Healthcare Sector Comment – November 2015

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Cardiovascular disease (CVD) is responsible for approximately 15 million deaths each year and is the number one cause of death according to the World Health Organization (WHO). This is driven by an ageing population and an increase in risk factors such as diabetes, smoking, obesity, and hypertension. The market for CVD devices is growing and is estimated to be worth around €36bn, with growth mainly being fuelled by adoption of new interventional and diagnostic technologies and the rise in diet related CVD conditions.

There were two stand out transactions in this market last month. Firstly, we saw Medtronic pay €260m (plus another potential €32m on achievement of CE Marking) for California-based start-up Twelve Inc, a company focused on the development of a transcatheter mitral valve replacement (TMVR) device. The device hasn’t yet reached the market, however Medtronic strongly believes that Twelve has the most “novel technology” having followed the TMVR space closely for a number of years. The deal is very similar to one of C R Bard’s back in 2011: the company paid €250m for Lutonix Inc., a company that, at the time, was developing drug-coated balloons for the treatment of peripheral arterial disease. In October of 2014, Lutonix received FDA approval for their product ‘Lutonix 035 Drug Coated Balloon Percutaneous Transluminal Angioplasty Catheter’ which became the first ever drug-coated angioplasty balloon catheter to treat vascular disease.

Secondly, St Jude Medical spent €3.1bn on the purchase of Thoratec Corporation, a worldwide leader in mechanical circulatory support (MCS) technology for the treatment of advanced heart failure (HF). The deal, the largest in St Jude’s history, helps the company boost their position in the heart failure device market. Just after the completion of the deal, Thoratec landed European regulatory approval to introduce their latest device, the HeartMate III, into the market. This followed its FDA approval in April 2015 to expand its clinical trials in the US.

At Clearwater International, we believe companies will continue to fund and acquire new technologies at different stages of approval.

 

Health and Social Care

Oral Hammaslaakarit Oyj, a Finland-based dental service provider and portfolio company of CapMan Oyj, acquired Oy Dioral Ab, a Finland-based dental care services provider, for an undisclosed amount.

Quironsalud – the Spain-based company that provides services in diagnosis and treatment of cardiovascular disease and oncology, and a portfolio company of UK-based private equity firm CVC Capital Partners – acquired Hospital Miguel Dominguez SL, the Spain-based hospital, for an undisclosed amount.

Capitol Health Ltd acquired Australia-based medical imaging services provider Liverpool Diagnostics for a consideration of €3.8m. Capitol Health operates 51 diagnostic imaging facilities in Australia, that offer general X-ray, MRI, ultrasound, mammography, echocardiography, CT, nuclear medicine and fluoroscopy services to name a few.

NASDAQ-listed outpatient diagnostic imaging services provider RadNet Inc. acquired Diagnostic Imaging Group LLC (“DIG”) for a consideration of €57.6m. DIG owns and operates 17 imaging centres in the New York City area.

In one of the largest healthcare deals in West Asia, Dubai-based Indian billionaire Dr Azad Moopen has acquired a majority stake in Sanad Hospital in Riyadh, Saudi Arabia, for a consideration of €380.8m. Aster DM Healthcare, Moopen’s company, bought the additional 57% from a Saudi partner to up the total stake to 97%. In December 2011, the company had acquired 40% in the hospital.

CVS Group, the UK’s largest veterinary group, expanded their presence with the acquisitions of Alnorthumbria Veterinary Practice and Highcroft Pet Care, for €10.8m and €10.4m respectively. Alnorthumbria operates nine sites across Northumberland, whilst Highcroft has 13 surgeries in Bristol.

US leading provider of post-acute services HealthSouth Corporation acquired the operations of Reliant Hospital Partners and affiliated entities, for a consideration of €648.9m. Reliant operates a portfolio of 11 inpatient rehabilitation hospitals in Texas, Massachusetts and Ohio, plus three inpatient satellite locations in Massachusetts.

 

Medical Equipment & Supplies

NYSE-listed medical device company,Greatbatch Inc. acquired Lake Region Medical in a €1.5bn deal. Lake Region Medical mainly provides contract manufacturing and research and development services to medical device makers in the cardio, vascular, and advanced surgical markets.

Multinational specialty drugs company Valeant Pharmaceuticals International completed the €164.5m acquisition of Synergetics USA Inc., the listed US-based supplier of precision surgical devices with a primary focus on the surgical disciplines of ophthalmology and neurosurgery.

UK-based private equity firm Palatine Private Equity backed the management buy-out of Vernacare Ltd, a UK-based medical hygiene products manufacturer, in a deal advised on by Clearwater International.

NYSE-listed St Jude Medical completed one of the biggest deals so far this year with their €3.1bn purchase of US-based Thoratec Corporation, a world leader in mechanical circulatory support with a broad portfolio of products to treat the full range of clinical needs for patient suffering from advanced heart failure.

Cardinal Health, the NYSE-listed health care service company, paid €1.7bn to purchase the Cordis vascular device unit from Johnson & Johnson, the world’s biggest maker of healthcare products. Cordis is a global leader in cardiology and endovascular devices.

Irish medical device conglomerate Medtronic completed their previously announced acquisition of US-based Twelve Inc., for a consideration of €401.4m. Twelve is a chronic cardiovascular diseases treatment devices manufacturer focused on the development of a transcatheter mitral valve replacement (TMVR) device.

A year after the announcement, Tonier NV and Wright Medical Group completed their merger, creating a premier high-growth extremities-biologics company.

 

Pharma & Biotech

In a €3.2bn deal, Cinven, the European private equity group, sold AMCo, the UK-based pharmaceuticals group, to Canadian pharmaceutical company Concordia Healthcare Corp. AMCo has a broad portfolio of branded and generic pharmaceutical prescription products that they sell to distributors, wholesalers, hospitals, pharmacies and doctors.

Dechra Pharmaceuticals plc, a UK-based veterinary pharmaceutical company, acquired a 63.3% stake in Genera dd, a Croatia-based pharmaceuticals and veterinary drugs manufacturer, for a consideration of €43.4m.

Spanish private equity firm ProA Capital acquired a majority stake in Suanfarma SA, for a consideration of €25.0m. Suanfarma specialises in the development, manufacture, and distribution of raw materials and finished dosage forms for pharmaceutical, biotechnological, veterinary, nutritional, and cosmetic sectors.

Hepalink USA Inc., a subsidiary of Shenzhen Hepalink Pharmaceutical Co., Ltd, acquired Cytovance® Biologics for a consideration of €177.1m. Based in the US, Cytovance is a leading biopharmaceutical contract development manufacturing company specialising in the production of therapeutic proteins and antibodies from mammalian cell culture and microbial fermentation

Global leading pharmaceutical company Allergan plc continued on its acquisition spree, acquiring US-based Kythera Biopharmaceuticals, a biopharmaceutical company focused on the discovery, development and commercialisation of novel prescription products for the aesthetic medicine market, for a consideration of €1.8bn.

Continuing its expansion into emerging markets, Acino Pharma AG, the international pharmaceutical company, completed the acquisition of Pharma Start, the ninth largest local pharmaceutical company in Ukraine, for an undisclosed consideration.