Healthcare & Life Sciences Industry Overview

Our Latest Insights | Return on Innovation, Part 3: Pharmaceutical Safety and Risk Management

The outsourced pharmaceutical services sector provides a wide range of opportunities for strategic acquirers and private equity investors. Motivated by the need to become more efficient in drug development and maximize returns on approved therapies, pharmaceutical companies are turning to outsourcers to drive efficiency across their value chains.

In this article, Paul Hepper, a managing director in the Harris Williams Healthcare & Life Sciences (HCLS) Group, discusses a segment within outsourced pharmaceutical services offering robust opportunities for buyers. Hepper draws upon recent experience with WIRB-Copernicus Group (WCG) and Synowledge to identify three traits setting the best assets apart.

Read the article.

M&A Environment1

There have been a little over 820 M&A transactions in the healthcare & life sciences (HCLS) industry since the beginning of 2019, worth roughly $187 billion, compared to $241.7 billion for all of 2018. One hundred and sixty 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 (NasdaqGS: JAZZ).

Public Company Performance1

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 shows 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%).

Industry News

Google is engaged with one of the U.S.’s largest healthcare systems on a project to collect and crunch the detailed personal-health information of millions of people across 21 states. The initiative, code-named “Project Nightingale,” appears to be the biggest effort yet by a Silicon Valley giant to gain a toehold in the healthcare industry through the handling of patients’ medical data. Google in this case is using the data in part to design new software, underpinned by advanced artificial intelligence and machine learning, that zeroes in on individual patients to suggest changes to their care.

Global drugmakers may now have the opportunity to get better access to the world’s second most valuable market for pharmaceutical products after the U.S. There has been a tectonic shift in China’s drug policy in the past couple of years, with a plan to make its healthcare system better and more affordable. Global companies haven’t always been on the right side of policy change in Beijing, but the medicine China is administering to its healthcare system could be an exception.

KKR & Co. has formally approached drugstore giant Walgreens Boots Alliance Inc. about a deal to take the company private, in what could be the biggest-ever leveraged buyout, people familiar with the matter said. Deerfield, Illinois-based Walgreens Boots has a market value of about $56 billion and $16.8 billion of debt. At that size, a take-private of the company would top the largest leveraged buyout in history.

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

Pharma | China’s Drug Market is Opening Up

"China’s plan to make its healthcare system better and more affordable is throwing up opportunities for global drugmakers. There has been a tectonic shift in China’s drug policy in the past couple of years. The government is approving innovative foreign drugs at a record pace, while trying to push down sky-high prices. Fifty-one innovative drugs, 80% of them from global pharmaceutical companies, were approved last year, up from just five in 2016, according to Deloitte. By cutting red tape and fast-tracking approvals for drugs that have already been greenlighted by regulators in the U.S., Japan or Europe, China wants to give its fast-aging population access to the best drugs. Top drugmakers get better access to the world’s second most valuable market for pharmaceutical products, after the U.S. However, China also is trying to clamp down on runaway drug prices. Manufacturers will have to slash prices to get on a list of treatments partially covered by China’s state insurance program. Many might still choose to be on the list, because the price cuts could be offset by the volume gains. For generic drugs, the government said in September that it will expand a bulk purchase program to almost the whole country. Under the program, pharmaceutical companies bid for the right to supply drugs to hospitals, the country’s biggest buyers, and the cheapest provider gets the contract. Global companies haven’t always been on the right side of policy change in Beijing, but the medicine China is administering to its healthcare system could be an exception."

Read the article.

Tech | Google’s ‘Project Nightingale’ Gathers Personal Health Data on Millions of Americans

"Google is engaged with one of the U.S.’s largest healthcare systems on a project to collect and crunch the detailed personal-health information of millions of people across 21 states. The initiative, code-named “Project Nightingale,” appears to be the biggest effort yet by a Silicon Valley giant to gain a toehold in the healthcare industry through the handling of patients’ medical data. Amazon.com Inc., Apple Inc. and Microsoft Corp. are also aggressively pushing into healthcare, though they haven’t yet struck deals of this scope. Google began Project Nightingale in secret last year with St. Louis-based Ascension, a Catholic chain of 2,600 hospitals, doctors’ offices and other facilities, with the data sharing accelerating since the summer, according to internal documents. The data involved in the initiative encompasses lab results, doctor diagnoses and hospitalization records, among other categories, and amounts to a complete health history, including patient names and dates of birth. Google in this case is using the data in part to design new software, underpinned by advanced artificial intelligence and machine learning, that zeroes in on individual patients to suggest changes to their care. Google and nonprofit Ascension have parallel financial motives. Google has assigned dozens of engineers to Project Nightingale so far without charging for the work because it hopes to use the framework to sell similar products to other health systems. Its end goal is to create an omnibus search tool to aggregate disparate patient data and host it all in one place, documents show."

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M&A | KKR Makes Formal Approach to Walgreens Boots on Record Buyout

"KKR & Co. has formally approached drugstore giant Walgreens Boots Alliance Inc. about a deal to take the company private, in what could be the biggest-ever leveraged buyout, people familiar with the matter said. Deerfield, Illinois-based Walgreens Boots has a market value of about $56 billion and $16.8 billion of debt. At that size, a take-private of the company would top the largest leveraged buyout in history. A buyout would give Walgreens Boots time to adapt to a fast-changing retail landscape, free from the quarter-by-quarter demands of public shareholders. The company is under immense pressure from online competitors, including Amazon.com Inc., that have chipped away at sales of household and beauty items. While top rival CVS Health Corp. has grown into a vertically integrated healthcare giant, Walgreens Boots has doubled down on shops, announcing pilot partnerships with retailers such as  grocer Kroger Co."

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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