Healthcare sector comment – May 2011

Date

May was an encouraging month for deals in the healthcare sector with a total of 16 deals.

A significant deal this month was Alkermes Inc’s merger with Elan Drug Technologies (EDT), the profitable, world-class drug formulation and manufacturing business unit of Elan Corporation plc, in a cash and stock transaction currently valued at approximately $960 million. Alkermes and EDT will be combined under a new holding company incorporated in Ireland. This newly created company will be named Alkermes plc.

Interestingly, both Alkermes and Elan have manufacturing capabilities, and each own their respective proprietary drug delivery technology; Alkermes with its injectable extended-release technology and Elan with its Nanocrystal water soluble drug technology. Elan also recently had market approval for two drugs, INVEGA SUSTENNA and AMPYRA, which will drive top line revenue growth for the merged entities and compliment Alkermes’ existing product portfolio and treatment of chronic conditions, such as central nervous system diseases, diabetes and addiction. The combined businesses will bring the scale, resource and capabilities required across the whole product continuum, from R&D innovation to clinical development, manufacturing and commercial expansion.

The coming together of two complimentary drug delivery businesses with proprietary technology and manufacturing capabilities is inevitable in a market where cost and reimbursement pressures drive consolidation. Other large pharmaceutical, biotechnology, generic and OTC companies will look to do similar acquisitions to get access to proprietary technologies that can help extend the life cycle of existing brands, make medicine more convenient for patients, improve compliant practices and reduce medicine costs, as well as to help accelerate drug discovery of new molecules.

Deals

Methodist Homes has acquired two purpose-built elderly care homes with 100 beds in South Yorkshire for an undisclosed amount. Methodist Homes is a charity providing care homes, accommodation and support services for older people throughout Britain. The two care homes were previously part of Highgrove Ltd, which has since gone into administration.

Shire Plc has agreed to acquire Advanced BioHealing Inc for a cash consideration of £465m. Shire is a UK based specialty biopharmaceutical company. Advanced BioHealing is a US based regenerative medicine company. The acquisition will give Shire the global rights for DERMAGRAFT with £90m sales in 2010, a regenerative bio-engineered skin substitute that assists in restoring damaged tissue. Thermo Fisher Scientific Inc has acquired Sterilin Ltd for an undisclosed consideration. Thermo Fisher Scientific Inc is a listed US based manufacturer of analytical instruments that monitor, collect, and analyse information for a broad range of life science, laboratory and industrial customers. Sterilin Ltd is a UK based manufacturer and supplier of disposable plasticware and silicone products for the life science market. The acquisition will complement Thermo Fisher’s line of plastic consumable products used in laboratories.

EKF Diagnostics Holdings Plc has acquired Stanbio Laboratory L.P. for £13.3m. EKF Diagnostics Holdings is a UK based company engaged in the design, development, manufacture and sale of diagnostic instruments. Stanbio Laboratory is a US based company engaged in developing, manufacturing, and distributing clinical diagnostic products. EKF’s acquisition strategy is to build a presence and reputation in the US point of care test market.

Abcam Plc has acquired MitoSciences Inc for a cash and equity consideration of £3.8m. Abcam Plc is a UK based company engaged in the development, marketing and distribution of antibodies and related products. MitoSciences Inc is a US based provider of mitochondrial research tools. This acquisition supports Abcam’s strategy of enhancing its position in protein research, assay development and detection.

Civica has acquired PSCAL Ltd for an undisclosed amount. Civica is a specialist in systems and business process services that help organisations like the NHS achieve a more cost-efficient way of working. PSCAL Ltd specialises in financial management software and related services for the National Health Service.

Nuffield Health has acquired Medica Reporting Ltd for an undisclosed amount. Nuffield is a leading UK private healthcare provider. Medica Reporting Ltd provides teleradiology services to the NHS.

Lab21 Ltd has acquired Myconostica Ltd for an undisclosed amount. Lab21 Ltd is a specialist in personalised medicine and clinical diagnostics. Myconostica Ltd is a molecular diagnostic company focusing on the diagnosis of fungal infections of clinical importance.

Bibby Scientific Ltd has acquired Electrothermal Engineering Ltd for an undisclosed amount. Bibby Scientific Ltd is a UK manufacturer of laboratory equipment. Electrothermal Engineering Ltd is a specialist in precisely controlled heating and cooling applications and was part of Thermo Fisher Scientific Inc.

Carewatch has acquired Twenty Four 7 Care Services Ltd for an undisclosed amount. Carewatch is a domiciliary care business backed by Lyceum Capital. Twenty Four 7 Care Services is a domiciliary care agency providing services including personal care and support to adults and older people living in their own homes in North & East Riding of Yorkshire.

ExamWorks Group Inc has acquired Premex Group Ltd for a consideration of £49.6m. ExamWorks Group Inc is a US based company engaged in provision of independent medical examinations, peer and bill reviews. Premex Group Limited is a UK based company engaged in provision of medico-legal reports to the legal and insurance industry. The transaction will enable ExamWorks to significantly expand its business in the UK market.

Allied Healthcare Group has acquired BiJu Limited for an undisclosed amount. Allied Healthcare Group provides healthcare staffing and has over 110 branches. BiJu supplies homecare services, including rehabilitation, physical disabilities, sensory impairment and extra care sheltered housing projects.

Syntopix Group Plc has acquired Leeds Skin Centre for Applied Research Ltd for £0.9m. Syntopix Group Plc is a speciality pharmaceutical research and development company focused on topical antimicrobial innovations for products in the medicine and consumer healthcare market. Leeds Skin Centre for Applied Research Ltd provides laboratory service facilities for general microbiology applications and high quality contract research services and consultancy to the pharmaceutical, personal products and healthcare industries.

Polymeroptix GmbH has acquired West Pharmaceutical Services Cornwall Ltd for an undisclosed consideration. Polymeroptix GmbH is a specialist for ultra-precise injection moulding technology based in Germany. West Pharmaceutical Services Cornwall Ltd has a plastics injection moulding factory and is a subsidiary of West Pharmaceutical Services Inc, a global provider of innovative systems, device and component solutions for the medical industry. The acquisition enables Polymeroptix to invest in new technologies in order to serve new trends in medical and optical markets.

Techne Corp has acquired Tocris Holdings Ltd for a consideration of £77m. Techne Corp is the US based manufacturer of haematology controls and biotechnology products for research and diagnostics. Tocris Holdings Ltd is a UK based company that makes biologically active neurochemicals and biochemicals that researchers use to better understand the biological processes and pathways.