Every quarter, Health Evolution will report on the biggest proposed and finalized mergers and acquisitions in the health care industry that occurred over the preceding three months. If we missed any deals, contact us here.
In Q3, the health care sector continued to see a frenzy of merger and acquisition activity as providers, payers, life science and health IT companies announced major deals. According to an analysis from consulting and advisory firm KPMG, there were 252 deals in the health care sector in August alone, a huge jump from the 161 transactions the previous year. On the digital health front, according to Rock Health, “Q3 2021 was the largest quarter to date for digital health M&A activity with 79 deals in which a digital health company was acquired or underwent a merger.
These trends in health care mirror a trend that is being seen across the globe in all sectors, as companies plan to recover from the pandemic with capital to spend. Willis Towers Watson says that “deal volume in the last three months is the second highest recorded for a third quarter” and as companies move away from the economic impact of last year’s lockdowns, they are looking “to bulk up and address the vulnerabilities it exposed.”
A recent study from Lazard delves into some of the reasoning for health care executives’ interest in pursuing deals. Nearly 80 percent of the leaders surveyed by Lazard say the need for growth is what’s catalyzing M&A activity, 59 percent say it’s the need for innovation, and 50 percent say it’s reasonable price levels and value expectations. On the flip side, 82 percent say price level and expectations is the greatest challenge in executive M&A deals in health care. For large cap companies (valued over $25 billion), 52 percent are concerned about regulatory uncertainty.
What follows is a look at the major M&A activity from late June to September in the health care industry:
Provider M&A activity has shifted to a more regional focus, according to Kaufman Hall, as a response to what the company saw was a need to share resources with nearby health care providers at the height of COVID-19. In early July, President Biden ordered the federal government to review and revise guidelines regarding hospital mergers.
In late June, University of Oklahoma and University Hospitals Authority and Trust signed a deal to merge and create the first-ever academic medical health system in the State of Oklahoma. The deal allowed for the combined enterprise to feature singular leadership, operational and financial functions under the name OU Health. The organization says the combined entity will allow for the research and education elements of University of Oklahoma to combine with the patient care side from the hospitals and clinics. “The healthiest states have one thing in common: an academic health system that brings together patient care, research and the training of tomorrow’s health care leaders. Before today, we had each of those pieces, and while they worked together, they operated separately with different management structures. Now, this merger unlocks unlimited potential as we bring together research-driven care and education that will make Oklahomans healthier, lead to economic prosperity and move our state forward,” OU President Joseph Harroz Jr. said in a statement.
In Florida, Cano Health bought Doctor’s Medical Center for $300 million in July, combining two primary care provider organizations. Cano will operate Doctor’s Medical Center’s 18 medical centers in the Miami area, mostly serving adult and pediatric Medicaid members. Cano says the combined entity will make it the “the largest independent value-based primary care provider to both Medicare and Medicaid patients.”
In the Rocky Mountain region, Utah-based Intermountain Healthcare and Colorado-based SCL Health announced plans to merge and create a $14 billion health system. The combined entity will employ 58,000 people and operate 33 hospitals. It will run 385 clinics across six states and provide health insurance to about one million people. “American health care needs to accelerate the evolution toward population health and value, and this merger will swiftly advance that cause across a broader geography. We’ll bring together the best practices of both organizations to do even more to enhance clinical excellence, transform the patient experience, and support healthy lives,” said Intermountain CEO Marc Harrison, MD, in a statement.
Other deals…In the home health space, Amedisys acquired Contessa Health for $250 million. Contessa provides hospital-at-home and skilled nursing facility at-home services to health systems. Amedisys says this expands its addressable market to $73 billion…Atrium Health finalized an agreement to acquire Floyd Health System in Georgia. The deal was announced in 2019 but was delayed because of the pandemic. Atrium Health has pledged to invest $650 million in capital for Floyd over the next decade to enhance capabilities, skills and talent, facilities and technology…In the imaging world, Akumin acquired Alliance Healthcare Services for $820 million. Alliance provides imaging outpatient services in oncology and radiology…In early July, UVA Health announced it acquired full ownership of Novant Health UVA Health System, which it ran jointly with Novant since 2016…Tampa General Hospital and the University of South Florida announced a partnership to put their services under the same administrative umbrella, although the organizations say it’s not a formal merger…NorthShore University Health announced plans to acquire Edward-Elmhurst Health, with the two sides forming a 9-hospital entity that employs 25,000 people….HCA Healthcare announced a deal to acquire five hospitals from Steward Health Care in Utah. HCA also bought Tennessee-based NorthCrest Health in September.
Eli Lilly announced it acquired Protomer Technologies, a private biotech company in the diabetes care space, in a deal that has a potential valuation of more than $1 billion based on a successful rollout of Protomer’s proprietary peptide- and protein-engineering platform. Lilly had already led an investment round in Protomer and had a 14 percent ownership stake.
PerkinElmer has made half a dozen acquisitions in 2021 and the trend continued in the Summer months when it acquired BioLegend for $5.25 billion. The deal aims to increase PerkinElmer’s capabilities in precision medicine and diagnostic test development for drug discovery. Since May, PerkinElmer has acquired SIRION Biotech GmbH, Immunodiagnostic Systems Holdings, and Nexcelom Bioscience, along with this latest purchase. The life sciences giant also acquired Oxford Immunotec and ES Industries in 2021.
Sanofi acquired messenger RNA therapeutics company, Translate Bio, in a deal valued at $3.2 billion. The two companies have worked together since 2018 when they entered into a collaboration and exclusive license agreement to develop mRNA vaccines, which was further expanded in 2020 to broadly address current and future infectious diseases. “Translate Bio adds an mRNA technology platform and strong capabilities to our research, further advancing our ability to explore the promise of this technology to develop both best-in-class vaccines and therapeutics,” stated Paul Hudson, Sanofi Chief Executive Officer.
In one of the biggest deals of the quarter, MedTech company Baxter announced it was acquiring Hill-Rom for a deal valued at $12.4 billion, which includes the assumption of debt. The companies say there is strategic alignment and combined capabilities in therapeutic delivery, monitoring, blood purification, diagnostics and communications. Moreover, Baxter is strong in international sales, while Hill-Rom has two-thirds of its sales in America. The combined company will have an annual revenue of $14.6 billion and expects $250 million in annual cost synergies over the next three years. The deal will close in 2022, pending regulatory review.
Pfizer is acquiring Trillium, a clinical stage immuno-oncology company developing innovative therapies for the treatment of cancer, for $2.3 billion. The offer represents an 118 percent premium to the 60-day weighted average price for Trillium. Pfizer says that adding Trillium enhances its pipeline with Trillium’s TTI-622 and TTI-621 molecules, which enhance patients’ innate immune system to detect and destroy cancer cells. “We are encouraged by the early clinical data for TTI-622 and TTI-621 monotherapy for patients with heavily pretreated lymphoid malignancies and early encouraging activity for TTI-622 in patients with multiple myeloma,” stated Chris Boshoff, MD, PhD, Chief Development Officer, Oncology, Pfizer Global Product Development.
Other deals…AstraZeneca acquired Caelum Biosciences to expand its rare disease portfolio for $150 million. AstraZeneca also committed up to $350 million to add Caelum’s antibody to its rare disease pipeline…In late September, GE Healthcare acquired BK Medical for $1.45 billion for its surgical visualization technology… Bayer made a deal to acquire Vividion and its drug discovery platform for $1.5 billion and potential success-based milestone payments of up to $ 500 million…Verily made its first acquisition when it picked up clinical trial software company SignalPath for an undisclosed amount. “Joining forces helps to accelerate and scale our shared vision, increase efficiency and lower costs in clinical trials, empower clinical research sites with world class technology, and ultimately bring medicines to patients faster,” said Amy Abernethy, MD, PhD, President of Clinical Studies Platforms at Verily.
Health Catalyst announced plans to acquire patient engagement company Twistle for $104.5 million, plus a potential earn-out of up to $65 million based on performance targets. Health Catalyst says it will use its analytics capabilities with Twistle’s patient engagement platform to personalize outreach to patients as they navigate through their care journey.
Amwell was busy in late July as it acquired two different companies for a combined $320 million to expand beyond its telehealth services. The company bought SilverCloud Health, a digital mental health platform, and Conversa Health, which has an automated virtual health care platform. “By integrating SilverCloud Health and Conversa Health into our platform we are demonstrating Amwell’s fundamental and repeatable design to continually scale digital health care services across the different sites of care,” Ido Schoenberg, Chairman and Co-CEO, Amwell, said in a statement.
In Mid-August, Inovalon, a cloud-based health care data provider, announced it was being acquired by an equity consortium led by Nordic Capital to go private. Nordic was joined by Insight Partners as lead co-investor, 22C Capital, and Inovalon founder and Chief Executive Officer Keith Dunleavy, MD. The deal was valued at $7.3 billion and ensures Dunleavy will continue to serve as CEO.
Speaking of the mental digital health space, Ginger and Headspace announced an agreement to merge into a combined company, Headspace Health valued at $3 billion. “When I spoke with co-founder Rich Pierson it was a bit of a mind meld as if we were singing from the same hymnal. We really got on well. And there was a feeling of both business logic and culture fit that made a ton of sense about what we are both trying to accomplish in the world. There’s a great fit in the complementary nature of what we do,” Ginger CEO Russell Glass told Health Evolution in an interview announcing the deal.
Other deals…Virtual health company Ro acquired at-home testing kit company Kit to expand the diagnostics capabilities and lab infrastructure of its vertically integrated primary care platform… WellSky acquired Healthify to expand its social determinants of health efforts. Wellsky will combine Healthify’s SDoH referral platform and community networks with its own human and social services network. Late last year, WellSky acquired CarePort for $1.35 billion…In the genetics space, Invitae acquired consumer health tech firm, Ciitizen for $325 million…Sema4, a clinical data and genomics company, went public through a special purpose acquisition deal (SPAC) for a valuation of $3 billion…Unite Us, another SDOH-driven software company, made a couple of moves during the Summer. First, it bought Carrot Health for its consumer data and predictive analytics platform and then it bought NowPow for its community resource network management software-as-a-service platform…Avere Health sold its telemedicine platform, Avera eCare, to private investment firm Aquiline Capital Partners…Cloud-based patient management software provider Azalea Health Innovations acquired dashboardMD for an undisclosed amount.
In early September, Guidewell, the parent company of Blue Cross and Blue Shield of Florida, announced it was acquiring Triple-S Management, a health services firm based in Puerto Rico for $900 million. Under terms of the deal, Triple-S Management will become a subsidiary of GuideWell and continue to operate under the Triple-S Management brand. Triple-S has a strong position in Medicare Advantage, Medicaid and commercial segments in Puerto Rico. “The Transaction expands GuideWell’s core insurance operations and positions Florida Blue and Triple-S Management for significant growth and meaningful value creation for the customers and communities we serve,” Pat Geraghty, President and Chief Executive Officer of GuideWell and Florida Blue, said in a statement.
Humana closed its acquisition of Kindred at Home. The deal was announced in April of this year and is valued at $5.7 billion. Kindred will become part of Humana’s home solutions business.
Centene announced it is consolidating Medicare brands under the Wellcare name. Centene’s Medicare brands, including Allwell, Health Net, Fidelis Care, Trillium Advantage, ‘Ohana Health Plan and TexanPlus will become one unified Medicare brand under the Wellcare name. The insurer acquired Wellcare in early 2020 bringing aboard its Medicare Advantage plans across 33 states.