Health Care Deal News, July 13, 2015 — Consolidation Continues for CROs

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Week ending July 10, 2015:

Recent Healthcare M&A Deals

Home Health & Hospice

Acquirer

Target

Price

The Ensign Group, Inc.

Buena Vista Hospice

N/A

RESMed, Inc.

CareTouch

N/A

Laboratories, MRI & Dialysis

Charles River Laboratories

Celesis International

$212 million

Other Services

BioClinica

MediciGroup Inc.

N/A

EAG, Inc.

ABC Labs

N/A

BioClinica Acquires a Patient Recruitment Firm

BioClinica, Inc., a global provider of clinical trial management services, extended its offerings with the acquisition of MediciGroup, Inc., a global patient recruitment and retention firm. The acquisition includes MediciGlobal, Ltd. and Access to Patients, LLC. Medici also provides a lost-to-follow-up patient locate service that finds missing patients globally. BioClinica was taken private for $123 million in January 2013 by a joint venture between JLL Partners, Inc. and Ampersand Partners. As part of that deal, the firms paid an undisclosed amount for medical imaging company CoreLab Partners, Inc. and merged it with BioClinica. Financial terms for the MediciGroup deal were not disclosed.

Consolidation Continues in the CRO Market

Back in 2013 clinical research organizations (CROs) were hot commodities, with 20 transactions for the year (that’s big, for the CRO sector). That was the summer that Kohlberg Kravis Roberts (NYSE: KKR) acquired PRA International and then ReSearch Pharmaceutical Services. This year, CROs are still in investors’ sites, with seven trasactions announced to date. After visiting a few healthcare deal making conferences recently, we expect to see a few more in the coming months.

Clinical Research Organizations M&A, through July 10, 2015

Acquirer

Target

Price

Management buyout

Synexus

$128.4 million

Manna Research

LMC Diabetes Research

Merger

PAREXEL

Quantum Solutions India

N/A

Clinipace Worldwide

Accovion

N/A

Recipharm AB

OnTarget Chemistry

$1.8 million

ABC Labs

EAG, Inc.

N/A

Source: The Health Care M&A Information Source, July 10, 2015

Ventas Spins Off Ardent Health’s Hospital Operations

As expected, Ventas, Inc. (NYSE: VTR) transferred the majority of Ardent Health Service’s hospital operations to Equity Group Investments last week, in exchange for $475 million. Ventas retains the owned real estate of the 10 Ardent Health hospitals, which it acquired in April 2015 for $1.75 billion. Ventas retains a 9.9% interest, while EGI and current Ardent Health Services management share the remaining ownership stake.

Eye Diseases Spur More M&A in July

At least three of the deals announced so far in July have targeted companies or compounds that treat eye diseases. The first was Biogen Inc. (NASDAQ: BIIB) and its $124 million deal with Applied Genetic Technologies (NASDAQ: AGTC) for the worldwide commercialization rights to one clinical-stage and one pre-clinical therapeutic program. Last week, Allergan Inc. (NYSE: AGN) paid $125 million for Oculeve, Inc., a medical device company focused on new technologies for dry eye disease. Then, rival Valeant Pharmaceuticals International (NYSE: VRX) paid an undisclosed amount for the global rights to EyeGate Pharmaceuticals’ (OTCQB: EYEG) EyeGate II Delivery System and EGP-437 combination product in the field of uveitis. ………………………….Click here for a free trial to The Health Care M&A Information Source and download the current issue today.

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Health Care Deal News, July 6, 2015 — Second Quarter M&A Spending Tanks

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Week ending July 3, 2015:

Recent Healthcare M&A Deals

Managed Care

Acquirer

Target

Price

Maestro Health

Group Health Associates

N/A

GENEX Services

Integrated Care Management

N/A

Centene Corp.

Health Net Inc.

$6.8 billion

Aetna

Humana

$37 billion

Centene Snares Health Net for $6.8 Billion

And so it begins. The managed care merry-go-round picked up speed last week as Centene Corporation (NYSE: CNC) announced it would pay approximately $6.8 billion (including $500 million of debt) to acquire a smaller rival, Health Net, Inc. (NYSE: HNT). A day later, Aetna (NYSE: AET) and Humana (NYSE: HUM) agreed to a deal priced at $37 billion, including debt. That leaves Anthem Inc. (NYSE: ANTM) in pursuit of Cigna (NYSE: CI), which had turned down its latest offer of $47.5 billion the week before. All eyes are now on Molina Healthcare (NYSE: MOH) and WellCare Health Plans (NYSE: WCG), waiting to see if they are targets, or merger partners. Or both.

Second Quarter Health Care M&A Spending Tanks

It’s still early yet, but we can say with confidence that the second quarter of 2015 doesn’t hold a candle to last year’s second quarter, at least dollar-wise. Last year, deal volume and value hit all-time highs for all previous Q2s, coming in at 325 deals and $135.8 billion in spending on those deals. This year, deal volume was fairly steady at 312 (remember, these are preliminary figures for Q2:15) but deal value plummeted 60% to $54.2 billion. We’ll have more details in the July issue of Health Care M&A News, but in the meantime, here are the biggest deals of Q2:15.

Top Five Deals in Q2:15

Acquirer

Target

Price

CVS Health

Omnicare Inc.

$12.7 billion

Alexion

Synageva BioPharma

$8.4 billion

Endo International

Par Pharmaceutical

$8.05 billion

Allergan Inc.

Kythera Biopharmaceuticals

$2.1 billion

Hill-Rom Holdings

Welch Allyn, Inc.

$2.05 billion

Source: The Health Care M&A Information Source, July 6, 2015

Juno Therapeutics Teams up with Celgene

Celgene Corporation (NASDAQ: CELG) made a big bet on a small company last week, when it agreed to pay nearly $1 billion to Juno Therapeutics (NASDAQ: JUNO) for a 10-year collaboration on immunotherapies targeting cancer and autoimmune diseases. The real price is $999,803,496 and consists of an upfront payment of $150 million, and the purchase of 9.1 million shares of JUNO common stock at a price of $93.00 per share. That’s a pretty generous offer, considering Juno’s stock price was bumping along around $54.00 late last week. Juno will be responsible for research and development in North America, and retains commercialization rights there. Celgene will be responsible for development and commercialization in the rest of the world, and will pay Juno a royalty on sales in those areas.

Madison Dearborn Buys into Rehab Products

Chicago-based private equity firm Madison Dearborn Partners plunked down $715 million for Patterson Medical, a division of Patterson Companies (NASDAQ: PDCO). The parent company wants to focus on its dental and animal health businesses, and was looking for a buyer. Patterson Medical provides rehabilitation, assistive and splinting products around the world, which is clearly not great fit. Price-to-EBITDA was a mere 1.06x. ………………………….Click here for a free trial to The Health Care M&A Information Source and download the current issue today.

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Health Care Deal News, June 29, 2015 — June 2015 Deals Slow Down

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Week ending June 25, 2015:

Recent Healthcare M&A Deals

Medical Devices

Acquirer

Target

Price

MELA Sciences, Inc.

XTRAC and VTRAC businesses

$42.5 million

Smith & Nephew plc

Zimmer’s Unicondylar Knee system

N/A

DJO Global, Inc.

Biomet Cobalt™ Bone Cement

N/A

Other Services

Thermo Fisher Scientific Inc.

Alfa Aesar

$405 million

Bolder Healthcare Solutions

Avectus Healthcare Solutions

N/A

Zimmer-Biomet Merger Spurs More Deals
After more than a year of regulatory reviews in the United States and Europe, Warsaw, Indiana-based Zimmer Holdings (NYSE: ZMH) and its cross-town rival Biomet, Inc., finally tied the knot on June 24, 2015. In April 2014, when the deal was first announced, the price was put at $13.35 billion. At closing, management stated that the value of the deal was approximately $14 billion. The combined company will be known as Zimmer Biomet Holdings, Inc., and will trade on the NYSE and SIX under the ticker symbol ZBH. The acquisition was conditioned upon the sale of some Zimmer and Biomet assets, and hot on the heels of the closing, Smith & Nephew (NYSE: SNN) acquired Zimmer’s Unicompartmental High Flex Knee system in the U.S. market, and privately held DJO Global, Inc. purchased Biomet’s Cobalt™ Bone Cement, Optivac® Cement Mixing accessories and Discovery® Elbow System for the U.S. market. Terms of those deals were not disclosed.

Top Deals in June 2015 Aren’t So Big
Healthcare M&A in June 2015 hasn’t been dead slow, but it certainly hasn’t kept pace with previous months’ totals. With 83 deals and $14.8 billion in spending, June 2015 lags far behind June 2014’s 120 transactions and $59.2 billion in spending. That said, we’re writing this on the day the U.S. Supreme Court found for the defendant (the Obama administration) in King v. Burwell, which means there could be a few very large deals announced between now and next week—particularly in the managed care sector, where the Big Five health insurers have already made plans to consolidate into the Big Three (see last week’s story in Health Care Deal News). For now, here are the five biggest deals announced in June 2015. This is by no means the final word.

Top Five Deals in June 2015

Acquirer

Target

Price

Allergan plc

Kythera Biopharmaceuticals

$2.1 billion

Hill-Rom Holdings, Inc.

welch Allyn, Inc.

$2.05 billion

CVS Health Corp.

Target’s pharmacy business

$1.9 billion

OPKO Health, INc.

Bio-Reference Laboratories

$1.47 billion

Panasonic Healthcare

Bayer’s diabetes care business

$1.15 billion

Source: The Health Care M&A Information Source, June 25, 2015

Sabra Buys the NMS Portfolio

Sabra Health Care REIT (NASDAQ: SBRA) plunked down $234 million for four skilled nursing facilities, known as the “NMS Portfolio,” all located in Maryland. The four skilled nursing facilities, with a combined total of 678 beds, specialize in transitional care and medically complex post-surgical, ventilator and dialysis patients. Sabra will enter into a triple-net master lease agreement with the current operator on three of the facilities and a triple-net lease agreement on the fourth, which is encumbered by a HUD loan. They will have an initial term of 15 years, two 10-year renewal options and annual rent escalators equal to the great of 2.50% or CPI, but not to exceed 2.75%. Initial yield on cash rent is expected to be 8.75%. Sabra expects to close on three of the facilities by the end of the month, while the fourth will close upon Sabra’s assumption of a $10.8 million HUD loan with an interest rate of 5.6%.

Bolder Healthcare Solutions Makes Two Bolt-on Acquisitions

You probably haven’t heard of Bolder Healthcare Solutions, the Louisville, Kentucky-based partnership formed by The Edgewater Funds, JZ Capital Partners and BHS CEO, Michael Shea. The company offers a suite of healthcare revenue cycle management (RCM) services to hospitals and physician practices. Last week BHS announced two transactions, for two privately held companies, The ROI Companies and Avectus Healthcare Solutions. ROI Companies also provides healthcare RCM services, while Avectus Healthcare specializes in processing third-party liability claims and accounts for hospitals and trauma centers. Not to be boastful, but its press release states that Avectus “utilizes every resource provided by state law, including hospital and medical lien statutes and assessment of benefit protections, to properly process these complex claims.” Somebody’s gotta do it. ………………………….Click here for a free trial to The Health Care M&A Information Source and download the current issue today.

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Health Care Deal News, June 22, 2015 — Managed Care M&A Ramps Up

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Week ending June 19, 2015:

Recent Healthcare M&A Deals

Medical Devices

Acquirer

Target

Price

Hill-Rom Holdings, Inc.

Welch Allyn, Inc.

$2.05 billion

XIO Group, LLP

Lumenis Ltd.

$510 million

Teva Pharmaceuticals Industries Ltd.

Drug delivery collaboration

$93 million

Other Services

Recipharm AB

OnTarget Chemistry

$1.84 million

VS Health Corporation

Target’s pharmacy and clinic business

$1.9 billion

Allergan Adds Kythera to Smooth Its Profile
Allergan plc (NYSE: AGN), formerly known as Actavis plc, wasted no time in acquiring another publicly traded company. Last week, Allergan picked up Kythera Biopharmaceuticals, Inc. (NASDAQ: KYTH) for $2.1 billion, payable 80% in cash and 20% in new AGN shares issued to KYTH shareholders. Kythera’s only marketed product is Kybella™, an injectable drug that is the first and only approved, non-surgical treatment for double chin. The acquisition is expected to be breakeven in 2016 and accretive thereafter. Actavis, er, Allergan remains committed to de-levering to below 3.5x debt to Adjusted EBITDA by the end of the first quarter of 2016.

The Giant Health Insurers Are Circling
It began in May, with Humana Inc. (NYSE: HUM) publicly declaring it was exploring a sale. That announcement ignited the smoldering rumors that have been swirling around the healthcare industry since the beginning of 2015: Expect a lot of consolidation in the Managed Care sector this year. By mid June The Wall Street Journal reported that UnitedHealth Group (NYSE: UNH) approached Aetna Inc. (NYSE: AET) with an offer, and that Anthem (NYSE: ANTM) and Cigna (NYSE: CI) were engaged in merger talks. We checked our DealSearchOnline database to see how each of the top five spent on managed care targets since 1994. Check ’em out.

Health Insurers’ M&A Spending on Managed Care Targets, 1994 t0 2015

Acquirer

Number of deals completed

Price

Aetna

14

$13.3 billion

Anthem

10

$21.1 billion

Cigna

13

$8.0 billion

Humana

22

$4.3 billion

UnitedHealth Group

31

$34.8 billion

Source: The Health Care M&A Information Source, June 19, 2015

Independent Welch Allyn Sells for $2.05 Billion
Welch Allyn, Inc. was a quiet, family-run global medical device company, based in the Finger Lakes region of New York State. We knew the peace couldn’t last. Sure enough, last week Hill-Rom Holdings, Inc. (NYSE: HRC) agreed to pay $2.05 billion for the Skaneateles Falls-based company that makes those physical examination instruments and accessories you so look forward to seeing whenever you visit your doctor. It also makes EMR-connected vital signs and cardiac monitoring devices, with the aid of 2,600 people in 26 countries. Hill-Rom Holdings operates as a medical technology company, and its financial advisors at Goldman, Sachs & Co. expect this transaction to generate $2.6 billion in revenues and more than $500 million in adjusted EBITDA.

Joint Venture Buys Regal Lifestyle Communities

Another good REIT story was made in the long-term care sector. Last week Health Care REIT, Inc. (NYSE: HCN) one of the largest diversified healthcare REITS in the country, agreed to pay $623 million for Regal Lifestyle Communities Inc. (TSX: RLC). Regal operates 23 independent living communities with more than 3,600 units—13 in Ontario, seven in Quebec, and one each in British Columbia, Saskatchewan and Newfoundland. Far-flung as that sounds, about 83% of the NOI is derived from four large metro markets.  HCN will be buying this portfolio in an existing RIDEA joint venture with Revera, Inc., with HCN owning 75% and Revera 25%…………………………Click here for a free trial to The Health Care M&A Information Source and download the current issue today.

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Health Care Deal News, June 15, 2015 — Rehab Deals Shows Some Muscle

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Week ending June 12, 2015:

Recent Healthcare M&A Deals

Pharmaceuticals

Acquirer

Target

Price

Mission Pharmacal Company

ProSolus Pharmaceuticals LP

N/A

POZEN Inc.

Tribute Pharmaceuticals Canada Inc.

$146 million

Aytu BioScience, Inc.

Rights to ProstaScint®

N/A

Rehabilitation

ATI Physical Therapy

Proaxis Physical Therapy

N/A

HealthSouth Corporation

Reliant Hospital Partners, LLC

$730 million

Bayer’s Diabetes Care Business Fetches $1.1 Billion
Last week Bayer AG (XETRA: BAYN) agreed to sell its Diabetes Care business to Panasonic Healthcare Holdings Co., Ltd. for €1,022 million (¥138 billion), or $1.154 billion. The sale includes the leading Contour™ portfolio of blood glucose monitoring meters and strips, as well as other products such as Breeze™2, Elite™ and Microlet™ lancing devices. The portfolio accounted for €909 million (of $1.02 billion) in sales in 2014, according to Bayer. Panasonic Healthcare Holdings was formed in September 2013 when KKR & Co. (NYSE: KKR) invested $1.67 billion in cash to gain 80% control of the healthcare division of Japan’s Panasonic Corporation. Panasonic retained 20% of the division. With this acquisition, Panasonic strengthens its In Vitro Diagnostics including self-monitoring of blood glucose systems.

The Rehab Sector Shows Some Muscle
HealthSouth Corporation’s (NYSE: HLS) acquisition of Reliant Hospital Partners LLC for $730 million was a tremendous boost for the sector’s year-to-date spending, bringing the total to $85 million through June 12, 2015. But the real action, as always, is in the deal volume. In the same period, 12 acquisitions of rehabilitation facilities and occupational therapy clinics have been announced. Compare that to the same period in 2014, and only seven deals were reported, with just $11 million spent. Here are the three deals in 2015 with reported prices.

Top Three Rehabilitation Deals in 2015, through June 12

Acquirer

Target

Price

HealthSouth Corporation

Reliant Hospital Partners, LLC

$730 million

U.S. Physical Therapy

9-clinic physical therapy practice

$7.2 million

U.S. Physical Therapy

3 physical therapy practices

$4.8 million

Source: The Health Care M&A Information Source, June 12, 2015

Nautic Partners Exits, HealthSouth Buys In
Nautic Partners made a grand exit last week as it sold Reliant Hospital Partners, LLC to HealthSouth Corporation (NYSE: HLS) for $730 million. Reliant operates a portfolio of 11 inpatient rehabilitation hospitals in Texas, Massachusetts and Ohio, plus three inpatient satellite locations in Massachusetts, for a total of 902 beds. All of the hospitals are leased. Operating entities at seven of the hospitals include minority limited partners whose interest represents less than 10% of the equity of the combined Reliant operating entities. HealthSouth will assume the lease obligations of all the acquired hospitals. Based on the structure of the transaction, it expects to realize a tax benefit with and estimate net present value of approximately $125 million to $150 million.

The Old Irish Shuffle Play

A bit of financial wheeling and dealing occurred last week, as Altan Pharma Limited, a privately held pharmaceutical company based in Dublin, Ireland, announced its acquisition of Madrid-based GES Group, which is comprised of GES Genéricos Españoles Laboratorio; Genfarma Laboratorio, S.L. and Biomendi, S.A.U. The price was €87.5 million ($98.3 million, approximately). What the announcement left out was that, on the same day, Dublin-based Malin plc invested €34.5 million ($38.9 million, approximately) to gain a 65% equity stake in Altan Pharma. While Altan is a central player to these transactions, it lacks a website, as well as a corporate address. But now it owns GES Group, which develops, manufactures and markets specialty injectable drugs with an international distribution business. Time to get cracking on a corporate image…………………………Click here for a free trial to The Health Care M&A Information Source and download the current issue today.

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Health Care Deal News, June 8, 2015 — May 2015 vs. May 2014

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Week ending June 5, 2015:

Recent Healthcare M&A Deals

Hospitals

Acquirer

Target

Price

SSM Health

Saint Louis University Hospital

Merger

Franciscan Alliance

Jasper County Hospital

Merger

Laboratories, MRI & Dialysis

Acquirer

Target

Price

Accuratus Lab Services, Inc.

Array Biopharma’s CMC operation

N/A

OPKO Health, Inc.

Bio-Reference Laboratories

$1.47 billion

OPKO Health Buys Bio-Reference Labs

OPKO Health (NYSE: OPK) may have posted a net loss of $244 million on a trailing 12-month basis, but it had the wherewithal to buy Bio-Reference Laboratories (NASDAQ: BRLI), one of the largest full-service diagnostic laboratories in the world. Bio-Reference provides clinical testing services to physician offices, clinics, hospitals, long-term care facilities and employers in more than 50 countries. OPKO plans to leverage the company’s the national marketing, sales and distribution resources to boost sales of its 4Kscore test, a blood test that evaluates a patient’s risk for aggressive prostate cancer. Under terms of the deal, BRLI stockholders will receive 2.75 shares of OPKO common stock for each share of BRLI common stock. Based on a closing price of $19.12 per share of OPKO stock on June 3, 2015, the transaction is valued at approximately $1.47 billion.

May 2015 Health Care M&A vs. May 2014

Health care deals were fairly strong in the early weeks of May 2015, but deal makers seemed to take a vacation around the Memorial Day weekend, and didn’t get back to work until the first week in June. Here’s how May 2015 transactions compare with the same month the year before, when M&A was booming through the second quarter. The difference isn’t dramatic, but so far in Q2:15, we’ve counted approximately 228 transactions, compared with 325 in Q2:14. Stay tuned.

Deal Volume, May 2015 vs. May 2014

Segment

May 2015

May 2014

Change

Health Care Services

53

63

-16%

Health Care Technology

50

46

9%

Total

103

109

-6%

Source: The Health Care M&A Information Source, June 5, 2015

Acadia Healthcare Is Still on the Acquisition Trail

Acadia Healthcare (NASDAQ: ACHC) made its second acquisition of 2015 last week, adding three more facilities to its growing list of inpatient behavioral health care assets. Two of its targets are in the United Kingdom, where last year it picked up Partnerships in Care, the second-largest independent behavioral health care provider, for $662 million. This year Acadia acquired Care UK, which operates 15 inpatient facilities with approximately 300 beds, and Choice Lifestyles, a single facility with 42 beds. The third property is Belmont Behavioral Health, a 147-bed inpatient facility that was part of the not-for-profit Einstein Healthcare Network outside Philadelphia, Pennsylvania. The aggregate cash consideration for all three companies is approximately $145 million.

McKesson Sells its Care Management Business

McKesson Corporation (NYSE: MCK) is divesting its Care Management business, which will be renamed AxisPoint Health. Its offerings include complex and chronic case management services to payers and other risk-bearing entities through a network of nurses and clinicians in 24 states. The buyers are Comvest Partners and Mosaic Health. Financial terms were not disclosed…………………………Click here for a free trial to The Health Care M&A Information Source and download the current issue today.

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