November Health Deals Drop Slightly, but on Track to Top 2018

Dec. 18, 2019, 3:53 PM

Deal volume in the health-care industry dropped slightly in November, marking the first time in the past five months when there were fewer than 150 announced or closed transactions, investment bankers and attorneys told Bloomberg law.

The health-care information technology, long-term care, and physician practice and services sectors all fell in volume, but deals in these sectors remain on pace to exceed 2018’s numbers, S. Lawrence Kocot, a principal at KPMG LLP in Washington told Bloomberg Law.

Overall, the numbers are still strong. There were 1,400 deals through the end of November—a nearly 40% increase in deal volume from this point last year, ECG principal Hector M. Torres said.

ECG Management Consultants, Chicago, prepared the curated year-to-date list and the list of select November transactions for Bloomberg Law.

Life Sciences Tops Month

The life sciences and pharmaceuticals sector had the most transactions in November, Kocot said.

These deals also involved some of the highest amounts, Gary W. Herschman, a member of Epstein Becker Green in Newark, N.J., told Bloomberg Law.

For example, Bristol-Myers Squibb closed its acquisition of Celgene Corp. for $74 billion, Amgen completed its purchase of the world-wide rights to Celgene’s psoriasis drug Otezla for $13.4 billion, Novartis AG announced it will buy the Medicines Co. for $9.7 billion, Exact Sciences Corp. completed its deal to acquire Genomic Health Inc. for $2.8 billion, and Swiss drugmaker Roche bought U.S. biotech company Promedior for $1.4 billion, he said.

The medical device and supplies sector also put in a significant showing, with 19 deals announced or closed, Epstein Becker Green member Anjana D. Patel said. Stryker Corp. announced the biggest deal, a definitive agreement to acquire Wright Medical for a total equity value of $4 billion, she said.

Steady Pace for Health IT

Health IT continued on its steady pace, ECG senior manager Aaron T. Newman told Bloomberg Law. The yearly deal volume is now over 180, compared with 127 transactions through November 2018, he said.

Optum is investing heavily in IT, Patel said. The United Health Group subsidiary acquired Vivify Health, a Texas-based remote patient monitoring start-up. This broadens Optum’s investments in consumer-focused businesses, particularly engagement solutions for patients with chronic health conditions, she said.

Other big deals included Leonard Green & Partners’ $3 billion recapitalization of WIRB-Copernicus Group, which provides review services for human research trials, and Daré Bioscience’s agreement to acquire Microchips Biotech, Newman said. Daré is a leader in women’s health innovation, and Microchips provides a user-controlled drug delivery platform. The deal is for about $110 million.

Long-Term Care

There were 23 long-term-care sector deals announced or closed in November, ECG’s Christopher McGuine told Bloomberg Law. The 273 year-to-date total is up about 36% from last year, he said.

Notable transactions included the Ensign Group’s acquisition of six skilled nursing facilities in Texas, McGiune said. The publicly traded provider of post-acute care services has completed over 20 deals this year, he said.

The hospital and health system sector is well short of where it was at this time last year, Kocot said. Only 119 hospital transactions have taken place in 2019 so far, compared with 165 as of November 2018.

And there were just five deals in November, Nicholas B. Davis of ECG said. Those deals included the University of Louisville’s acquisition of KentuckyOne Health’s Louisville holdings, which include Jewish Hospital, St. Mary Hospital, St. Elizabeth Hospital, and certain CommonSpirit Health assets, he said.

Physician Practice and Services

The physician practice and services sector also saw fewer transactions in November, but overall is still running above 2018’s year-to-date total, Torres said.

Private equity was a big player, with Audax Private Equity, American Securities, Waud Capital Partners, CI Capital Partners, Chicago Pacific Founders, and LNK Partners LLC all doing deals during the month.

Increased competition in private equity recapitalizations of specialty physician groups continues to drive deals in gastroenterology, orthopedics, and ophthalmology, Patel said. More private equity firms are pushing to acquire platforms in these areas, she said.

“It’s clearer than ever that the key to future survival and success of hospitals and physicians (and other healthcare providers) is robust implementation of virtual health, data analytics, advanced EMR and patient access—which only large organizations with substantial capital can invest in,” Herschman said.

Despite the slight downturn in November, Herschman predicted that “even more consolidation among providers is coming in 2020.”

Bloomberg Law’s Health Care Transactions Editorial Committee contributed guidance for this report. Members include Gary W. Herschman, of Epstein, Becker & Green PC, Newark, N.J. (gherschman@ebglaw.com); Anjana D. Patel, of Epstein, Becker & Green PC, Newark (adpatel@ebglaw.com); Hector M. Torres, of ECG Management Consultants, Chicago (hmtorres@ecgmc.com); Aaron T. Newman, of ECG Management Consultants, Chicago (atnewman@ecgmc.com); Nicholas B. Davis, of ECG Management Consultants, Chicago (nbdavis@ecgmc.com); and Christopher McGuine, of ECG Management Consultants, Chicago (ctmcguine@ecgmc.com); S. Lawrence Kocot, of KPMG, Washington (lkocot@kpmg.com); Carole Streicher, of KPMG, Chicago (cstreicher@kpmg.com); and Brett S. Glover, of KPMG, Dallas (bglover@kpmg.com).

Epstein, Becker & Green PC and KPMG LLP didn’t comment on any particular transaction or party discussed or listed in this article.

To contact the reporter on this story: Mary Anne Pazanowski in Washington at mpazanowski@bloomberglaw.com

To contact the editor responsible for this story: Rob Tricchinelli at rtricchinelli@bloomberglaw.com

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