Healthcare & Life Sciences Industry Overview

Medical Device Contract Manufacturing Offers Healthy Growth Potential

Strong demand for medical devices used to treat a wide range of conditions is being driven by an aging population, more chronic illness and greater access to healthcare. To keep up with this demand, medical device original equipment manufacturers (OEMs) are increasingly outsourcing production to contract manufacturers.

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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 $540 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

The future of health insurance is one of the most hotly debated topics in the country, and physicians — like most — are split on the best option moving forward. Though over two-thirds of physicians said they prefer a two-tiered insurance system, with a single payer option and private insurance, about 40% said that a Medicare for All system is the best or next-best direction for the U.S. healthcare system, according to a new survey. In part three of its 2020 survey, The Physicians Foundation focused on the impact of COVID-19 and the future of healthcare. The survey, conducted between Sept. 14 and 28, includes responses from 1,270 physicians nationwide. In addition to the physicians who prefer a two-tiered system or Medicare for All, 49% of physicians rated maintaining or improving the current Affordable Care Act-influenced system as the best or next-best direction for the U.S. payer landscape, and 45% of physicians said a market-driven system, featuring health savings accounts and catastrophic plans, is the way forward.

When the COVID-19 pandemic began to sweep across the U.S. this year, early fears of shortages of critical pharmaceutical supplies and lifesaving drugs were quickly abated by a responsive and resilient supply chain. As the crisis unfolded and the public’s attention was focused on shortages of everyday items like toilet paper, paper towels and disinfectants, patients with critical needs for treatments that ranged from insulin to inhalers also began to fret. Manufacturers worried as well. Was the pharmaceutical industry prepared to meet the challenge? Particularly since—according to industry averages—between 70% to 80% of APIs (active pharmaceutical ingredients) are manufactured in China and roughly 40% to 50% of generic drugs are produced in India.

Federal health IT officials outlined their top goals and priorities for the next five years with a big focus on pushing the industry to make more patients' health data accessible through smartphone apps. The Department of Health and Human Services (HHS) published Friday the final 2020-2025 Federal Health IT Strategic Plan. The plan is designed to align goals and help prioritize resources related to health IT and health data exchange across federal agencies. The Office of the National Coordinator for Health IT (ONC) developed the road map in collaboration with more than 25 federal organizations and was informed by nearly 100 public comments.

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)

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 | U.S. Physicians Split on Future of Payer Landscape

The future of health insurance is one of the most hotly debated topics in the country, and physicians — like most — are split on the best option moving forward. Though over two-thirds of physicians said they prefer a two-tiered insurance system, with a single payer option and private insurance, about 40% said that a Medicare for All system is the best or next-best direction for the U.S. healthcare system, according to a new survey. In part three of its 2020 survey, The Physicians Foundation focused on the impact of COVID-19 and the future of healthcare. The survey, conducted between Sept. 14 and 28, includes responses from 1,270 physicians nationwide. In addition to the physicians who prefer a two-tiered system or Medicare for All, 49% of physicians rated maintaining or improving the current Affordable Care Act-influenced system as the best or next-best direction for the U.S. payer landscape, and 45% of physicians said a market-driven system, featuring health savings accounts and catastrophic plans, is the way forward. But regardless of their differing viewpoints, a vast majority of physicians (89%) agreed that providing affordable health insurance is a key step to ensuring wide access to high-quality and cost-efficient care. Other steps that physicians rated as important or extremely important for improving healthcare access and controlling costs included simplifying or streamlining the prior authorization process for medical services and prescriptions (89%), providing insurance coverage for COVID-19 diagnosis and treatment (83%), and reimbursing physicians for providing telemedicine services (82%). Amid the COVID-19 pandemic, the demand for affordable and easy-to-access mental healthcare services grew rapidly as stress and anxiety levels soared.

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Pharma | Tested by a Pandemic, Pharma Supply Chain Showed Resilience

When the COVID-19 pandemic began to sweep across the U.S. this year, early fears of shortages of critical pharmaceutical supplies and lifesaving drugs were quickly abated by a responsive and resilient supply chain. As the crisis unfolded and the public’s attention was focused on shortages of everyday items like toilet paper, paper towels and disinfectants, patients with critical needs for treatments that ranged from insulin to inhalers also began to fret. Manufacturers worried as well. Was the pharmaceutical industry prepared to meet the challenge? Particularly since—according to industry averages—between 70% to 80% of APIs (active pharmaceutical ingredients) are manufactured in China and roughly 40% to 50% of generic drugs are produced in India. On top of that were early shortages of protective equipment like face masks, face shields and gowns for frontline healthcare workers and other essential workers like associates at AmerisourceBergen’s distribution centers. AmerisourceBergen is one of the nation’s primary pharmaceutical wholesale distribution entities. The company picks, packs and ships nearly 4 million pharmaceutical and healthcare products daily and services more than 65,000 hospitals, pharmacies, physicians’ practices and clinics annually. “Our family and friends used to say they didn’t really understand what we did every day,” Heather Zenk, Senior Vice President for Strategic Global Sourcing at AmerisourceBergen, said. “Now supply chain is something we talk about around the kitchen table.” The immediate response from the company was to ensure that its frontline associates—primarily distribution center associates, patient-facing nurses and pharmacy staff—were monitored for health and provided the protective equipment they needed.

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Tech | HHS Prioritizing Health Data Access through Smartphones in 5-Year Strategic Plan

Federal health IT officials outlined their top goals and priorities for the next five years with a big focus on pushing the industry to make more patients' health data accessible through smartphone apps. The Department of Health and Human Services (HHS) published Friday the final 2020-2025 Federal Health IT Strategic Plan. The plan is designed to align goals and help prioritize resources related to health IT and health data exchange across federal agencies. The Office of the National Coordinator for Health IT (ONC) developed the road map in collaboration with more than 25 federal organizations and was informed by nearly 100 public comments. “The new federal health IT strategic plan continues the momentum created by the 21st Century Cures Act and reflects the federal government’s commitment to making patients’ electronic health record (EHR) information accessible on their smartphones,” said Don Rucker, M.D, national coordinator for health IT. In today’s digital world, patients’ right to control their health must include the right to access and control their health information, Rucker wrote in the strategic plan. The strategic plan outlines concrete steps federal partners can take to improve health through health IT. The goals, objectives and strategies within this plan highlight the importance not only of electronic health information, but also of the capabilities enabled by health IT including public health surveillance, telehealth and remote monitoring, Rucker wrote in the plan. The COVID-19 pandemic caused by the novel coronavirus has highlighted the importance of IT-enabled tools in supporting the healthcare infrastructure, he wrote.

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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