Health-care mergers and transactions surged in August, led by activity in the pharmaceutical and medical device sectors.
The 1,125 deals announced or closed by the end of August were well ahead of the 900 deals for the same period in 2019.
There were 166 deals in August alone. That number was the highest since January, attorneys and health-care analysts reported.
Investment activity may be accelerating as the industry and the U.S. continues to respond to the economic disruption caused by the global Covid-19 pandemic, according to Larry Kocot, a principal at KPMG LLP and national leader of the firm’s Center for Healthcare Regulatory Insight.
The 222 life science and pharmaceutical deals year-to-date were well ahead of all other categories of the health-care industry. The 31 deals in August were a close second to the 32 medical device and supplies deals, Kocot said.
“Investor interest is expected to continue to be strong for the remainder of the year as we move closer to potential approval of a COVID-19 vaccine and more evidence emerges from clinical trials on potential therapeutics,” he said.
The largest life science deal announced in August was Johnson & Johnson’s agreement to acquire Momenta Pharmaceuticals Inc., a biotechnology company focused on developing biologic therapies for immune-mediated diseases, for more than $6 billion.
Investor Interest Increases
Medical device and services deals were at their highest volume for the sector this year, Kocot said.
“As hospitals continue to recover from the pandemic, demand for medical devices and services is increasing along with investor interest in innovative care delivery in new or alternative settings, which are contributing to transaction growth in the sector,” he said.
Deals in the health information technology and software sector dipped to 20 in August. However, activity in this sector is still at one the highest levels in recent times, Anjana Patel, a member of Epstein Becker Green and its National Health Care and Life Sciences Steering Committee, said.
Transactions included Teladoc Health’s merger with Livongo Health and MedCrypt’s acquisition of cybersecurity company MedISAO, as well as GI Partners investment in Clinical Ink, a clinical trials technology company.
“Investors see big payoffs from the pandemic’s continued effect on these sectors’ ability to handle and innovate in light of the high volume usage of these platforms,” Patel said.
Cannabis Sector Exceeds Expectations
Activity in the cannabis sector this year continued to exceed expectations, Zachary Taylor, an associate in the health-care and life sciences practice of Epstein Becker Green, said.
“This growth is likely due to the widespread confidence that more and more states will be expanding medical marijuana, as well as recreational use, over the next several years,” he said.
Five states will vote on legalizing marijuana this November: Arizona (recreational); Mississippi (medical); Montana (recreational); New Jersey (recreational); and South Dakota (medical and recreational), Taylor said. The Democratic Party, particularly vice presidential candidate Sen. Kamala Harris (D-Calif.), favors the decriminalization of marijuana, and that could be affecting the sector’s growth, he said.
The physician services sector, with nearly 20 deals in August, had a significant increase from the six transactions in July, Gary Herschman, a member of Epstein Becker Green’s health-care and life sciences practice, said.
The sector “is demonstrating a strong rebound since the initial COVID shutdowns and restrictions,” Herschman said. Deals included six primary care groups and multiple deals in orthopedics, eye care, and dermatology, he said.
“We expect this robust level of deals in this sector to continue, or increase, in the remaining months of the year,” Herschman said.
Physician groups, “hit over their heads with the ‘Covid bat'—continue to seek to join larger, well-capitalized organizations with strong corporate infrastructure,” he said.
Hospital Deals Fall Off
Just four transactions were announced or closed in the hospitals/health systems sector in August, Hector Torres, managing director at FocalPoint Partners LLC, said.
“Many companies are likely focused on ramping up internal operations and financial performance in light of the COVID-19 pandemic and the corresponding halt on elective surgeries,” Torres said.
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. (firstname.lastname@example.org); Anjana D. Patel, of Epstein Becker & Green PC, Newark, N.J. (email@example.com); Zachary S. Taylor, of Epstein Becker & Green PC, Newark, N.J. (firstname.lastname@example.org); Larry Kocot, of KPMG, Washington (email@example.com); Ross White, of KPMG, Washington (firstname.lastname@example.org); Carol Streicher, of KPMG, Chicago (email@example.com); Hector M. Torres, of FocalPoint Partners, Chicago (firstname.lastname@example.org); Aaron Newman, of FocalPoint Partners, Chicago (email@example.com); Ryan DeBlaey, of FocalPoint Partners, Los Angeles (firstname.lastname@example.org); and Michael Stotz, of FocalPoint Partners, Chicago (email@example.com).
Epstein Becker & Green and KPMG didn’t comment on any particular transaction or party discussed or listed in this article.