Week of November 14, 2016 | Vol. 5, Issue 45
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A potential influx of foreign cash and improved stock valuations under the Trump administration would likely boost dealmaking in the industry, which has been anemic ever since political rhetoric against high drug prices picked up late last year, industry analysts and investment bankers said.
Despite a few headline-grabbing deals, such as Pfizer Inc's $14 billion acquisition of cancer drugmaker Medivation Inc in August, overall life sciences dealmaking is down 65 percent from the same period last year, according to Thomson Reuters data.
Indeed, the biggest mergers and acquisitions news this year was Pfizer's failed bid to buy Allergan Inc for $160 billion, which was shot down by U.S. regulators in April.
Investment bankers attribute the slowdown to weak biotech stock prices, which have traded down as much as 30 percent after Democratic presidential candidate Hillary Clinton vowed to act against pharmaceutical "price gouging" late last year.
Sector stocks are still valued more than 25 percent below their 2015 peak, and potential acquisition targets have stood firm against suitors who tried to take advantage of the drop. "There's been a gap between what acquirers and shareholders are willing to pay for a biotech company and what the company's board thinks it's worth," said one investment banker, who asked not to be named because he was not authorized to talk to media.
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Mylan Posts Loss, Hurt by Lower EpiPen Volumes, Charge Related to Settlement
Mylan
NV swung to a quarterly loss as it booked a charge related to a settlement with U.S. authorities on pricing of its EpiPen. Revenue growth was below expectations as volumes of the lifesaving auto-injector fell.
The quarter's results gave the first indication of the impact of the EpiPen pricing controversy, which triggered a congressional hearing and the $465 million settlement to resolve allegations that Medicaid overpaid Mylan.
The company said sales were down 4% for the segment that includes EpiPen, to $418 million, due to wholesalers cutting back purchases in anticipation of Mylan selling an authorized generic at half the branded product's price.
"I wish we had anticipated" the burden facing some patients who have high out-of-pocket costs under their health plans, Chief Executive Heather Bresch said on an earnings conference call on Wednesday. The drug payment system, she added, "needs to be completely reinvented."
She said Mylan would begin selling the authorized generic EpiPen, at a list price of $300, in the first half of December.
Shares slipped a fraction in after-hours trading. Earlier in the day, the stock had joined a rally among pharmaceutical companies following Donald Trump's victory in Tuesday's presidential election. Mylan shares closed up 4.9% at $38.92, lifted on expectations that Mr. Trump's election and Republican control of Congress would lessen the chances of government restrictions on drug prices-a prospect that seemed on the rise in response to a public backlash against escalating prescription costs over the past few years.
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Below are summaries and charts with the past week's transactions from the different healthcare sectors. For a detailed table showing data for each industry transaction click on any of the charts or use the download link above. Total transaction values are provided in USD millions.
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Pharma & Biotech
7 transactions totaling $1,021
million
Supplies, Equipment & Services
15 transactions totaling $96 million
Healthcare IT & Managed Care
5 transactions totaling $- million
Healthcare Facilities & Distributors
12 transactions totaling $74 million
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Pharma & Biotech
12 private placements totaling $128 million
Supplies, Equipment & Services
14 private placements totaling $73 million
Healthcare IT & Managed Care
6 private placements totaling $1 million
Healthcare Facilities & Distributors
1 private placement totaling $- million
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Pharma & Biotech
6 public offerings totaling $38 million
Supplies, Equipment & Services
4 public offerings totaling $128 million
Healthcare IT & Managed Care
2 public offerings totaling $28 million
Healthcare Facilities & Distributors
0 public offerings
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 Each week, w
e provide updated trading
comps for leading comp
anies from numerous healthcare subsectors.
To the right you will see a high-level breakdown of median revenue and EBITDA multiples for each of the specific subsectors
For a complete trading comp analysis (including the individual equities that comprise the subsectors), click on the table to the right or use the download link from the top of this newsletter.
Note: data reflects prior week close.
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RECENT INDUSTRY HEADLINES
A Sampling of Relevant Industry Headlines from the Last Week
Below are snippets from relevant industry news articles from the past week presented in chronological order. For additional information or the article's complete text, click the headline link to view the original publication.
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Affordable Care Act Enrollment Surges Following Trump Election
November 10, 2016 -
Wall Street Journal
The government on Thursday reported a surge in people picking plans on the Affordable Care Act's federal exchange on the day after voters elected presidential candidate who has pledged to repeal the law.
Insurance agents and consumer groups say they think final enrollment totals for coverage in 2017 will be depressed in light of President-elect Donald Trump's victory Tuesday. He
has made getting rid of the law a priority
. On Wednesday, however, about 100,000 people made plan selections on the federal exchange-the highest daily number since enrollment began Nov. 1. It ends Jan. 31.
November 10, 2016 -
Fierce Pharma
Smart pharma CEOs are getting ahead of the drug pricing argument. Rather than getting in the trenches to defend their price tags, they're flanking the fight by talking up value-based payer deals.
In recent days, Novartis chief Joe Jimenez and Amgen CEO Robert Bradway, among others, have
spoken out publicly about pegging drug costs to their results. They're veterans of the practice--Novartis has performance-based contracts on its
heart failure med Entresto, for one, as does Amgen on its PCSK9
cholesterol-fighter Repatha--so they can already claim to be part of the spending solution.
Meanwhile, Johnson & Johnson has signed on to help Medicare move toward rewarding "the value of care,"
according
to Andy Slavitt, acting administrator of the Centers for Medicare and Medicaid Services. And Roche, which has outcomes-based deals in a variety of European countries with single-payer systems, says it now sees cancer patients as ripe for such an approach.
November 10, 2016 - Fierce Pharma
While industry closely tracks developments on the Department of Justice price-fixing investigation into a host of generics companies, one influential analyst has run the numbers on potential liabilities.
In an investigation that spans 12 companies and 24 drugs, Evercore ISI's Umer Raffat said he believes Teva could face a liability of $300 million to $700 million, while Mylan could face a $380 million to $770 million liability. Those numbers are strictly based on the drugs "most likely" to be involved in the probe of which Raffat and company "are aware."
Allergan, which sold its generics division to Teva for $40.5 billion this summer, doesn't face liability in the investigation, Raffat said.
To arrive at those figures, the analysts ran numbers on 11 drugs from the combination of Teva and Allergan's generics businesses and 6 from Mylan's generics offerings.
Pfizer considers cashing in on its consumer health biz: Reuters
November 10, 2016 -
Fierce Pharma
Pfizer CEO Ian Read may have decided not to split the company up, but that doesn't mean he isn't looking at divesting units. Word is the company is considering doing something with its consumer health operations and that it could bring in $14 billion or more.
According to a Reuters exclusive, unnamed sources
caution
that a deal is not a certainty for the unit, which holds iconic brands like Advil and Centrum and which generated $3.5 billion in sales last year. There was no indication whether Pfizer was thinking of a sale, or maybe a tax-free spinoff like it used for its animal health unit Zoetis some years back, or some kind of an asset swap.
Evercore ISI analyst John Scott told investors that the unit could potentially bring in even more than $14 billion. He pointed to the fact that when Merck sold its consumer health unit in 2014, it put it on the block at $10 billion. But the unit drew a lot of interest, and Bayer ended up
paying
more than $14 billion for it.
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As an international, healthcare-focused merchant bank and financial advisory firm, we provide world-class services and capital to middle-market healthcare companies around the globe. We aim to keep our clients well-informed of healthcare news and events. With this additional insight in mind, together, we can recognize trends and opportunities that benefit our clients. We hope that you will reach out to Bourne Partners to help execute your healthcare operational and transactional needs. To learn more about our firm, visit our website or utilize the links below to engage with us on social media.
Sincerely,
The Bourne Partners Team
Bourne Partners
550 South Caldwell Street
Suite 900
Charlotte, NC 28202
704-552-8407
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