Healthcare Sector Comment – March 2016

Date

In-vitro-fertilisation (IVF) companies have seen an upturn as more women delay having children until later, with some placing a greater emphasis on their careers. As rates of conception in older women are lower, delaying pregnancy can increase the likelihood of suffering from gynecological conditions and this is driving more women to require medical assistance in the conception process. Added to this, technological advancements and pre-implantation genetic diagnosis mean this growth is set to continue. Hence, the global IVF market is expected to reach €10.5bn by 2021 with a large part of this growth driven by increased uptake in the Asia-Pacific region.

This month, the UK listed provider of medical services in the UAE, NMC Health acquired IVF provider Fakih IVF Group, based in the UAE. This continues NMC’s consolidation which saw them acquire Clinica Eugin, the Spanish operator of fertility clinics, in 2015.

The other major consolidator in this sector is the Australian listed Virtus Health Limited, who made their first outbound acquisition of The Sims Clinic, an Irish provider of infertility services. Subsequently The Sims Clinic has acquired Irish maternity and pregnancy services provider, The Rotunda Hospital.

As the market is still very fragmented we at Clearwater believe there is a significant opportunity for continued consolidation in the fertility sector and there are several assets to target.

The market for healthcare assets has been particularly active this month and we have seen the following deals close:

  • Canada Pension Plan Investment Board, Discovery Senior Living and Welltower, Inc. acquired Aston Gardens, a senior housing portfolio from US based Aston Care Systems Inc. The rationale for CPP’s investment is to further develop their differentiated care home offering for senior residents seeking more independent living. Welltower CEO Thomas DeRosa said that the joint deal with CPP allowed Welltower to benefit from the two businesses being well-aligned and achieved their joint objective of building the industry’s leading high-quality care home portfolio.
  • CareTech’s sale of the ground rent on 41 properties to Alpha Real Capital LLP. While these sorts of ground rent deals are relatively new to the healthcare sector they have been used extensively in the hotel and leisure industries. For CareTech this transaction released a large amount of cash for acquisitions, whilst Alpha Real Capital gained properties let to CareTech on 150-year ground leases.

We believe we will continue to see healthcare asset investment grow in the coming months, particularly in the elderly and primary care sectors. Healthcare assets represent an attractive investment with good yields due to their long 25 year plus leases and relatively safe revenues backed by strong public sector debtors, compared to core commercial property sector with circa 7 year long leases.

This is an area we have significant interest in at Clearwater and we will be publishing an extended analysis in our Healthcare Assets Clearthought in the coming months.

A taste of deals in February
Health & Social Care

DaVita HealthCare Partners Inc., the listed US provider of kidney health services acquired The Everett Clinic, the US-based physician group engaged in providing healthcare services, for a consideration of €353m.

Canada Pension Plan Investment Board, Discovery Senior Living and Welltower, Inc. acquired Aston Gardens, Senior Housing Portfolio from US based Aston Care Systems Inc., for a consideration of €508m. Canada Pension Plan and Welltower now hold 43.9% and 53.6% respectively and Discovery Senior Living will retain the remaining 2.5%.

AVEO Group, the listed Australian owner-operator of retirement villages acquired Freedom Aged Care Pty Ltd, the Australian owner-operator of aged care facilities, for a consideration of €137m.

Acadia Healthcare Company, Inc., US based developer and operator of specialist care facilities acquired The Priory Group Limited, UK based behavioural care services provider, for a consideration of €1.9bn.

Mediclinic International Ltd, South Africa listed and based hospital group acquired Al Noor Hospitals Group plc, the UK listed, UAE based, hospital and medical group, in a reverse takeover and for a consideration of €9.1bn.

Omega Healthcare Investors Inc., the listed US healthcare facilities investment firm acquired 10 skilled nursing facilities consisting of 985 beds In Ohio, Virginia and Michigan from Laurel Healthcare Holdings, Inc., for a consideration of €150m.

Target Healthcare REIT Limited, UK listed real estate investment firm acquired a Care Home in the South East of England, for a consideration of €18m.

NMC Health PLC, UK listed provider of medical services to the private sector in the UAE acquired Fakih IVF Group provider of in vitro fertilization services in the UAE, for a consideration of €316m.

Medical Equipment & Supplies

Bunzl PLC, UK-listed provider of distribution and outsourcing services acquired Dental Sorria Ltda, Brazil based distributor of dental, medical, surgical, hospital, and laboratory products, for an undisclosed consideration.

Judges Scientific PLC, the UK listed manufacturer of scientific instruments acquired CoolLED Limited, the UK based manufacturer of LED illumination systems for scientists and researchers, for a consideration of €6m.

Prestige Brands Holdings Inc., the US listed over-the-counter (OTC) healthcare and household cleaning products distributor acquired DenTek Oral Care, Inc., the US based dental care products manufacturer, for a consideration of €191m.

Halma PLC, UK listed safety, health and environmental technology developer acquired CenTrak, Inc., the US based provider of real time location systems to healthcare facilities, for a consideration of €124m.

Endologix Inc., US listed abdominal aortic aneurysm device manufacturer acquired TriVascular Technologies, Inc., the US based abdominal aortic aneurysm devices company, for a consideration of €168m.

Analogic Corporation, listed US-based developer and manufacturer of systems for medical and security imaging acquired Oncura Partners Diagnostics, LLC, US listed provider of remote, real-time ultrasound imaging, for a consideration of €17m.

Pharma & Biotech

Hikma Pharmaceuticals PLC, UK listed developer of a range of generic pharmaceuticals acquired Roxane Laboratories, Inc., the US based speciality generics company, for a consideration of €1.7bn.

Recipharm Italia SpA, Sweden based contract pharmaceutical manufacturer acquired Mitim S.r.l., an Italy-based pharmaceutical manufacturing company, for a consideration of €68m.

Harbin Gloria Pharmaceuticals Co., Ltd, the Chinese listed pharmaceuticals developer acquired a 60% stake in Proteus Digital Health, Inc., the US based digital medicines company, for a consideration of €38m.

Chr Hansen Holding A/S, the Denmark listed bioscience company acquired Nutrition Physiology Holdings LLC and Guardian Food Technologies LLC, both US based probiotic microbial feed additives manufacturers, for a consideration of €164m.

4D pharma PLC, UK listed developer of pharmaceutical products in new live biotherapeutic areas acquired Tucana Health Limited, the Irish microbiome signature researcher, for a consideration of €14m.

Aralez Pharmaceuticals Inc., Ireland based specialist pharmaceuticals manufacturer acquired Tribute Pharmaceuticals Canada Inc., a Canada based diagnostic pharmaceuticals manufacturer, for a consideration of €114m.

AstraZeneca PLC, UK listed developer of prescription medicines for a range of diseases and illnesses acquired Acerta Pharma BV, the Netherlands based drug discovery and development services provider for oncology and autoimmune diseases, for a consideration of €5.2bn.