Healthcare & Life Sciences Industry Overview

M&A Environment

There have been roughly ~700 M&A transactions in the healthcare & life sciences (HCLS) industry since the beginning of 2018, worth approximately $193.8 billion, compared to $239.8 billion for all of 2017. 205 of these deals were executed by private equity groups.

Notable transactions include the acquisition of Mikart by Nautic Partners, the acquisition of Syntimmune by Alexion Pharmaceuticals, and the acquisition of Sandoz by Aurobindo Pharma.

Public Company Performance

Stock prices grew for many HCLS companies during the past three months, slightly lower than the value of the S&P 500 over the same period.  In fact, the Harris Williams HCLS Composite Index grew 6.2%, while the S&P grew 7.3%. Notable exceptions to this trend include specialty pharmacy (decreased 25.6%), behavioral health / management (decreased 13.8%), disease management (decreased 10.4%), assisted living (decreased 4.8%), and dental products (decreased 3.0%).

Over the past 12 months industry-wide growth looks much stronger, with the HCLS Composite Index achieving a 17.2% increase. At the category level, provider-based services stock prices grew by 40.5% over the past 12 months, followed by payor, provider and pharmacy support services at 28.6% and products and devices at 17.6%. Specific stock price growth leaders over the past year include home care, hospice and home infusion (77.5%); surgicenters / rehabilitation (56.7%); specialty pharmacy management (50.6%); and long-term care (44.0%).

Industry News

CMS issued a final ruling that will allow home health agencies to pay for remote patient monitoring. This will allow providers to collect real-time data and improve outcomes. CMS has finalized a rule that will even the playing field between what physician offices and hospital outpatient departments are paid. The move is expected to save Medicare $380 million in 2019. LifePoint Health’s shareholders have approved its acquisition by Apollo. Once combined with RCCH HealthCare, the combined company will consist of 84 hospitals with revenue of $8 billion.

M&A Overview

Announced Healthcare & Life Sciences M&A1

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Debt Markets Overview

Key Credit Statistics3

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Select Healthcare & Life Sciences Debt Offerings4

(by deal amount)

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Public Markets Overview

Key Trading Statistics1

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Public Company Sector Performance1

(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 Offerings2

(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

Providers | CMS will pay for remote patient monitoring by home health agencies

CMS issued a final ruling that will allow home health agencies to pay for remote patient monitoring. Remote patient monitoring allows providers to collect data from patients digitally and in real-time, which providers believe can lead to better outcomes. In 2016, Medicare spent $18.1 billion on 3.4 million home health patients. Home health is expected to grow significantly in the coming years as baby boomers retire. CMS will also begin paying for home infusion therapy providers to administer certain drugs. The rule, effective January 1, 2019, also increases Medicare payment for home health agencies by 2.2%.

Read the article.

M&A | LifePoint shareholders approve RCCH deal, nix golden parachutes

LifePoint Health, a rural hospital operator, approved its proposed sale to Apollo Global Management. Shareholders also voted strongly against giving golden parachutes to four top LifePoint executives. Apollo plans to merge LifePoint with portfolio company RCCH HealthCare Partners. 83% of shareholders voted against the proposed golden parachute provision, which would have paid four executives nearly $120 million. The proposed golden parachute proposal applied to CEO Bill Carpenter, COO David Dill, CFO Michael Coggin, and CAO John Bumpus. Apollo is paying $5.6 billion to create an 84-hospital chain with combined revenue of $8 billion. Apollo is funding the purchase with $2.9 billion of debt and minority interest.

Read the article.

Providers | CMS finalizes site neutral payment rule

CMS has finalized a site neutral payment rule that will even the playing field between what physician offices and hospital outpatient departments are paid for clinical visits. Currently, CMS often pays more for hospital outpatient clinic visits than similar physician office visits. CMS estimated that it was paying an average of $75 to $85 more for the same service in hospital outpatient settings compared to physicians’ offices. The move to site neutral payments is expected to save Medicare $380 million in 2019. The move will also save patients money through lower co-payments.

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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Sources

1.FactSet.

2.Company Filings.

3.S&P.

4.PNC Debt Capital Markets.

 

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