Week of February 13, 2017 | Vol. 6, Issue 5
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Reckitt Benckiser to Buy Mead Johnson for $16.6 Billion
Deal will boost British company's consumer-health business and push it deeper into emerging markets
Reckitt Benckiser Group PLC on Friday said it agreed to buy baby-food maker
Mead Johnson Nutrition
Co. for $16.6 billion, a deal that will almost double the size of the British company's consumer-health business and push it deeper into emerging markets.
Reckitt, whose lineup includes Durex condoms and Scholl foot-care products, earlier this month
disclosed that it was in talks with Mead
after The Wall Street Journal reported on the potential deal. It will pay $90 a share in cash for the Glenview, Ill.-based company, which makes a range of nutritional products including Enfamil infant formula and the Sustagen milk supplement for children.
Including debt, the deal is valued at $17.9 billion. The acquisition caps a yearslong search by Chief Executive Rakesh Kapoor, who lost out to Bayer AG in a bidding war for Merck & Co.'s consumer business in 2014 and has since been seeking a major acquisition. Reckitt's growth has slowed lately, leaving the Slough, England-based company in need of a way to jump-start sales. On Friday, the company, which also has household-cleaning, personal-hygiene and food businesses, reported organic revenue growth of just 3% for 2016. The measure, which excludes currency effects and acquisitions and divestments, was the weakest in over a decade.
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Federal Judge Blocks Anthem's Planned Acquisition of Cigna
Second court ruling in recent weeks to deal rebuke to efforts to reshape industry through megamergers
A federal judge, in a Wednesday evening decision, blocked health insurer
Anthem
Inc. from acquiring rival
Cigna
Corp., the second court ruling in recent weeks to deal a decisive rebuke to efforts to reshape the industry through megamergers.
The decision, by U.S. District Judge Amy Berman Jackson, said the proposed $48 billion deal violated federal antitrust law because it would create an unacceptable reduction in the number of companies able to serve large multistate employers that insure their workers.
"The evidence has also shown that the merger is likely to result in higher prices, and that it will have other anticompetitive effects: it will eliminate the two firms' vigorous competition against each other for national accounts, reduce the number of national carriers available to respond to solicitations in the future, and diminish the prospects for innovation in the market," Judge Jackson wrote. The ruling echoed a decision last month by a different judge who blocked Aetna Inc.'s plans to take over Humana Inc. Though the two proposed insurer combinations were different in many ways, the message from the courts was similar: Judges found that merging top industry rivals threatened to harm consumers on price and service, with the benefits of those deals failing to outweigh the threats. While Aetna is considering a possible appeal in its case, Wednesday's ruling almost certainly kills the Anthem-Cigna transaction, as discord between the companies has grown considerably since they announced their deal in July 2015.
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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 $133
million
Supplies, Equipment & Services
23 transactions totaling $92 million
Healthcare IT & Managed Care
1 transactions totaling $102 million
Healthcare Facilities & Distributors
16 transactions totaling $245 million
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Pharma & Biotech
16 private placements totaling $107 million
Supplies, Equipment & Services
17 private placements totaling $140 million
Healthcare IT & Managed Care
8 private placements totaling $16 million
Healthcare Facilities & Distributors
4 private placements totaling $43 million
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Pharma & Biotech
11 public offerings totaling $336 million
Supplies, Equipment & Services
5 public offerings totaling $29 million
Healthcare IT & Managed Care
0 public offerings
Healthcare Facilities & Distributors
1 public offering totaling $32 million
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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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February 10, 2017 -
Wall Street Journal
A drug to treat muscular dystrophy will hit the U.S. market with a price tag of $89,000 a year despite being available for decades in Europe at a fraction of that cost.
Marathon Pharmaceuticals LLC's pricing of the drug, which has been available in Europe, is the latest example of a business model that has drawn ire from doctors, patients and legislators in recent years: cheaply acquiring older drugs and then drastically raising their prices.
The practice has prompted congressional investigations and hearings into companies including
Valeant Pharmaceuticals International
Inc.
and Turing Pharmaceuticals LLC, the firm formerly run by onetime hedge-fund manager Martin Shkreli.
The U.S. Food and Drug Administration on Thursday approved Marathon's drug, a corticosteroid called deflazacort, to treat a rare type of muscular dystrophy that affects some 12,000 boys in the U.S., most of whom die in their 20s and 30s. The drug isn't a cure, but it has been shown to improve muscle strength, the FDA said in a statement announcing the approval.
As HHS Head, Price Has Wide Latitude to Shape Obamacare's Fate
February 10, 2017 -
Wall Street Journal
Tom Price's swearing-in as secretary of health and human services Friday means he is now in position to
dismantle key parts of the Affordable Care Act, even if repeal efforts in Congress bog down.
But it isn't clear Dr. Price will quickly gut parts of the law. Instead, the Trump administration is expected to issue a proposed rule soon to appease insurers and help stabilize the individual insurance market for 2018, giving Republicans breathing room to continue working on their overhaul plans. That is a marked shift in message from just after the election, when congressional Republicans vowed to repeal the ACA within 100 days. Now President Donald Trump has said an ACA replacement may not be completed until next year, and insurers are anticipating administrative steps they believe will help sustain the health law's controversial exchanges in the meantime. "We're going to end up with tremendous health care," Mr. Trump said Friday at a press conference, referring to the swearing in of Dr. Price, who formerly practiced as an orthopedic surgeon. But he added the process would be "difficult."
February 8, 2017 - Wall Street Journal
A U.S. federal appeals court said Wednesday that
Sanofi
SA and partner
Regeneron Pharmaceuticals
Inc. can keep selling their cholesterol drug while they challenge a patent-infringement ruling by a lower court that threatened to halt sales.
The decision, by the U.S. Court of Appeals for the Federal Circuit, gives the two companies a temporary reprieve from a
trial court's ruling last month
finding their drug Praluent violated patents held by rival
Amgen
Inc.
Sanofi and Regeneron praised the decision for ensuring patients could keep getting Praluent while the litigation continues, and expressed confidence in their prospects on appeal. "It is our longstanding position that Amgen's asserted patent claims are invalid," the companies said in a statement.
Without the appeals court's decision, Sanofi and Regeneron would have been blocked from selling Praluent in the U.S. while they kept fighting the patent-infringement case. The decision doesn't mean, however, the companies will ultimately prevail.
"Amgen remains confident in the validity of our patents and the correctness of the jury verdict and district court's judgment," a company spokeswoman said. "We look forward to presenting our case on the lack of merit in" the appeal by Sanofi and Regeneron.
February 8, 2017 -
Fierce Pharma
After its "black eye" in the third quarter, Allergan appeared to correct course as the year ended. It trotted out Street-beating earnings and revenue for the fourth quarter, and set out a 2017 forecast that demonstrates "continued, healthy growth," an analyst said.
Allergan's fourth-quarter adjusted earnings of $3.90 per share
came in ahead
of consensus estimates of $3.75, while its $3.86 billion in revenue also beat Street expectations.
Last year, after missing on earnings and sales in the
third quarter
, Allergan was forced to lower its full-year guidance as its established brands struggled. Despite the challenges, the company continued to maintain it was a "growth pharma."
Now, Allergan is looking to make good on that pledge. It's anticipating $15.5 billion to $15.8 billion in 2017 sales, or 7.4% growth at the midpoint.
In the fourth quarter, Botox and dry eye med Restasis each beat consensus expectations with sales of $739 million and $411 million, respectively.
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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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