COVID-19 Impacts on M&A
Despite the healthcare industry's essential industry status, total transaction volume is down nearly 24% (1,020 transactions) between March 22 – December 31 compared to the same period in 2019 (1,336 transactions). Strategic buyers drove nearly 89% of closed transactions between March 22 – December 31 (873 transactions). In comparison, 2019 saw nearly 86% of transactions (1,091 transactions) completed by strategic buyers within the same period. Nearly 27% of the transactions (271 transactions) closed between March 22 – December 31 were comprised of targets engaged primarily in healthcare services. In comparison, 2019 saw nearly 30% of transactions (394 transactions) comprised of targets in the same subsector within the same time frame.
Healthcare Jobs Continue Growth in November
Healthcare continues to see positive month over month employment growth, adding 46,000 jobs in November. The healthcare industry added 1.1 million jobs since the lows seen in March 2020. During November, ambulatory care services added 52,000 jobs, while nursing care facilities netted a loss of 12,000 jobs. If the current trends continue, the healthcare industry is expected to return to March 2020 employment levels by October 2021.1
U.S. Secures 400 Million Doses of Covid-19 Vaccines
In December, the FDA approved two Covid-19 vaccines developed by Moderna and Pfizer-BioNTech. The U.S. made agreements with both companies to purchase 200 million doses of each vaccine. Pfizer and BioNTech state that they can deliver 70 million doses by June 30th, 2021, with the rest to be delivered by the end of July. Both vaccines require two doses, giving the U.S. a current total of 200 million vaccines.2
Hospital Operating Margins Fall while Expenses Rise
Hospital inpatient and outpatient revenues decreased by 0.6% in November, and 6% year to date. In contrast, key expenses for hospitals increased year to date. The total expense per adjusted discharge rose 14%, labor expense per adjusted discharge rose 15.2%, and non-labor expense per adjusted discharge rose 14.2%. Drug expense also increased by 16% in the same period. In the coming winter months, hospital resources will continue to be scarce as experts predict increases in Covid-19 cases and hospitalizations. Rises in Covid-19 patients in hospitals lead to a reduction in higher revenue-generating elective procedures.3
FTC Fails to Halt Jefferson-Einstein Merger
The FTC tried to halt the Philadelphia-based Thomas Jefferson University from acquiring the Albert Einstein Healthcare Network. The FTC cited that the merger would threaten competition as both entities operate in the same market and would create a monopoly. Despite this objection, a federal judge ruled against the FTC. This announcement comes as M&A activity decreased significantly in 2020. Other small and independent hospitals could seek mergers in the future due to increasing expenses and diminishing operating margins.4
Philips to Acquire BioTelemetry
Royal Philips (NYSE: PHG) announced that it would acquire a remote patient monitoring company, BioTelemetry (NASDAQ: BEAT), for $2.8 billion. BioTelemetry provides remote cardiac and blood glucose monitoring, laboratory services for clinical trials, and equipment manufacturing. The company’s core offering is wearable heart monitors, and the company monitors 1.2 million patients a year. BioTelemetry develops software that allows for electronic HIPAA-compliant patient records to be generated and sent to the provider's EHR system. The acquisition is the latest in Philips’s strategy of becoming a leading provider of patient care management solutions for hospitals and the home.5
Telehealth Proves Future Role in Healthcare
The pandemic has shifted the traditional method in which Americans obtain medical care. Telehealth has emerged as a safe and effective way to connect with doctors for routine and non-emergency care. Although many primary care and non-acute care facilities reopened for in-person visits, many report higher telehealth visits than their pre-pandemic levels. Advantage Benefits Groups saw an increase in telehealth billings by 2,600% in 2020 compared to 2019. Healthcare professionals also see benefits, as telehealth visits increase capacity and space in offices and hospitals. Telehealth increases access to care and is especially beneficial for rural areas.6
AstraZeneca to Acquire Alexion
AstraZeneca (NASDAQ: AZN) agreed to purchase the immunology and rare disease pharmaceutical company Alexion Pharmaceuticals Inc. (NASDAQ: ALXN) for $39 billion. The deal will be a combination of cash and stock and is expected to close in the third quarter of 2021. The acquisition dramatically increases AstraZeneca’s immunology pipeline as Alexion focuses on developing monoclonal antibodies to selectively inhibit immune factors. This transaction represents the largest acquisition in AstraZeneca’s history.7
Purdue Pharma Pleads Guilty for Role in Opioid Crisis
The maker of OxyContin pleaded guilty to three felony offenses for their role in the opioid crisis. Purdue’s plea deal resulted in more than $5.5 billion in penalties, much of which will go unpaid. The company will pay $225 million toward a $2 billion criminal forfeiture, with the rest being foregone if the company completes a bankruptcy reorganization dissolving itself. Purdue Pharma generated more than $30 billion in sales from OxyContin.8
Largest Transactions Closed
- Danaher Corporation
- Immunomedics, Inc.
- Gilead Sciences, Inc.
- Livongo Health, Inc.
- Teladoc Health, Inc.
- WellCare Health Plans, Inc.
- Centene Corporation
- MyoKardia, Inc.
- Bristol-Myers Squibb Company
- The Medicines Company
- Novartis AG
- Momenta Pharmaceuticals, Inc.
- Johnson & Johnson
- Veritas Capital Fund Management, L.L.C
- Forty Seven, Inc.
- Gilead Sciences, Inc.
- Asklepios BioPharmaceutical, Inc.
- Bayer Aktiengesellschaft
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.
EBIT - Earnings Before Interest and Taxes