failed on reducing overall spending, as healthcare spending still makes up nearly a fifth of the country’s GDP.

Total U.S. investment in health and medical R&D grew by 6.4% from 2017 to 2018, reaching $194.2 billion. However, R&D spend still only represents about 5% of every health dollar spent. The problem is that total investment isn't keeping pace with the disease burden, and should do so in the future if there's a realistic hope of ending or greatly curtailing certain diseases that result in hardships.

Artificial intelligence (A.I.) has been found to help doctors do a better job finding cancer, say researchers from Google and medical centers in the United States and Britain. Research has shown that computers can be trained to recognize patterns and interpret images; leveraging proprietary algorithms, the system can help predict diagnosis by reading scans. The next step is to have radiologists try using the tool as part of their routine practice in reading mammograms.

M&A Overview1

Announced Healthcare & Life Sciences M&A

Note: Transactions based on publicly available information

Healthcare & Life Sciences M&A Trends

screen_shot_2020-01-14_at_3.25.21_pm.png

Announced Private Equity M&A Activity

screen_shot_2020-01-14_at_3.27.44_pm.png

 

Debt Markets Overview

Key Credit Statistics2

screen_shot_2020-01-14_at_3.28.38_pm.png

Select Healthcare & Life Sciences Debt Offerings3

(by deal amount)

screen_shot_2020-01-14_at_3.29.25_pm.png

Public Markets Overview1

Key Trading Statistics

screen_shot_2020-01-14_at_3.30.12_pm.png

Public Company Sector Performance

(12-month % change in stock price)

screen_shot_2020-01-14_at_3.31.12_pm.png

Equity Markets Overview

Healthcare & Life Sciences Industry Stock Performance1

screen_shot_2020-01-14_at_3.32.55_pm.png

Top Equity Offerings4

screen_shot_2020-01-14_at_3.33.35_pm.png

M&A Transactions

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

screen_shot_2020-01-14_at_3.34.53_pm.png

screen_shot_2020-01-14_at_3.35.40_pm.png

screen_shot_2020-01-14_at_3.36.34_pm.png

What We’ve Been Reading

Insurance | How the Affordable Care Act Transformed Our Healthcare System

Former President Barack Obama signed the Patient Protection and Affordable Care Act into law on March 23, 2010, aimed to curb swelling healthcare costs, increase the quality of care and help insure the more than 30 million Americans who were uninsured at the time. The Affordable Care Act established health insurance marketplaces, including Healthcare.gov and state exchanges at which people could sign up for coverage and potentially qualify for federal subsidies. Despite initial spikes in prices on the marketplace, premiums have grown more affordable over the past couple of years. More than 20 million Americans gained health insurance under the ACA, and 37 states have expanded Medicaid which deepened the pool of eligible residents who live at or below the federal poverty level. The ACA also banned insurers from charging rates based on gender, stopped reimbursing hospitals for the treatment of hospital-acquired infections, and prohibited insurers from denying coverage or charging more to people with preexisting conditions. The ACA, however, has largely failed on reducing overall spending, as healthcare spending still makes up nearly a fifth of the country’s GDP.

Read the article.

Research | Investment in Medical and Health R&D Not Keeping Up With Needs of Nation

Total U.S. investment in health and medical research and development grew by 6.4% from 2017 to 2018, reaching $194.2 billion. For the third straight year, the growth rate of health and medical R&D investment outpaced the growth rate of overall health spending. However, R&D spend still only represents about 5% of every health dollar spent. This is one of the key findings in the 2019 U.S. Investments in Medical and Health Research and Development, a new report from Research!America. The report shows growth in investment across every sector over the past six years, with industry growth leading at $36.5 billion, followed by federal government spending at $9.1 billion. The problem is that total investment isn't keeping pace with the disease burden, and should do so in the future if there's a realistic hope of ending or greatly curtailing certain diseases that result in hardships.

Read the article.

Tech | A.I. Is Learning to Read Mammograms

Artificial intelligence (A.I.) has been found to help doctors do a better job finding cancer on mammograms, say researchers from Google and medical centers in the United States and Britain. The new system comes from Google’s venture into medicine. Though still being studied, research has shown that computers can be trained to recognize patterns and interpret images. Leveraging proprietary algorithms, the system can help detect lung cancers, diagnose eye disease in people with diabetes and find cancer on microscope slides. When tested on images where the diagnosis was already known, the new system performed better than radiologists. On scans from the U.S. the system produced a 9.4% reduction in false negatives, and provided a lowering of 5.7% in false positives. About 33 million screening mammograms are performed each year in the United States. The test misses about 20% of breast cancers, and false positives are common. The next step is to have radiologists try using the tool as part of their routine practice in reading mammograms.

Read the article.

Public Comparables

Payor, Provider, & Pharmacy Support Services1

screen_shot_2020-01-14_at_3.41.13_pm.png

screen_shot_2020-01-14_at_3.41.39_pm.png

screen_shot_2020-01-14_at_3.42.03_pm.png

Products & Devices1

screen_shot_2020-01-14_at_3.42.40_pm.png

screen_shot_2020-01-14_at_3.43.05_pm.png

Provider-Based Services1

*DaVita Medical Group to be acquired by UnitedHealth in a $4.9 billion deal announced on December 6th, 2017.
*Figures are adjusted for minority interest.
 

screen_shot_2020-01-14_at_3.44.23_pm.pngscreen_shot_2020-01-14_at_3.45.11_pm.png

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. DE321666994). 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.