Week of April 24, 2017 | Vol. 6, Issue 15
|
|
Cardinal Health's $6.1 Billion Deal for Some Medtronic Operations Raises Debt Concerns
Health-care services firm is acquiring Medtronic's patient care, deep vein thrombosis and nutritional insufficiency units
Cardinal Health
Inc. struck a deal to buy part of
Medtronic PLC's patient monitoring and recovery unit for $6.1 billion, bringing businesses under Cardinal's roof that it has sought for years but also boosting its debt load.
Cardinal said it would fund the acquisition with $4.5 billion in new debt plus existing cash.
Cardinal hopes the acquisition will help offset competitive pressures in its drug-wholesaling business, where the company is lowering generic-drug prices to maintain market share among independent pharmacy retailers. Cardinal said it expects the prices it charges customers for generic drugs to fall in the low-double-digit-percentage range in its fiscal year ending in June 2017.
Due to the pricing pressure
and other factors, Dublin, Ohio-based Cardinal now forecasts its adjusted profit for this year will be at the bottom of its previous guidance range of $5.35 to $5.50 a share, and it guided for adjusted earnings in 2018 to be flat to down midsingle digits. Analysts had expected 9.2% growth for next year, according to Thomson Reuters.
|
Big Pharma faces $26.5B in losses this year as next big patent cliff looms, analyst says
With 18 branded drugs on the line, patent losses this year could jeopardize $26.5 billion in annual sales from Big Pharma, projected to be the biggest fall-off until at least 2025, according to Bernstein analyst Tim Anderson.
Which companies are at risk? Roche, GlaxoSmithKline, Eli Lilly, Pfizer and AstraZeneca to name a few.
This year's potential patent expiry damage is much more daunting than 2015 and 2016, when only four and nine meds from companies in Bernstein's coverage lost exclusivity, respectively. Anticipated expirations for 2017 include Roche's Rituxan, GSK's Advair, Eli Lilly's Humalog and Cialis, AstraZeneca's Byetta, Pfizer's Viagra and Merck's Vytorin, according to the report. Together, the 2017 patent losses and associated sales declines will "continue to pressure growth" in the industry, according to Anderson. Back in 2012, the U.S. drug market actually contracted by 1%, tallied by the IMS Institute for Healthcare Informatics, as a wave of patent losses hit top drugmakers. It was the first time the institute had ever noted a shrink in that metric. EvaluatePharma has reported that $55 billion in total drug sales lost patent protection that year. This time around, though, Anderson noted that about 45% of the sales at risk looking forward are for biologics, which will face biosimilar competition rather than generics. There, he said, "erosion rates will be slower," but still "unpredictable." Roche tops the list of drugmakers facing biosimilar threats, with Sanofi, Bristol-Myers Squibb and Lilly trailing in order.
While considering patent losses through 2025 and including the potential value of pipeline assets, Bernstein predicts that AstraZeneca will see the most growth of any pharma company it covers. It's predicting AZ to grow at an average of 5.6% per year, while Pfizer is expected to lag the pack in the metric at 2% per year.
|
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.
|
|
|
|
Pharma & Biotech
11 transactions totaling $734
million
Supplies, Equipment & Services
19 transactions totaling $6,061 million
Healthcare IT & Managed Care
4 transactions totaling $- million
Healthcare Facilities & Distributors
11 transactions totaling $315 million
|
|
|
|
|
|
Pharma & Biotech
22 private placements totaling $379 million
Supplies, Equipment & Services
12 private placements totaling $101 million
Healthcare IT & Managed Care
7 private placements totaling $87 million
Healthcare Facilities & Distributors
2 private placements totaling $77 million
|
|
|
|
|
Pharma & Biotech
9 public offerings totaling $751 million
Supplies, Equipment & Services
1 public offering totaling $1 million
Healthcare IT & Managed Care
0 public offerings
Healthcare Facilities & Distributors
1 public offering totaling $- million
|
 |
|
 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.
|
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.
|
Pressuring GSK's Advair, Teva launches both AirDuo RespiClick and authorized generic
April 20, 2017 -
Fierce Pharma
Ready to take a stab at GlaxoSmithKline's top-seller Advair, Teva Pharmaceutical Industries on Thursday
announced the simultaneous launch of its newly approved AirDuo RespiClick and its authorized generic, which Teva priced at a significant discount to the GSK blockbuster.
With the latter launch, Teva introduced a "true generic" to the market, Evercore ISI's Umer Raffat wrote in a note on what he called a "shrewd" move by the Israeli generics giant. Depending on dose, Teva's authorized generic, which is not directly substitutable with the Glaxo inhaler, will carry a 69% to 81% discount to the GlaxoSmithKline asthma and COPD stalwart, according to Raffat.
Teva said it expects the authorized generic to reap the most sales out of the two new launches, which contain the same active ingredients as GSK's Advair. AirDuo RespiClick won FDA approval in February.
April 20, 2017 -
Fierce Pharma
Pfizer and ICU Medical, which recently bought the Hospira Infusion Systems business from Pfizer, both acknowledged on Wednesday that they have been caught up in the Justice Department's investigation into possible price collusion in sales of saline solution and infusion equipment and have been called to testify before a federal grand jury.
The disclosures come on the heels of Baxter International's acknowledgement on Friday that it had been
called
to testify before the grand jury in the Eastern District of Pennsylvania in connection with an investigation by the DOJ's Antitrust Division into saline sales, shortages and pricing. Baxter and Hospira, which Pfizer acquired in 2015 for $15 billion, reportedly control about 90% of the saline market.
ICU Medical
reported
the subpoena in a public filing on Wednesday, saying it has been ordered to provide documents about saline manufacturing and sales, as well as "communications with competitors." ICU said the investigations related primarily to time periods before it bought the IV solutions business, which it acquired from Pfizer in February for $900 million.
UnitedHealth Profits Rise as it Exits Health-Care Exchanges
April 18, 2017 -
Wall Street Journal
UnitedHealth Group Inc. reported revenue and profits rose as the company pulled back sharply from the Affordable Care Act's exchanges and saw rapid growth in its Medicare business.
As the largest U.S. health insurer and the first to report quarterly results, UnitedHealth is typically viewed as a bellwether for the industry's earnings season, and analysts said its better-than-expected results would likely lift expectations for its managed-care peers.
The report comes amid continued uncertainty about the
future of Republican efforts to overhaul the ACA
. On its call with analysts, UnitedHealth called for repeal of the current ACA health-insurer tax, which is already suspended for 2017. Getting rid of the tax has been a longtime industry priority.
Chief Executive Stephen J. Hemsley also suggested UnitedHealth wants to see "more flexible state-based markets," implying a more limited federal overlay of standards and rules on individual and small-business plans. He pointed to greater freedom for insurers in underwriting as part of the company's desired flexibility-meaning that insurers could have more ability to tie plan prices to the likely health costs of enrollees. That is a sensitive topic, as older, less-healthy consumers balk at paying higher rates. Mr. Hemsley said that change will likely depend on "what is politically possible."
|
 |
|
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
|
|
|
|
|
