Deals and Dealmakers. The Health Care M&A Review Fourth Quarter 2017

Transcription

1 Deals and Dealmakers The Health Care M&A Review Fourth Quarter 217

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3 Irving Levin Associates Publications and Services Subscriptions & Memberships The SeniorCare Investor Dealmakers Forum & News Health Care Deal News Deal Search Online Webcasts & Training Interactive Webinar Series Data Reports The Senior Care Acquisition Report The Health Care Services Acquisition Report The Home Health Care & Hospice Acquisition Report The Hospital Acquisition Report Deals and Dealmakers The Health Care M&A Review Fourth Quarter, 217 Volume 22, No. 4, 217 ISSN ISBN ISBN (Four-Volume Set) Published by: Irving Levin Associates, Inc /2 Main Avenue Norwalk, CT Fax Publisher: Senior Editor: Editor: Analysts: Eleanor B. Meredith Stephen M. Monroe Lisa E. Phillips Margaret Mark, Ben Swett Price $ Irving Levin Associates, Inc. All rights reserved. Reproduction or quotation in whole or part without permission is forbidden. Flat Rate Postage is paid at Norwalk, CT. This publication is not a complete analysis of every material fact regarding any company, industry or security. Opinions expressed are subject to change without notice. Statements of fact have been obtained from sources considered reliable but no representation is made as to their completeness or accuracy. POSTMASTER: Send address changes to Irving Levin Associates, Inc., 268-1/2 Main Avenue, Norwalk, CT 6851.

4 Table of Contents Page To Our Friends and Colleagues Health Care M&A Market 5 Sector Highlights Behavioral Health Care 9 Biotechnology ehealth 11 Home Health & Hospice 12 Hospitals 13 Laboratories, MRI & Dialysis 14 Long-Term Care 15 Managed Care 16 Medical Devices 17 Pharmaceuticals 18 Physician Medical Groups 19 Rehabilitation 2 Other Health Care Services 21

5 To Our Friends and Colleagues Deals and Dealmakers is a snapshot of current trends in health care mergers and acquisitions. Presented in the following pages are editorial comments, charts and data representing the overall quarterly deal volume and monetary commitments that shaped the health care merger and acquisition market during the fourth quarter of 217, as well as listings of the major deals. Deals and Dealmakers summarizes the detailed information contained in other publications by Irving Levin Associates, Inc. This privately held corporation publishes research reports and newsletters, and maintains a searchable, online repository of current and historical data on mergers and acquisitions in all the health care sectors and the seniors housing markets. The data discussed in the following pages was generated by the DealSearchOnline database, which offers transactional data and details, as well as contact information for key dealmakers. Registration and initial searches are free of charge; further access is granted through a paid subscription or on a paid per-deal basis. HealthCareMandA.com is a comprehensive service dedicated exclusively to the tracking and analysis of health care mergers and acquisitions. This service includes a monthly newsletter, weekly deal alerts and a quarterly report of all transactions, as well as special access to M&A deals data through DealSearchOnline. The Health Care Services Acquisition Report is also available as a standalone subscription. The SeniorCare Investor has the scoop on mergers, acquisitions, financings and corporate rumblings in the long-term care sector. Long-term care and senior care industry leaders stay current on the market by reading this newsletter and the associated online blog, which covers current news in the long-term care market as the stories are unfolding. For nearly two decades this publication has been tracking and analyzing the trends driving the assisted living, independent living and skilled nursing markets. Levin also publishes the annual Senior Care Acquisition Report, which provides details on publicly announced long-term care deals as well as a composite analysis including private deals. Inquiries are welcome for specific information on any of the transactions or analysis in this review. For more information or to subscribe, go online or call Stephen M. Monroe Partner 4

6 Quarterly Mergers & Acquisitions, by Deal Volume With 377 deals announced in the fourth quarter, acquisition activity was up 1% compared with the 373 transactions announced in the previous quarter. Deal volume was lower than the same quarter in 216, down 3% compared with the 389 deals reported then. Deal volume in the last five quarters has been relatively uniform, staying above the 37 level, with the exception of Q1:17 (433 deals). That pattern between 32 and 4-plus transactions per quarter has been consistent since the first quarter of 214, when only 293 deals were recorded. Heavy deal volume has become the new normal, it appears, and judging by the most recent five quarters, the lower range may begin around 37 transactions per quarter. Deal volume in the health care services category, at 236 transactions, was down 5% from the previous quarter. Services deals made up 63% of the quarter s deals, which is slightly lower than the previous quarter, in which the services side accounted for 67%, but equal to Q4:16. 5

7 Deal Volume by Health Care Sector Deal Volume by Health Care Sector Q4:17 Deals Q3:17 Deals Change Q4:16 Deals Change Services Behavioral Health Care % 2% Home Health & Hospice % 24-46% Hospitals % 23-9% Labs, MRI and Dialysis % 9 78% Long-Term Care % 93-25% Managed Care 8 25% 4 15% Physician Medical Groups % 28 14% Rehabilitation % 11 % Other % 45 13% Services subtotal % 247-4% Technology Biotechnology % 56-13% ehealth % 3 % Medical Devices % 23 22% Pharmaceuticals % 33 3% Technology subtotal % 142-1% Grand Total % 389-3% Long-Term Care remained the most active of all the sectors, although quarterly deal volume continued to slip. The 7 deals announced in the recent fourth quarter are 5% lower than the previous quarter (74 transactions). Among the services sectors, Hospitals, Labs/MRI/Dialysis, Rehabilitation and Other Services were the only sectors to equal or increase deal volume levels above the previous quarter. Compared with Q4:16, some sectors showed significant gains, such as Laboratories, MRI & Dialysis (+78%), and Managed Care (+15%). Deal activity is typically light for both sectors, so a couple of deals either way makes a difference. Still, there was considerable movement in the Managed Care sector, with at least two foreign deals announced, and some U.S.-based specialty firms acquired. In the Labs sector, investors have become more interested in diagnosis-related services in recent quarters. The technology sectors showed some improvement versus the year-ago quarter, except for Biotechnology, which dipped 13%. Compared with the previous quarter, all showed higher deal volume, with the exception of ehealth (-29%). 6

8 Dollar Value: Services vs. Technology 14. Health Care Mergers & Acquisitions Total Dollar Volume by Quarter Dollar Volume (in $ billions) Technology Services Deal value in the fourth quarter totaled $114.5 billion, which was 166% higher than the previous quarter ($43.1 billion), and 197% above Q4:16 s $38.6 billion total. Deals on the Technology side of health care usually take the lion s share of spending in each quarter, but that didn t happen this time. Thanks to the $77 billion CVS Health acquisition of Aetna, the Services side accounted for 87% of the quarter s spending, close to $ billion. Technology deals accounted for 13% ($15.1 billion). The situation will likely be reversed, beginning in the first quarter of 218, as the Pharmaceutical sector wakes up with the tax overhaul. In Q4:17, the median price was approximately $32.3 million, well below the previous quarter s median price of $4. million. The average price of a transaction in Q4:17 was $98.1 million, based on 127 transactions that reported financial terms, pushed higher by the CVS/Aetna deal. 7

9 Top in Q4:17 Acquirer Name CVS Health Corporation Optum Humana Inc.; TPG Capital; and Welsh, Carson, Anderson & Stowe Novartis AG Acquirer Listing Target Target Listing Price Target Sector NYSE: CVS Aetna Inc. NYSE: AET $77. billion Managed Care NYSE: UNH NYSE: HUM NYSE: NVS DaVita Medical Group Kindred Healthcare, Inc. Advanced Accelerator Applications S.A. NYSE: DVA NYSE: KND $4.9 billion $4.1 billion Physician Medical Groups Home Health & Hospice NASDAQ: AAAP $3.9 billion Pharmaceuticals Express Scripts NASDAQ: Holding Company ESRX evicore healthcare Private $3.6 billion Managed Care UnitedHealth Group, Inc. NYSE: UNH Banmedica SA SSE: SGO $2.8 billion Hospitals Roche VTX: ROG Ignyta, Inc. NASDAQ: RXDX $1.7 billion Biotechnology Shanghai Cardinal Health Pharmaceuticals OTC: SHPMY China Holding Co., Ltd. NYSE: CAH $1.2 billion Other Services Mallinckrodt plc Vir Biotechnology, Inc. NYSE: MNK Private Sucampo Pharmaceuticals, Inc. Collaboration on infectious disease programs NASDAQ: SCMP $1.2 billion Pharmaceuticals Private $1. billion Biotechnology Ten of the largest deals announced in the fourth quarter broke the $1. billion mark, for a total of $.4 billion (88% of the quarter s total spending of $114.4 billion). The largest transaction, CVS Health s $77. billion acquisition of managed care giant Aetna, made up 67% of the quarter s combined total spending. 8

10 Behavioral Health Care Deal activity was consistent with most of the previous quarters. Although deal volume slipped 14% from the previous quarter, it rose 2% compared with the same quarter a year earlier. The fourth quarter s total of 12 deals represents 22% of the 54 transactions announced in the past 12 months. 2 Behavioral Health Care Mergers & Acquisitions Total by Quarter None of the deals announced in the fourth quarter disclosed prices. Dollars Spent on Behavioral Health Care Mergers & Acquisitions, by Quarter $874,, $149,595, $38,, $1,, $ Below we list the four largest Behavioral Health Care deals of the past 12 months. Four Largest Behavioral Health Care Deals in the Past 12 Months Care Capital Properties, Inc. 6 behavioral health hospitals Q2:17 $38,, Sequel Youth and Family Global Partner Acquisition Corp. Services Q1:17 $149,595, AAC Holdings, Inc. AdCare, Inc. Q3:17 $85,, MedEquities Realty Trust, Inc. 4 behavioral health facilities Q3:17 $25,, 9

11 Biotechnology Biotechnology deal activity steadied in the fourth quarter, rising 17% to 49 transactions, compared with the third quarter s 42 transactions. The total represents 23% of the 29 deals announced in the previous 12 months. 7 Biotechnology Mergers & Acquisitions Total by Quarter A total of $5.2 billion financed the fourth quarter s activity, representing % of the approximately $54.2 billion committed in the preceding 12 months. Dollars Spent on Biotechnology Mergers & Acquisitions, by Quarter $4,914,939,456 $32,498,77, $2,642,1, $14,148,8,7 Below we list the five largest Biotechnology deals of the past 12 months. Five Largest Biotechnology Deals in the Past 12 Months $5,242,626,239 Johnson & Johnson Actelion Ltd. Q1:17 $3,173,8, Gilead Sciences, Inc. Kite Pharma, Inc. Q3:17 $11,95,, Roche Ignyta, Inc. Q4:17 $1,7,, Collaboration on infectious disease Vir Biotechnology, Inc. programs Q4:17 $1,,, Sanofi Protein Sciences Q2:17 $65,,

12 ehealth Merger and acquisition activity declined in the fourth quarter, down 29% compared with the previous quarter, to 3 deals. The deal volume equaled that reported in the same period a year earlier. The fourth quarter s total represents an 18% share of the 164 deals announced in the previous 12 months. 6 ehealth Mergers & Acquisitions Total by Quarter Only one of the deals in the fourth quarter included a price, for $88.8 million. Dollars Spent on ehealth Mergers & Acquisitions, by Quarter $312,645, $1,988,5, $2,555,5, $4,584,65,346 $88,8, Below we list the five largest ehealth deals of the past 12 months. Five Largest ehealth Deals in the Past 12 Months Internet Brands WebMD Health Corp. Q3:17 $3,564,865,346 Global Healthcare Exchange, Temasek Holdings Limited LLC Q2:17 $1,8,, McKesson Corporation CoverMyMeds LLC Q1:17 $1,4,, Symphony Health Solutions PRA Health Sciences, Inc. Corporation Q3:17 $53,, Teladoc, Inc. Best Doctors, Inc. Q2:17 $44,, 11

13 Home Health & Hospice Still, deal volume remained slow in the fourth quarter, at 13 transactions, which represents 24% of the 54 deals announced in the past 12 months. Compared with the same period a year earlier, deal volume was down 46% Home Health & Hospice Mergers & Acquisitions Total by Quarter Only two of the 13 deals disclosed financial terms, but spending surged 3,733% compared with the same quarter a year earlier. Dollars Spent on Home Health & Hospice Mergers & Acquisitions, by Quarter $132,6, $2,945,62 $ $ $5,83,119, Below we list the four largest Home Health & Hospice deals of the past 12 months. Four Largest Home Health & Hospice in the Last 12 Months Humana Inc.; TPG Capital; and Welsh, Carson, Anderson & Stowe Kindred Healthcare, Inc. Q4:17 $4,,, LHC Group, Inc. Almost Family, Inc. Q4:17 $983,119, AMEDISYS, INC. 6 home health and hospice centers Q1:17 $2,5, Stillwater Medical Center Judith Karman Bristol Hospice Q1:17 $445,62 12

14 Hospitals The fourth quarter of 217 posted 21 transactions, accounting for 27% of the 78 announced in the prior 12 months. Deal volume was up 4% compared with the previous quarter, but 9% lower than the same quarter in Hospital Mergers & Acquisitions Total by Quarter Four of the transactions disclosed prices in the fourth quarter, but one deal accounted for 99% of the spending of $2.8 billion. Dollars Spent on Hospital Mergers & Acquisitions, by Quarter $2,312,147,55 $362,8, $2,129,, $ $2,819,2, Below we list the five largest Hospital deals of the past 12 months. Five Largest Hospital Deals in the Past 12 Months UnitedHealth Group, Inc. Banmedica SA Q4:17 $2,8,, acute care hospitals and 1 Medical Properties Trust, Inc. BHC facility Q2:17 $1,4,, HCA Holdings, Inc. 3 Houston hospitals from Tenet Q2:17 $725,, PinnacleHealth System 4 Community Health hospitals Q1:17 $231,, Saint Francis Health System EASTAR Health System Q1:17 $64,3, 13

15 Laboratories, MRI and Dialysis Deal volume in the fourth quarter rose 7% compared with the previous quarter, to 16 deals, and increased 78% compared with the fourth quarter in 216. The fourth-quarter deals represent 29% of the 56 transactions announced in the past 12 months Labs, MRI & Dialysis Mergers & Acquisitions Total by Quarter Only one transaction disclosed a price in the fourth quarter, for $ million. Dollars Spent on Laboratories, MRI & Dialysis Mergers & Acquisitions, by Quarter $276,, $243,95, $1,375,, $1,264,3, $,, Below we list the five largest Laboratories, MRI & Dialysis deals of the past 12 months. Five Largest Laboratories, MRI and Dialysis Deals in the Past 12 Months EUROIMMUN Medical Laboratory Diagnostics PerkinElmer, Inc. AG Q2:17 $1,3,, Konica Minolta, Inc. Ambry Genetics Corporation Q3:17 $8,, Quidel Corporation Triage and BNP business of Alere Inc. Q3:17 $4,, PerkinElmer, Inc. Tulip Diagnostics Private Ltd. Q1:17 $127,3, Bio-Rad Laboratories, Inc. RainDance Technologies Inc. Q1:17 $75,2,

16 Long-Term Care Merger and acquisition activity continued a slow decline in the fourth quarter, down 5% compared with the previous quarter, to 7 transactions, and 25% lower than the same quarter in 216, which had 93 transactions. The quarter s deal volume makes up 23% of the 299 deals announced within the past 12 months Long-Term Care Mergers & Acquisitions Total by Quarter Forty-five of the 7 deals disclosed prices, although none topped $425 million. Dollars Spent on Long-Term Care Mergers & Acquisitions, by Quarter $6,47,61,655 $1,444,3, $9,815,55,5 $2,559,628, $1,849,85, Below we list the five largest Long-Term Care deals of the past 12 months. Five Largest Long-Term Care Deals in the Past 12 Months Sabra Health Care REIT, Inc. Care Capital Properties, Inc. Q2:17 $3,996,, Columbia Pacific Advisors, LLC Hawthorn Retirement Group Q2:17 $2,6,, Sentio Healthcare Properties, Kayne Anderson Real Estate Advisors Inc. Q2:17 $825,, Sabra Health Care REIT, Inc. The Enlivant portfolio Q3:17 $793,8, The Blackstone Group 26 senior living communities Q2:17 $75,, 15

17 Managed Care The fourth quarter of 217 will be remembered for some time to come, thanks to the game-changing deal announced between pharmacy/retailer CVS Health and Aetna, one of the largest managed care companies in the country. That was only one deal, of course, and there were actually transactions announced in Q4:17. Fourth quarter deal volume represents a 38% share of the 26 deals announced in the previous 12 months, and a 15% increase over the same quarter in Managed Care Mergers & Acquisitions Total by Quarter Two of the deals disclosed prices in the fourth quarter, for nearly $8.6 billion, the highest ever recorded in this sector, or several others. The total represents 95% of the $84.7 billion in spending announced in the previous 12 months. Dollars Spent on Managed Care Mergers & Acquisitions, by Quarter $957,5, $ $ $4,15,, $8,6,, Below we list the four largest Managed Care deals of the past 12 months. Four Largest Managed Care Deals in the Past 12 Months CVS Health Corporation Aetna Inc. Q4:17 $77,,, Centene Corporation Fidelis Care Q3:17 $3,75,, Express Scripts Holding Company evicore healthcare Q4:17 $3,6,, Magellan Health, Inc. Senior Whole Health Q3:17 $4,, 16

18 Medical Devices Deal volume reached 28 transactions, rising 22% compared with the previous quarter, and 22% compared with the same quarter a year earlier. This quarter accounted for 26% of the 8 deals announced in the previous 12 months Medical Device Mergers & Acquisitions Total by Quarter Seventeen deals disclosed a price, for a total of nearly $2.9 billion. Dollars Spent on Medical Device Mergers & Acquisitions, by Quarter $5,447,58,28 $6,178,889,614 $34,139,693,1 $4,93,772,617 $2,78,32, Below we list the five largest Medical Device deals of the past 12 months. Five Largest Medical Device Deals in the Past 12 Months Becton, Dickinson and Company C.R. Bard, Inc. Q2:17 $24,,, Cardinal Health, Inc. 3 Medtronic businesses Q2:17 $6,,, Allergan plc ZELTIQ Aesthetics, Inc. Q1:17 $2,475,, Royal Philips The Spectranetics Corporation Q2:17 $1,995,32, Fresenius Medical Care NxStage Medical, Inc. Q3:17 $1,973,3,8 17

19 Pharmaceuticals Deal volume in the fourth quarter shot up % over the previous quarter, to 34 transactions. Q4:17 basically equaled the same quarter in 216, when 33 deals were announced. This quarter s deal volume accounts for 35% of the 96 deals announced in the previous 12 months Pharmaceutical Mergers & Acquisitions Total by Quarter Twenty of the 34 announced transactions disclosed a price, making for a total of $6.9 billion spent in the fourth quarter. Dollars Spent on Pharmaceutical Mergers & Acquisitions, by Quarter $9,47,951,425 $,199,77, $9,24,86, $1,965,5, $6,941,2, Below we list the five largest Pharmaceutical deals of the past 12 months. Five Largest Pharmaceutical Deals in the Past 12 Months Fresenius Kabi USA Akorn Inc. Q2:17 $5,131,3, Takeda Pharmaceutical Co. Ltd. ARIAD Pharmaceuticals Inc. Q1:17 $4,66,8, Advanced Accelerator Applications Novartis AG S.A. Q4:17 $3,9,, Royalty Pharma Rights to royalty stream of Tysabri Q1:17 $2,2,, Mallinckrodt plc Sucampo Pharmaceuticals, Inc. Q4:17 $1,2,, 34 18

20 Physician Medical Groups The 32 acquisitions announced in the fourth quarter represent 19% of the 166 deals announced in the previous 12 months. Deal volume was down 26% compared with the previous quarter, but posted a 14% increase versus the same quarter a year earlier. 7 6 Physician Medical Group Mergers & Acquisitions Total by Quarter Once again, only two deals disclosed a price in the quarter, for $4.9 billion, which represents 47% of the $.4 billion spent in the past 12 months. Dollars Spent on Physician Medical Group Mergers & Acquisitions, by Quarter $6,411,9, $3,284,91,6 $76,, $1,45,915, $4,93,29,83 Below we list the five largest Physician Medical Group deals of the past 12 months. Five Largest Physician Medical Group Deals in the Past 12 Months Optum DaVita Medical Group Q4:17 $4,9,, Optum Surgical Care Affiliates, Inc. Q1:17 $3,277,4, Ares Management L.P. DuPage Medical Group Q3:17 $1,45,, Surgery Partners National Surgical Healthcare Q2:17 $76,, CRH Medical Corporation DDAB, LLC Q1:17 $4,89,791 19

21 Rehabilitation Deal volume seesawed throughout 217, reaching a high of 17 transactions in Q3:17 after a slow Q2:17 with only seven transactions. In the fourth quarter, 11 deals were announced, a drop-off of 35% compared with the busy third quarter. The fourth quarter of 217 equaled deal volume comparable to the 216 quarter. The 11 transactions account for 23% of the 47 transactions announced in the previous 12 months Rehabilitation Mergers & Acquisitions Total by Quarter Two of the 11 transactions disclosed prices, for a combined total of $757.5 million, thanks to a single large transaction. Dollars Spent on Rehabilitation Mergers & Acquisitions, by Quarter $79,593, $18,, $28,5, $56,95, $757,5, Below we list the five largest Rehabilitation deals of the past 12 months. Five Largest Rehabilitation Deals in the Past 12 Months Concentra Group Holdings, LLC U.S. HealthWorks, Inc. Q4:17 $753,, Global Medical REIT Inc. Central Texas Rehabilitation Hospital Q3:17 $4,65, Carrus Specialty Hospital and Carrus Global Medical REIT Inc. Rehabilitation Hospital Q2:17 $26,, U.S. Physical Therapy, Inc. 9 clinic physical therapy practice Q3:17 $16,3, U.S. Physical Therapy, Inc. 9-clinic physical therapy practice Q1:17 $11,4, 2

22 Other Services The 51 transactions announced in the fourth quarter equaled the number reported in the previous quarter, and represented a 13% increase compared with the year-earlier quarter. Deal volume accounted for 25% of the 28 deals announced in the past 12 months. 54 "Other Services" Mergers & Acquisitions Total by Quarter Of the 51 deals announced in the fourth quarter, only eight disclosed prices, and just one of those topped the $1. billion mark. Dollars Spent on Other Services Mergers & Acquisitions, by Quarter Q4:16 Q1:217 Q2:17 Q3:17 Q4:17 $1,425,997,163 $3,85,425, $35,481,573,994 $7,867,683,488 $3,349,75, Below we list the five largest Other Services deals of the past 12 months. Five Largest Other Services Deals in the Past 12 Months Pharmaceutical Product Hellman & Friedman LLC Development, LLC Q2:17 $9,5,, Thermo Fisher Scientific, Inc. Patheon N.V. Q2:17 $7,189,9, Avantor Performance Materials, Inc. VWR Corporation Q2:17 $6,558,36, Pamplona Capital Management LLP PAREXEL International Corporation Q2:17 $5,,, INC Research Holdings, Inc. inventiv Health Q2:17 $4,6,, 21