Week of November 12, 2024 | Vol. 13, Issue 46 | |
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Bourne Insights
Top Five Articles Our Research Team is Reading this Week
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President-elect Donald Trump announced the nomination of Robert F. Kennedy Jr. (RFK) as the Secretary of the U.S. Department of Health and Human Services (HHS). While Trump has publicly promised that RFK would have a senior role in his administration, we are surprised by Trump’s decision to go all the way and name RFK as head of HHS. RFK would still need Senate confirmation and there will certainly be debate around a number of controversial positions that RFK has taken. RFK is perhaps best known for his criticism of the lax regulation of vaccines. He has also supported measures to cap drug prices so that companies cannot charge Americans substantially more than Europeans pay. To us, this seems consistent with Trump’s attempt to implement a “Most Favored Nation” (MFN) policy during his first term. Under MFN, Medicare could pay no more than the lowest prices in other OECD countries for drugs. Finally, on drug advertising, RFK has spoken against direct-to-consumer pharmaceutical advertising, which he has called for banning. Listen Here | |
Figure: Will the Election of President Trump Catalyze More Healthcare Mergers and Acquisitions? | |
Source: Pitchbook and Bourne Partners | | |
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We expect the pending Trump administration to be much more friendly to mergers and acquisitions in healthcare. However, Trump will not be President until January 2025. In the meantime, the Department of Justice (DOJ) under President Biden, continues to push back on healthcare consolidation. This week, the DOJ filed an antitrust suit against UnitedHealth Group (NYSE: UNH) to prevent its proposed $3.3 billion acquisition of Amedisys (NASDAQ:AMED). The DOJ is arguing that the acquisition is part of a deliberate effort by UnitedHealth to undermine its competition, giving it 30%+ market share in the home health and hospice space in eight specific states. However, UnitedHealth responded that it has offered to address these DOJ concerns by divesting 58 home health and hospice centers in these states to the VitalCaring Group (an independent provider of home health and hospice services). Also, UnitedHealth launched a website to offer its perspective on the broader home health/hospice marketplace. Read More | | |
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Media reports suggest that Pfizer has engaged an investment banker to explore opportunities to divest its hospital drugs unit, which includes a portfolio of sterile injectable products such as Sulperazon, Zavicefta, Zithromax, and Panzyga. This business originated from Pfizer’s $17 billion acquisition of Hospira in 2015. This hospital drugs business reportedly generates ~$500 million of annual EBITDA, and we think a divestiture here could raise a few billion dollars in proceeds. Bigger picture, we view a potential divestiture of the hospital drugs unit could be a way for the Pfizer management team to placate activist investor Starboard Value. Starboard Value has argued that shareholders need to hold Pfizer’s Board of Directors accountable for its poor track record of acquisitions and R&D investments. As such, in our view, more divestitures of underperforming and non-core businesses could be on the way. Read More | | |
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Veeva Systems (NASDAQ: VEEV) hosted an Investor Day at which it provided incremental visibility into its various businesses. Most notably, Veeva management is targeting $6 billion in revenue by 2030, implying 15% annual growth, with operating margins of 35%+. Most of this growth is expected to come from organic product development and growth of its clinical development software applications (e.g., EDC, eCOA, RSTM, and CTMS related software solutions) and management downplayed the likelihood of any major acquisition in the life sciences. Also, the platform migration of Veeva’s CRM software appears to be proceeding on plan with no surprises. Boehringer Ingelheim is the latest global top 20 biopharma company announcing its commitment to migrate to the new Veeva Vault CRM. Altogether, today, ~94% of Veeva’s revenues are generated from biopharma companies with ~5% from medtech customers and ~2% from consumer companies. Within biopharma, the top-20 global pharma companies account for ~half of revenues. Read More | | |
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Lowering healthcare costs (and drug prices) was an important area of focus during the Presidential election campaigns. During President Trump’s first term, there was a focus on price transparency regulations that required hospitals to publicly disclose a list of standard prices for items and services in a machine-readable format to encourage patients to be able to “shop” for affordable care. However, a new report by the Health and Human Services Office of Inspector General (OIG) suggests that many hospitals are still not complying with these regulations. In a sample of 100 hospitals, the OIG cited that 34 hospitals were not disclosing their pricing information, as required, and another 14 hospitals did not do so in a consumer-friendly way. The OIG attributed the poor compliance to a lack of oversight by regulators at the U.S. Centers for Medicare and Medicaid Services (CMS) and a need for more regulatory guidance. Also, smaller hospitals reported having limited financial resources to comply. Read More | |
Source: S&P Global Insights | | | | |
