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    Healthcare Q3 2020

    Q3-2020-Healthcare

    Industry Trends

    Healthcare Jobs Grow in August

    The healthcare industry experienced a growth in jobs in August, a turnaround after a loss of 1.4 million in April. August gains include 14,000 jobs in hospitals, 49,000 jobs in physician and dentist offices, and 12,000 jobs in home and health services. Despite the positive job growth, healthcare employment is still down 679,000 jobs in 2020.1

    Metlife to Buy Versant Health

    Metlife has agreed on terms to purchase Versant Health, one of the nation's leading managed vision care companies, for $1.67 billion in an all cash transaction. Versant Health’s roughly 35 million members and Metlife’s 90 million existing customers would gain access to Versant’s provider network. The acquisition is the latest effort by Metlife to expand its business of selling group benefits to employers. Metlife is targeting a closing by the end of the year.2

    M&A Activity Expected to Surge For Health Systems

    Analysts predict that slow M&A activity in Q1 and Q2 of 2020 has caused a backlog of transactions that will look to close before year-end. After the historically low M&A activity, many independent hospitals will need to explore partnerships to ensure the continued quality of healthcare. Larger healthcare systems are better prepared for future growth as they have access to capital, scale, and vertically-integrated services.3

    Johnson & Johnson Vaccine Advances to Final Stage

    3M recently named Monish Patolwala as their new CFO effective July 1. The news comes as 3M has seen strong demand for products such as masks but suffered declines in other areas, as lockdowns resulted in lower industrial orders and a drop in healthcare spending. The company has also seen significant decreases in products that are sold to dentists and car manufacturers. 3M's current difficulties reflect the trends experienced by healthcare manufacturers across the industry, as a result of the Coronavirus.4

    Blue Health Insurers Reach Tentative Antitrust Settlement

    Blue Cross Blue Shield insurance group has negotiated a tentative settlement in an antitrust suit, in a deal that would require a payout of around $2.7 billion. The suit attempts to stop practices that allegedly limited competition among three dozen member-companies. The suit alleges that insurers illegally conspired to avoid competition to drive up customer prices. The tentative settlement would loosen a rule that had limited Blue Cross Blue Shield insurers' ability to compete for large national employers.5

    Things to Heed in Healthcare For The Rest of 2020

    The economic impact of COVID-19 may cause up to 10 million Americans to lose employer-sponsored healthcare coverage by the end of 2021. COVID-19 has amplified existing inequitable health outcomes. Approximately 10 million people live in counties with low physical access to care and do not have broadband access. Technology-driven innovation may improve and create value in many ways, including telehealth visits that may increase by as much as 50-175x. Lastly, estimates show that COVID–19 could depress healthcare industry earnings by between $35b and $75b compared with baseline expectations. 6

    Telemedicine Scales Up During The Pandemic

    The use of Telehealth technology has increased as providers have begun to offer virtual patient visits to limit unnecessary exposure to COVID- 19. Virtual urgent care technology is being utilized to provide patients a convenient way to be seen for minor illnesses and was adapted for screening suspected COVID patients. If a patient tested positive, they are enrolled in a remote patient monitoring program.7 8

    Autonomous Robots in The Operating Room

    With the recent breakthrough in technology, physicians and researchers have started to incorporate more advanced robotics in the operating room to perform certain tasks with minimal human oversight. Researchers at the National University of Singapore and Intel are creating a robotic silicon finger to mimic the sense of touch that surgeons need to identify organs, cut, and apply the proper amount of force. Additionally, researchers from Children's National Hospital in D.C. and Johns Hopkins are developing a robot coined STAR that can perform surgical sutures.9

    Largest Transactions Closed

    • Target
    • Buyer
    • Value($mm)
    • Momenta Pharmaceuticals, Inc.
    • Johnson & Johnson
    • $6,366.71
    • Principia Biopharma Inc.
    • Sanofi
    • $3,694.33
    • Portola Pharmaceuticals, Inc.
    • Alexion Pharmaceuticals, Inc.
    • $1,771.52
    • CerSci Therapeutics Inc.
    • ACADIA Pharmaceuticals Inc.
    • $936.92
    • Coventry Health Care Workers Compensation, Inc.
    • Genex Services, LLC
    • $850.00
    • Seniors Housing Properties in CA, NV and WA
    • Undisclosed
    • $702.00
    • Pfenex Inc.
    • Ligand Pharmaceuticals Incorporated
    • $566.06
    • InTouch Technologies, Inc.
    • Teladoc Health, Inc.
    • $549.24
    • Tetra Therapeutics Inc.
    • Shionogi & Co., Ltd.
    • $500.00
    • Tutogen Medical GmbH and RTI OEM, LLC
    • Montagu Private Equity LLP
    • $440.00

     

    Source S&P Capital IQ as of 10/8/2020 and PCE Proprietary Data

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    Data Assumptions

    This report represents transaction activity as mergers & acquisitions, consolidations, restructurings and spin-offs. Targets are defined as U.S. Based companies with either foreign or U.S. based buyers. Transaction information provided is based on closed dates only.

    Glossary

    EBIT - Earnings Before Interest and Taxes
    EBITDA - Earnings Before Interest, Taxes, Depreciation, Amortization
    LTM - Last Twelve Months
    TEV - Total Enterprise Value

    Sources:

    1. Commins, John. “Healthcare sector created 75k new jobs in August.” HealthLeaders, September 04, 2020.
    2. Maidenberg, Micah; Leslie Scism. “MetLife to Buy Versant Health for $1.7 Billion.” Wall Street Journal , September 17, 2020.
    3. Hackett, Mallory. “M&A activity expected to surge as independent health systems look for partners.” Healthcare Finance. August 27, 2020.
    4. Zimmer, Carl; Thomas, Katie. “Johnson & Johnson’s Vaccine Advances, Sparking Optimism in Race.” NY Times, September 23, 2020.
    5. Mathews, Anna Wilde; Kendall, Brent. “Blue Health Insurers Reach Tentative Antitrust Settlement for $2.7 Billion.” Wall Street Journal, September 24, 2020.
    6. Singhal, Shubham; Repasky, Cara. “The great acceleration in healthcare: Six trends to heed.” McKinsey & Company, September 9, 2020.
    7. McGhee, Kimberly. “Telehealth rapidly scales up during the pandemic to provide care to patients in the safety of their homes.” medical University of South Carolina, September 10, 2020.
    8. Kennedy, Andy. “How telemedicine became the most essential business in America today.” Medical Economics, September 14, 2020.
    9. Castellanos, Sara. “Automonous Robots are Coming to the Operating Room.”, Wall Street Journal, September 10, 2020.

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