Healthcare Sector Comment – April 2016

This month saw Excelsior Union Ltd, an investment firm owned by several members of the Mindray Medical board, delist Mindray Medical in a €2.4bn deal. The manufacturer of patient monitoring, life support and in-vitro diagnostic products was removed from the US stock exchange. Mindray’s share price had consistently underperformed over the last five years, prompting management to consider privatisation as a way to reflect the true value of the company. Mindray’s Senior Manager of Investor Relations, Cathy Gao, said that lower than expected earning and pressures from both inside and outside of China, such as an anti-corruption campaigns and the exchange rate of the renminbi, are the reasons the company considered a privatisation.

We have also seen two other recent delistings based on different rationale:

  • Thermo Fisher Scientific, Inc. (TFS), the US-listed medical devices manufacturer, acquired and subsequently delisted Affymetrix Inc., the US provider of life science and molecular diagnostics products, from the NASDAQ GSM. The acquisition allowed TFS to expand its antibody portfolio and added new genetic analysis capabilities. This deal raised some eyebrows as Affymetrix had turned down a rival all cash offer of €1.80 more per share from Origin Technologies Corp.
  • Hanger Inc., the US-listed manufacturer of orthotics and prosthetics and operator of a network of Autism clinics, saw 80% of its value wiped away in one day. The fall was caused by Hanger’s failure to meet financial filings deadlines set by the SEC: the company was moved from the NYSE to the OTC Pink Sheets. Hanger has no plans to file any reports until Q4 2016 and continues to investigate the falsifying of accounts and the misuse of general reserves by employees.

The key theme we are picking up in the UK is that there is a scarcity of medical equipment and supplies assets due to the consolidated nature of the market.  Whenever an asset comes to market, it is highly contested by financial investors. Clearwater International has recent experience in selling medical businesses to financial investors and understands the appetite including:

  • Advising Vernacare, the provider of single use infection control systems, on the MBO backed by Palatine Private Equity;
  • Providing advice to Prism Medical UK, the UK arm of the specialist mobility equipment manufacturer, on its buy-out by LDC; and
  • In early April, advising the vendors on the sale of Westfield, a sterilisation packaging business, to Maven Capital.

At Clearwater, we expect continued levels of investment across the globe in the medical equipment and supplies assets sector over the next 12 months. Interestingly, we have already seen 11 MBOs so far in 2016.

 

A taste of deals in March

Health & Social Care
Aberdeen Asset Management plc, the UK-listed asset management company, acquired a 98% stake in Hospitais Concesionados SL, the Spanish hospital owner, for a consideration of €110m.

Select Medical Corporation, the US-based speciality hospital and outpatient rehabilitation clinic operator, acquired Physiotherapy Associates Holdings Inc., the US-based outpatient physical therapy services provider, for a consideration of €371m.

Outcomes First Group Holdings Ltd, the UK social care and education services provider, acquired Options Group Holdings Ltd, the UK provider of complex child and adult care services, for an undisclosed consideration.

Alina Homecare Ltd, the UK homecare services provider, acquired The Care Division Ltd, the UK domiciliary care services provider, for an undisclosed consideration.

Spring Ventures LLP, the UK private equity firm, acquired Home from Hospital Healthcare Ltd, the UK provider of care services to individuals with complex health needs in their homes, in a management buyout transaction for a consideration of €13m.

Centene Corporation, the US provider of programs and services to under-insured and uninsured individuals, acquired Health Net Inc., the US medical health plans services provider, for a consideration of €6.1bn.

Fujian Thai Hot Investment Co Ltd, the Chinese private investment firm, acquired a 52% stake in Alliance HealthCare Services, Inc., the US-based outsourced healthcare services provider, for a consideration of €662m.


Medical Equipment & Supplies

Praxair Gases UK Ltd, the UK producer and distributor of a variety of gasses, acquired NOxBOX Ltd, the UK inhaled gas delivery and monitoring equipment manufacturer, for an undisclosed consideration.

Excelsior Union Ltd, the Cayman Islands-based investment firm, acquired and subsequently delisted Mindray Medical International Ltd, the Chinese manufacturer of patient monitoring, life support and in-vitro diagnostic products, for a consideration of €2.4bn.

Stevanato Group SpA, the Italy-based packaging containers manufacturer, acquired all operations and assets of Balda AG, the German manufacturer of plastic products for the pharmaceutical, diagnostics, and medical technology sectors, for a consideration of €93m.

iNeedMD Holdings, Inc., the US-listed cardiovascular device developer, acquired Mediplex Alliances Inc., the US general medical device manufacturer, for a consideration of €24m.

Bridgepoint Development Capital Limited, Euro Private Equity SA and RAISE Investissement, SAS, the English, Swiss and French private equity firms, acquired Acteon Group, the French manufacturer of dental equipment, for an undisclosed consideration.

Meridian Bioscience, Inc., the US-listed manufacturer of diagnostic kits, acquired Magellan Diagnostics, Inc., the US manufacturer of point-of-care systems and clinical laboratory instruments, for a consideration of €60m.

Gentherm Inc., the US manufacturer of climate control seats, acquired Cincinnati Sub-Zero Products, Inc., the US manufacturer of patient temperature systems, for a consideration of €57m.

Thermo Fisher Scientific, Inc., the US-listed provider of analytical instruments, reagents, consumables, software and services, acquired and subsequently delisted Affymetrix Inc., the US provider of life science and molecular diagnostics products, for a consideration of €972m.


Pharma & Biotech

Teva Pharmaceutical Industries Ltd, the Israel-based developer of generic and speciality medicines, acquired Representaciones e Investigaciones Medicas SA de CV, the Mexico-based generic drug manufacturer, for a consideration of €1.9bn.

Regent Pacific Group Ltd, the Cayman Islands-based investment holding company, acquired Plethora Solutions Holdings plc, the UK urological pharmaceuticals company, via a reverse merger for a consideration of €102m.

Lupin Ltd, the listed Indian manufacturer of branded and generic pharmaceuticals, acquired GAVIS Pharmaceuticals LLC and Novel Laboratories Inc., the US-based pharmaceuticals manufacturers, for a consideration of €786m.

N4 Pharma Limited, the UK drug reformulation company, acquired exclusive global rights to a range of novel patents from Opal IP Limited, the UK drug patent and formulation consulting services provider, for an undisclosed consideration.

SalvaRx Limited, the UK drug discovery and development company focused on immune-oncology, acquired 3Legs Resources plc, the Isle of Man-based investment company with interests in life sciences companies, via a reverse merger for a consideration of €11m.

Hikma Pharmaceuticals plc, the UK branded and non-branded generic and in-licensed pharmaceutical products manufacturer, acquired EIMC United Pharmaceuticals SAE, the Egypt-based manufacturer of oncology and intensive care pharmaceuticals, for a consideration of €30m.

CapVest Partners LLP, the UK-based private equity firm, acquired IBA Molecular Holding SA, the Belgian molecular imaging radiopharmaceutical manufacturer, for a consideration of €138m.

Leo Pharma A/S, the Denmark-based developer of drugs for dermatologic and thrombotic patients, acquired the global dermatology business of Astellas Pharma, Inc., the Japan-based manufacturer of a wide range of pharmaceuticals, for a consideration of €606m.