Week of May 8, 2017 | Vol. 6, Issue 17
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Senate Tackles Rewrite on GOP Health-Care Bill
Lawmakers in the upper chamber say they are particularly concerned about impact on elderly
Republican senators planned Friday to begin a formal full rewrite of the
House GOP health-care bill, driven in part by a sense that the House version made insurance cheaper for young people but costlier for older Americans-an influential, mostly GOP voting bloc.
Among the provisions senators are tackling is one that allows insurers to charge older Americans five times as much as younger people and lets states obtain waivers that could make that disparity even larger.
Sen. John Thune (R., S.D.) is seeking to alter the bill's tax credits, and at least one version of his proposal would provide more money to the elderly. Those are among the proposals being scrutinized by a working group of 13 GOP senators led by Senate Majority Leader Mitch McConnell (R., Ky.) that hopes to reach an agreement spanning its own ideological spectrum before working to win over the rest of the Senate GOP. "We have people who are conservatives, we have people who are much more moderate," Sen. Ted Cruz (R., Texas), a forceful conservative and a member of the group, told a Texas radio station. "It frankly is the process I think the House of Representatives should have started with, and they didn't." Mr. Cruz and Sen. Mike Lee of Utah have talked about rolling back regulations to lower the cost of premiums. Others have voiced concerns about the House bill's plans to cut Medicaid funding and freeze its expansion in 2020; they include Sens. Cory Gardner of Colorado, Tom Cotton of Arkansas and Rob Portman of Ohio.
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Pricing furor aside, drug spending growth slowed last year-but still hit $323B
Despite what you may have heard about drug pricing and expenses getting out of hand, net spending growth actually fell in the U.S. last year. After discounts, pharmaceutical spending increased 4.8% in 2016, down from 8.9% growth recorded in 2015
The figures are courtesy of the QuintilesIMS Institute, which released its annual drug spending
report on Thursday. All told, net U.S. drug expenses reached $323 billion last year, while invoice-level spending was $450 billion.
Taken together, the figures represent an industrywide rebate and discounting level of 28%. Spending growth also slowed on an invoice basis in 2016, to 5.8%, from about 12.5% in 2015 and about 15% in 2014.
Importantly, the numbers represent overall growth, and drug spending in the U.S. continued to expand in 2016. Last year's net spending increase followed an 8.9% jump in 2015, and an even higher leap of about 10% for 2014.
Other big industry trends, according to QuintilesIMS, include a continued shift to specialty medicine spending, a deceleration of invoice price hikes, and a downturn in new drug sales. On specialty meds, the experts noted that the class now accounts for $384 of the $895 per person per year spent on pharmaceuticals in the U.S. For invoice price hikes in recent history, QuintilesIMS' report notes a high point back in 2014, when average invoice price increases were 13.7% for the year. That number fell to 12% in 2015 and 9.2% last year as the industry continued to grapple with broad pricing pressures. Average price increases after discounts were even lower at 4.5% for 2014, 2.5% for 2015 and 3.5% for last year.
New drugs-those on the market for less than 24 months-generated $13.9 billion in sales last year, a downturn from $17.3 billion in 2015 and $20.6 billion in 2014. As the analysts note, the FDA approved fewer than half the number of new meds last year as it did in 2014 and 2015.
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Below are summaries and charts with the past week's transactions from the different healthcare sectors. For a detailed table showing data for each industry transaction click on any of the charts or use the download link above. Total transaction values are provided in USD millions.
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Pharma & Biotech
9 transactions totaling $134
million
Supplies, Equipment & Services
24 transactions totaling $6,744 million
Healthcare IT & Managed Care
4 transactions totaling $11 million
Healthcare Facilities & Distributors
17 transactions totaling $609 million
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Pharma & Biotech
22 private placements totaling $452 million
Supplies, Equipment & Services
14 private placements totaling $131 million
Healthcare IT & Managed Care
7 private placements totaling $204 million
Healthcare Facilities & Distributors
1 private placement totaling $- million
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Pharma & Biotech
9 public offerings totaling $145 million
Supplies, Equipment & Services
3 public offerings totaling $50 million
Healthcare IT & Managed Care
0 public offerings
Healthcare Facilities & Distributors
0 public offerings
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 Each week, w
e provide updated trading
comps for leading comp
anies from numerous healthcare subsectors.
To the right you will see a high-level breakdown of median revenue and EBITDA multiples for each of the specific subsectors
For a complete trading comp analysis (including the individual equities that comprise the subsectors), click on the table to the right or use the download link from the top of this newsletter.
Note: data reflects prior week close.
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RECENT INDUSTRY HEADLINES
A Sampling of Relevant Industry Headlines from the Last Week
Below are snippets from relevant industry news articles from the past week. For additional information or the article's complete text, click the headline link to view the original publication.
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Kayne Anderson Buying Sentio Healthcare Properties for $800 Million
May 3, 2017 -
Wall Street Journal
A private-equity firm has agreed to purchase a nontraded real-estate investment trust that focuses on health-care related property in a deal that values the company at about $800 million, according to people familiar with the matter.
Kayne Anderson Real Estate Advisors is expected to announce as early as Wednesday that it is buying Sentio Healthcare Properties Inc., which owns 34 properties in 16 states including medical office buildings and senior housing communities, the people said.
Founded in 2006, Sentio conducted an initial public offering in June 2008, according to documents filed with the Securities and Exchange Commission. In 2013,
KKR
purchased a controlling stake in Sentio for about $150 million.
May 3, 2017 -
Fierce Pharma
The first trial over blockbuster Xarelto's bleeding risks has swung in Bayer and Johnson & Johnson's favor as a New Orleans jury decided on Wednesday the Big Pharma companies didn't fail to warn a prescribing physician about bleeding risks.
After a trial that just kicked off just last week, a federal jury answered "no" when asked whether the companies failed to provide a physician with adequate prescribing information for Xarelto.
Plaintiff Joseph Boudreaux brought the case against the drug companies, the first of an estimated 18,000 over Xarelto's bleeding risks, claiming the next-gen anticoagulant caused internal bleeding, heart problems and a weeklong ICU visit.
In an emailed statement, Janssen spokesperson William Foster said the Wednesday decision "reflects the facts of this case and the appropriateness" of Xarelto's prescribing information. For their part, Boudreaux's attorneys said in a statement that they are "disappointed" with the outcome. They added that they'll "learn from the experience of this trial, and continue to press forward with the legal claims of thousands of innocent victims whose lives have been shattered by Xarelto."
AstraZeneca pays $45M, commits to $2B to team with Pieris
May 3, 2017 -
Fierce Biotech
AstraZeneca has
paid $45 million and committed to up to $2.1 billion in milestones to team with Pieris Pharmaceuticals. The agreement sets Pieris up to move respiratory candidate PRS-060 into the clinic on AstraZeneca's dime and pull in milestones as it and other pipeline prospects advance.
Tiny Pieris is due to receive the first, $12.5 million milestone when it moves moderate to severe asthma candidate PRS-060 into phase 1. AstraZeneca will fund clinical development of the interleukin-4 receptor alpha-targeting protein. If the asset reaches phase 2a, Pieris has the option to codevelop and commercialize it in the U.S., bumping up the royalties or gross margin share it receives in the process.
Pieris has a similar codevelopment option on other assets covered by the agreement. The biotech will develop four other proteins against undisclosed respiratory targets. If Pieris wants, it can sign up to codevelop and commercialize two of these programs in the U.S. Milestones and commercial payments across the deal could ultimately total $2.1 billion.
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As an international, healthcare-focused merchant bank and financial advisory firm, we provide world-class services and capital to middle-market healthcare companies around the globe. We aim to keep our clients well-informed of healthcare news and events. With this additional insight in mind, together, we can recognize trends and opportunities that benefit our clients. We hope that you will reach out to Bourne Partners to help execute your healthcare operational and transactional needs. To learn more about our firm, visit our website or utilize the links below to engage with us on social media.
Sincerely,
The Bourne Partners Team
Bourne Partners
550 South Caldwell Street
Suite 900
Charlotte, NC 28202
704-552-8407
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