Gabriel Perna | March 23, 2021
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 terms of the number and the value of deals in the life sciences industry, 2020 saw a decline from 2019, according to insights from PwC. In fact, the value of deals plummeted nearly 50 percent and that’s despite the 11th hour, $39 billion deal between AstraZeneca and Alexion in mid December.
But PwC and others are confident that the industry is on the rebound in 2021. They say that companies will be looking to increase scale in various therapeutic areas such as oncology, boost gene therapy innovation capabilities and most importantly, they have the balance sheets and capital that can be used for M&A. PwC is projecting up to $275 billion in deals for the life sciences sector in 2021.
Already, there are signs that PwC’s predictions are coming to fruition. Deals have been made left and right in the first few months of 2021 such that the activity prompted U.S., European Union and other antitrust enforcement agencies across the world to recently announce they were teaming up to better scrutinize pharma M&A deals.
“Given the high volume of pharmaceutical mergers in recent years, amid skyrocketing drug prices and ongoing concerns about anticompetitive conduct in the industry, it is imperative that we rethink our approach toward pharmaceutical merger review,” FTC Acting Chairwoman Rebecca Kelly Slaughter said in a statement.
Until those agencies act to curb M&A in the pharma and biotech industries, experts expect the frequent activity to continue. Here’s a look at the major deals in the life sciences industry (as well as the provider, payer, and tech sectors) for the first quarter of 2021.
French-based pharmaceutical company Sanofi acquired U.K.-based Kymab for $1.4 billion to increase its presence in immunology. The deal will allow Sanofi to add Kymab’s lead asset KY1005 to its pipeline, a human monoclonal antibody targeting key immune system regulator OX40L. “The novel mechanism of action may provide treatment for patients with suboptimal responses to available therapies. We understand from our ongoing work in debilitating immunological diseases how critical it is to find the right treatment for each patient,” said Sanofi CEO Paul Hudson.
Merck announced it was acquiring Pandion Therapeutics for $1.9 billion in February. The company, which announced that CEO Kenneth Frazier will be leaving in June, paid a premium for Pandion because of its autoimmune therapy candidate, PT101. The space is competitive with fellow big pharma companies—Eli Lilly, Amgen and Roche—all having IL-2 therapies.
Speaking of the autoimmune space, Horizon Therapeutics struck a deal to buy AstraZeneca’s spinout Viela Bio for $3 billion. Viela Bio comes with a number of clinical-phase autoimmune and inflammatory disease drug candidates. “This acquisition represents a significant step forward in advancing our strategy – to expand our pipeline in order to accelerate our growth over the long term,” said Tim Walbert, chairman, president and chief executive officer, Horizon. The deal is slated to close by the end of this quarter.
Amgen bought Five Prime Therapeutics for $1.9 billion. Five Prime has struggled in recent years — cutting 20 percent of its staff and losing its CEO in 2019. However, its midstage gastric cancer program received positive results in a recent trial, which made it appetizing for Amgen. “The acquisition of Five Prime offers a compelling opportunity for Amgen to strengthen our oncology portfolio with a promising late-stage, first-in-class global asset to treat gastric cancer,” said Robert Bradway, chairman and CEO at Amgen, in a statement.
Roche acquired GenMark Diagnostics for $1.8 billion. With the deal, Roche says GenMark’s syndromic panel testing portfolio will complement its current molecular diagnostics portfolio. Thomas Schinecker, CEO Roche Diagnostics: “Their proven expertise in syndromic panel testing provides faster targeted therapeutic intervention, resulting in improved patient outcomes and reduced hospital stays, and will contribute to Roche’s commitment to helping control infectious diseases and antibiotic resistance.”
Others: Boston Scientific acquired the remote cardiac monitoring developer Preventice Solutions, for $1.2 billion…Takeda sold four Type 2 diabetes medications to Japanese drugmaker Teijin for a total of $1.2 billion…Philips acquired Capsule Technologies, which offers a platform that connects medical device systems and EHRs, for $635 million. Walgreens sold its Alliance Healthcare business to AmerisourceBergen, the pharmaceutical wholesale company based in Pennsylvania, for $6.5 billion…There were also a number of IPOs in this space in the first quarter: Most prominently, 23andMe announced IPA plans through a $3.5 billion special purpose acquisition company (SPAC).
In the first quarter of 2021, UnitedHealth’s Optum biggest deal was the company’s $13 billion acquisition of Change Healthcare totaling a purchase price of $7.84 billion and an extra $5 billion added in debt owed by Change. The deal will combine the two entities’ software, data analytics and revenue cycle capabilities. Neil de Crescenzo, Change Healthcare’s CEO and a member of Health Evolution’s Leadership Committee, will lead the combined business unit as the CEO of OptumInsight. The acquisition gained the attention of the American Hospital Association, which is asking the Department of Justice to scrutinize it amid concerns over competition.
But the Change Healthcare wasn’t the only deal for Optum in the winter months. The company also announced it is acquiring Massachusetts-based physician group, Atrius Health, for an undisclosed price. Optum is looking to add 10,000 employed and affiliated physicians in 2021, UnitedHealth Group CEO David Wichmann said late last year. Speaking of Wichmann, he also retired from the top spot at United, with Sir Andrew Witty of Optum taking his place.
Centene bought Magellan Health for $2.2 billion. Magellan Health is a pharmacy benefits manager focused on the mental health and substance abuse space. After the deal closes, Magellan will operate independently of Centene. “We believe as you move forward in health care, you have to integrate it. We’re dealing with very vulnerable populations,” Centene CEO Michael Neidorff said on CNBC’s “Squawk on the Street” program.
Cigna’s Evernorth subsidiary bought MDLive, a telehealth provider, for an undisclosed price. The deal comes after Cigna CEO David Cordani recently said that he expects the insurer to spend close to a $1 billion on mergers and acquisitions in 2021. Evernorth was created during the pandemic as a way to accelerate innovation and more virtualized care offerings for Cigna. MDLive was used by Cigna’s commercial customers already. Like other telehealth providers, MDLive saw a substantial increase in visits in 2020 during the pandemic.
Others: Anthem entered into an agreement with InnovaCare Health to acquire its Puerto Rico-based subsidiaries. This includes Innova’s MMM Holdings and its Medicare Advantage plans, MMM Healthcare. The deal was for an undisclosed price…Oscar Health went public on March 3, priced at $39 per share…. Alignment Healthcare, a tech-enabled Medicare Advantage company, announced the launch of an IPO.
There was less happening on the provider M&A front, perhaps a sign of the pandemic’s lingering impact on health systems’ ability to make significant moves. One report in October of last year said that hospital M&A in 2020 was at a 10-year low. The new year seemingly hasn’t yet changed that. Although there are expectations that COVID-19 will prove to be catalyst for the remainder of 2021.
One of the biggest hospital M&A deals came in the smallest state. Lifespan and Care New England Health System, both based in Providence, R.I., agreed to merge and create an academic health system affiliated with Brown University. As part of the deal, Brown will invest $125 million over five years to support the creation and integration of the academic health system.
A deal between Philadelphia-based Einstein Medical Center and Jefferson Health was allowed to go through after the FTC decided to no longer challenge the merger. “It’s a milestone victory for the city of Philadelphia and for those patients and families we proudly serve,” Stephen Klasko, MD, president of Thomas Jefferson University and CEO of Jefferson Health, said in a statement. Originally, the FTC sued to halt the merger over fear of raised prices for patients. However, a federal judge ruled against the FTC in December saying the agency didn’t prove this would happen in its lawsuit.
Not as lucky in avoiding scrutiny from regulators was Massachusetts General Hospital, which announced it was not going to acquire Exeter Health Resources, a hospital in New Hampshire. Mass General said that it was ending a two-and-a-half-year effort to acquire Exeter and form a New Hampshire coast health care network with its Wentworth-Douglass hospital.
Michigan-based company Insight is buying Chicago-based safety-net hospital Mercy Hospital for $1. The safety-net hospital on the south side of Chicago filed for Chapter 11 bankruptcy last year and was going to shutter by May of this year. The hospital was going to merge with other South Side hospitals, but the deal fell through. Insight says it will keep the hospital’s services intact but plans on changing the name.
Others: In Cleveland, University Hospitals and Case Western Reserve University have extended their affiliation through 2031… Atrium Health Navicent and Houston Healthcare System gave up on their efforts to merge after FTC scrutiny… Kindred Healthcare and Mercy Hospital Oklahoma City have acquired Everest Rehabilitation Hospital of Oklahoma City… Children’s Hospital of Philadelphia and Geisinger’s Janet Weis Children’s Hospital entered into an affiliation agreement.
Google’s $2.1 billion acquisition of Fitbit closed in January. The deal was announced in November 2019 but has faced scrutiny by the Department of Justice. Many consumer groups have urged the DOJ—as well as other regulatory agencies across the globe—to scrutinize the deal. “Google will continue to protect Fitbit users’ privacy and has made a series of binding commitments with global regulators, confirming that Fitbit users’ health and wellness data won’t be used for Google ads and this data will be kept separate from other Google ad data,” Fitbit CEO James Park said to users.
A lot continues to happen in the telehealth space. On top of the move with MDLive and Evernorth, Grand Rounds, which offers virtual consultations with specialists and telehealth platform Doctor on Demand have announced that they’re merging for an undisclosed price. Grand Rounds had a valuation of $1.3 billion while Doctor on Demand was worth $820 million. Owen Tripp will become the CEO of the combined company. In addition, Accolade, a concierge tech company acquired 2nd.MD for $460 million…Talkspace, an online therapy app, announced plans to go public via a SPAC deal valued at $1.4 billion in January.
Others: GetWellNetwork, a patient engagement company, announced plans to acquire Docent Health for an undisclosed price…Nuance Communications acquired Saykara, a startup that developed a voice-enabled mobile artificial intelligence software for charting…Signify Health went public in February and raised $564…Appriss Health, a cloud-based care coordination software and analytics solutions company focused on behavioral health and substance use disorders, has acquired PatientPing for an undisclosed price.