Healthcare Sector Comment – June 2015

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One trend that Clearwater International has been tracking for a while is consolidation within the medical device contract manufacturing market. It is predicted that this market will reach a massive €45.5bn by the end of 2015, with strong growth predicted over the next 10 years as companies seek ways to reduce or remove the high costs associated with CAPEX within manufacturing.

An interesting transaction in the space this month was the acquisition of ProTek Medical, the Ireland-based contract medical device manufacturing company, by Molex Inc, the US-based manufacturer of electronic components and subsidiary of Koch Industries. The acquisition helps Molex to achieve growth in new regions and the healthcare market segment whilst also strengthening its medical device design, manufacturing and test capabilities.

This deal is another example of a number of strategic acquisitions that have occurred in the space over the last 18 months, including:

  • Tecomet’s acquisition of Symmetry Medical, a medical device OEM, for €328m and 7.3x EBITDA multiple;
  • Nortech’s acquisition of Devicix LLC, a designer and developer of medical devices;
  • Tecomet’s acquisition of 3D Medical Manufacturing, a contract manufacturer of custom medical implants and devices; and
  • Golden Gate Capital’s acquisition of Phillips-Medisize Corporation (PMC), a provider of contract manufacturing services, from KKR.

Golden Gate Capital is another in a long line of private equity (PE) firms to invest in the contract manufacturing space. Many of the leading players in this market are owned by PE, including:

  • Creganna Medical – owned by Permira Advisers;
  • Lake Region Medical (Accellent) – owned by Bain Capital and KKR;
  • Tecomet – owned by Genstar Capital; and
  • Vention Medical – owned by KRG Capital.

We expect this consolidation to continue as financial investors look for buy-and-build opportunities and strategic buyers look to access customers, geographic reach, manufacturing capabilities and technology & IP.

 

Health & Social Care Deals

Lifeways, one of the UK’s leading providers of support services for people with diverse and complex needs, acquired the learning disabilities division of Care UK, the UK private healthcare provider, for an undisclosed amount. The learning disabilities division provides supported living, residential care and day services to around 1,000 individuals.

NASDAQ-listed iKang Healthcare Group acquired Ommay Health Management Co Ltd, a China-based medical examination service centre operator, for an undisclosed amount. iKang Healthcare Group, together with its subsidiaries, provides preventive healthcare solutions in the People’s Republic of China.

IPC Healthcare Inc, the US-listed provider of acute care hospitals and post-acute care facilities, made two acquisitions:

  • Accountability Healthcare Inc, a US-based post-acute care practice group; and
  • Atlantic Hospitalist Group Inc, a US-based acute care in-patient group.

France-based private equity firm Parquest Capital SAS acquired Groupe Fontalvie, the France-based operator of private rehabilitation clinics specialising in the treatment of chronic diseases, for an undisclosed amount.

Pulse Health Ltd acquired The Hills Clinic Pty Ltd, an Australia-based psychiatric hospital operator, for a consideration of €33.2m. Based in Australia, Pulse Health operates private hospitals, day surgeries & community home care, and recruitment agencies.

G Square Capital’s Finnish portfolio company Mikeva, the rehabilitation and therapeutic services company, acquired Orimattilan Lepokoti Oy, a Finland-based provider of rehabilitation services for older people and patients with mental health needs, for an undisclosed amount.

Partnerships in Care (PiC), the UK-based operator of mental health facilities, bought Care UK’s mental health services (comprising of 323 beds) for an undisclosed amount.

Toronto Stock Exchange listed Extendicare Inc acquired the home health care business of Revera Inc, a Canada-based operator of retirement communities, long-term care homes and nursing & rehabilitation centres, for a consideration of €60.1m. Extendicare provides senior care services in Canada.

 

Pharma & Biotech Deals

US-based multinational biopharmaceutical and diagnostics company OPKO Health Inc made three acquisitions:

  • Farmadiet Group Holding SL, a Spain-based manufacturer and distributor of pharmaceutical, nutraceutical and veterinary products;
  • EirGen Pharma Ltd, an Ireland-based developer and manufacturer of solid dosage pharmaceuticals; and
  • Sevion Therapeutics Inc, a US-based biopharmaceutical company engaged in developing therapeutics for the treatment of cancer and immunological diseases.

Perrigo Company plc acquired the Mexican operations of Patheon Inc, a contract drug development and manufacturing service company, for a consideration of €33.8m. Headquartered in Ireland, Perrigo manufactures over-the-counter (OTC) and generic prescription (Rx) pharmaceuticals, nutritional products and active pharmaceutical ingredients (API).

NASDAQ-listed Horizon Pharma plc completed the acquisition of Hyperion Therapeutics Inc, a US-based orphan diseases and hepatology pharmaceutical products manufacturer, for a consideration of €882.7m. Horizon Pharma is a speciality biopharmaceutical company engaged in developing medicines for the treatment of arthritis, pain, inflammatory and orphan diseases.

Israel-based international pharmaceutical company Teva Pharmaceutical Industries acquired US-based biopharmaceutical company Auspex Pharmaceuticals for a consideration of €3bn. Auspex focuses on the development of novel medicines for the treatment of orphan diseases.

Fujifilm Holdings Corporation, the Japanese multinational photography and imaging company, acquired Cellular Dynamics International Inc (CDI) for a consideration of €235.4m. CDI is a US-based company that develops and manufactures fully functioning human cells in industrial quantities, including induced pluripotent stem cells (iPSCs).

 

Medical Equipment & Supplies Deals

LifeHealthcare Distribution Pty Ltd acquired M4 Healthcare Pty Ltd, an Australia-based provider of point-of-care ultrasound solutions to intensive care, regional anaesthesia, accident & emergency, and pain management specialities, for a consideration of €6.9m. LifeHealthcare supplies medical devices in Australia and New Zealand.

Japanese multinational corporation Nikon acquired Optos plc, the UK-based provider of ophthalmic devices, for a consideration of €352.3m.

Molex Inc acquired ProTek Medical Ltd, an Ireland-based contract medical device manufacturing company, for an undisclosed amount. Together with its subsidiaries, Molex engages in the manufacture of electronic components worldwide.

Ergoresearch Ltd, a Canadian company that designs and manufactures cutting edge technologies for the orthopaedic industry, completed its previously announced acquisition of the remaining 49% stake in Orthoconcept Inc, a manufacturer of orthopaedic products including silicone prostheses components, compression garments and mobility aids.

LSE-listed Oxford Instruments plc, a leading provider of high technology tools and systems for industry and research, acquired Medical Imaging Resources Inc (MIR) for a consideration of €21m. US-based MIR specialises in the lease and service of mobile medical imaging solutions including MRI, CT and PET systems.

Global medical device company St. Jude Medical Inc acquired Spinal Modulation Inc for a consideration of €162.7m. Spinal Modulation develops medical devices for improving the lives of patients with chronic pain.