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Healthcare & Life Sciences HEALTHCARE & LIFE SCIENCES INDUSTRY UPDATE │ AUGUST 2015 www.harriswilliams.de Harris Williams & Co. Ltd is a private limited company incorporated under English law having its registered office at 5th Floor, 6 St. Andrew Street, London EC4A 3AE, UK, registered with the Registrar of Companies for England and Wales under company number 7078852. Directors: Mr. Christopher Williams, Mr. Ned Valentine, Mr. Paul Poggi and Mr. Thierry Monjauze, authorised and regulated by the Financial Conduct Authority. Harris Williams & Co. Ltd Niederlassung Frankfurt (German branch) is registered in the Commercial Register (Handelsregister) of the Local Court (Amtsgericht) of Frankfurt am Main, Germany, under registration number HRB 96687, having its business address at Bockenheimer Landstrasse 33-35, 60325 Frankfurt am Main, Germany. Permanent Representative (Ständiger Vertreter) of the Branch Niederlassung: Mr. Jeffery H. Perkins. 0 HEALTHCARE & LIFE SCIENCES INDUSTRY UPDATE │ AUGUST 2015 WHAT WE’RE READING CONTENTS HOSPITALS| COMPETING FOR CHILDREN . PUBLIC MARKETS OVERVIEW As a result of megamergers in the marketplace, specialty pediatric hospitals are . EQUITY MARKETS OVERVIEW facing increased competition from integrated delivery networks. In order to provide a comprehensive service offering, hospitals must gather a large number of . M&A OVERVIEW subspecialties focused on children’s care. Whereas in the past, such an . DEBT MARKETS OVERVIEW aggregation required significant patient volume, now acquisitions, joint ventures . HEALTHCARE & LIFE SCIENCES and partnerships have enabled many health systems to acquire or share the PUBLIC COMPARABLES providers who target these specialized patient populations. The result is that the . M&A TRANSACTIONS children’s hospitals that had once cornered the market face heightened competition. In an article by Modern Healthcare, the publication explores whether this is best for the patient. Given the limited resources who care for these patients, CONTACTS too much competition may dilute the marketplace and drive physicians to other Turner Bredrup markets where there is a substantial patient base to support a world class pediatric Managing Director care center. A link to the article can be found here. [email protected] +1 (804) 915-0110 James Clark Managing Director [email protected] +1 (804) 915-0119 PHARMACY BENEFITS| SQUEEZING OUT EXPENSIVE, BRANDED DRUGS Todd Morris Viagra or Cialis? While some may never have to choose between two of Managing Director [email protected] America’s most well-recognized branded pharmaceuticals, CVS may have +1 (415) 217-3412 already chosen for a large portion of the population. CVS and Viagra made headlines this month when the pharmacy benefits manager (“PBM”) announced it Cheairs Porter would exclude the drug from its coverage. The decision represents a recent trend Managing Director whereby drug-benefit plans have transitioned from guiding patients to cheaper [email protected] drugs to a strategy whereby PBMs are excluding certain drugs altogether. +1 (804) 915-0130 Historically, patients would have been directed to try cheaper options but would Geoff Smith have retained the option to pay more out-of-pocket for more expensive options. Managing Director Excluding drugs altogether, however, may lead to significant cost savings for [email protected] benefit plans assuming the cheaper options have equivalent safety and efficacy. +1 (804) 915-0195 The move arrives amidst the greater issue of payers continuing to struggle with Andy Dixon rising drug prices. A link to the article can be found here. (A subscription to the Director Wall Street Journal may be required) [email protected] +1 (415) 217-3419 Paul Hepper Director [email protected] MEDICAID| CALIFORNIA’S PLAN TO CARVE IN COMPLEX CHILDREN +1 (804) 932-1326 We continue our review of children making the healthcare news as California Whit Knier Director announced its plan to carve in its California Children’s Services (“CCS”) program [email protected] into Medi-Cal managed care. This is not, however, the first controversial case of +1 (804) 932-1321 traditional fee-for-service populations being brought into managed care. Several populations, including the elderly, disabled and other child populations have been Jacques Fu highly contested nationwide. On one hand, there are benefits to a system Vice President [email protected] whereby a patient who sees a variety of specialists and physicians would benefit +1 (804) 915-0185 by being cared for under a single plan. The controversy lies in whether the plans themselves provide adequate coverage and are equipped to deal with the most Andy Hewlett acute (and high-cost) populations. For now, California’s legislature will review a bill Vice President to slow down the planned transition until further analyses can be completed. A [email protected] link to the article in the Kaiser Health News can be found here. +1 (415) 217-3427 Bill Kayser Vice President [email protected] +1 (804) 915-0180 Nick Owens Vice President [email protected] +1 (804) 887-6027 www.harriswilliams.de PAGE | 1 HEALTHCARE & LIFE SCIENCES INDUSTRY UPDATE │ AUGUST 2015 PUBLIC MARKETS OVERVIEW Key Trading Statistics (detail begins on page 6) Median TEV/ Median TEV/ Number of Aggregate Sector Enterprise Value Change in Stock Price LTM Multiples Forward Mulitples Companies ($ mm) 3 mos. 12 mos. Revenue EBITDA Revenue EBITDA Clinical Laboratories 3 $34,493 6.5% 22.8% 1.9x 11.0x 1.9x 10.5x Contract Pharma Manufacturing 3 12,297 12.4% 46.9% 3.9x 16.8x 3.6x 13.9x Contract Research Organizations 9 $40,310 17.1% 39.7% 3.0x 15.2x 3.0x 14.0x Disease Management 2 8,181 (12.4%) (2.6%) 1.9x 14.1x 1.9x 11.9x Emergency Services 1 $2,171 (13.8%) (21.6%) 2.1x 8.3x 2.1x 8.0x Healthcare Staffing 5 20,912 13.9% 41.9% 1.4x 17.5x 1.4x 14.0x HMO - Medical 10 $320,462 9.1% 51.4% 0.8x 10.0x 0.8x 9.7x Services Information Services 14 45,002 2.5% 21.5% 5.6x 20.4x 4.8x 17.2x Specialty Managed Care 3 $8,648 21.4% 17.7% 1.2x 9.9x 7.6x 6.4x Specialty Pharmacy 1 2,736 28.9% NM 1.0x NA 1.0x NM Retail Pharmacy 3 $269,870 15.6% 40.5% 0.9x 12.6x 0.9x 13.0x Payor, Provider, Support & Pharmacy Specialty Pharmacy Management 2 78,224 11.7% 28.0% 0.7x 10.6x 0.7x 10.3x Dental Products 3 $113,971 11.6% 22.6% 3.2x 15.6x 3.3x 14.7x Durable Medical Equipment 3 11,965 (9.4%) 13.9% 1.9x 14.7x 1.9x 13.4x Life Sciences Tools 4 $131,176 4.5% 14.8% 3.0x 14.6x 3.7x 15.7x Devices Medical Devices and Products 15 677,676 5.3% 25.7% 3.7x 14.9x 3.7x 14.0x Products &Products Medical / Surgical / Dental Supplies & Distribution 6 $131,910 2.5% 22.9% 0.3x 13.0x 0.3x 11.2x Acute-Care Hospitals 4 116,882 14.1% 19.1% 1.2x 8.6x 1.1x 8.0x Assisted Living 3 $14,165 (8.6%) (4.4%) 3.0x 15.9x 2.5x 13.6x Diagnostic Imaging 3 9,714 (20.2%) 4.8% 1.7x 8.9x 1.9x 9.8x Dialysis Services 2 $60,082 (2.8%) 15.0% 2.0x 11.0x 2.0x 10.6x Home Care, Hospice, and Home Infusion 6 6,344 29.8% 66.0% 1.4x 13.7x 1.4x 12.3x Long-Term Care 3 $7,125 (0.2%) 15.0% 1.0x 11.2x 0.8x 8.7x Physician Practice Management 2 10,188 18.9% 39.7% 3.3x 15.4x 3.1x 14.5x Behavioral Health / Management 6 $30,565 13.6% 27.5% 1.6x 10.8x 1.5x 10.1x Provider-Based Services Provider-Based Surgicenters / Rehabilitation 5 18,661 5.3% 27.3% 2.2x 13.0x 2.0x 11.0x Payor, Provider, & Pharmacy Support Services 56 $843,307 10.9% 42.9% 1.5x 13.1x 1.4x 12.0x Products & Devices 31 $1,066,698 3.0% 14.6% 3.5x 14.1x 3.3x 12.9x Provider-Based Services 34 $273,726 11.1% 27.7% 2.1x 11.6x 2.0x 10.7x HW&Co. HCLS Composite Index 121 $2,183,731 6.8% 23.8% 2.6x 13.5x 2.5x 12.4x S&P 500 0.9% 9.0% Public Company Sector Performance (12-month % change in stock price) Home Care, Hospice, and Home Infusion HMO - Medical Contract Pharma Manufacturing Healthcare Staffing Physician Practice Management Contract Research Organizations Specialty Pharmacy Management Behavioral Health / Management Surgicenters / Rehabilitation Medical Devices and Products HW&Co. HCLS Composite Index Medical / Surgical / Dental Supplies & Distribution Clinical Laboratories Dental Products Information Services Acute-Care Hospitals Specialty Managed Care Long-Term Care Dialysis Services Life Sciences Tools Durable Medical Equipment S&P 500 Diagnostic Imaging Specialty Pharmacy Disease Management Assisted Living Emergency Services (40.0%) (30.0%) (20.0%) (10.0%) 0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0% 90.0% 100.0% PAGE | 2 HEALTHCARE & LIFE SCIENCES INDUSTRY UPDATE │ AUGUST 2015 EQUITY MARKETS OVERVIEW Healthcare & Life Sciences Industry Stock Performance 220 203.5% 200 180 169.9% 160 152.5% 140 120 100 80 60 40 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14 Oct-14 Jan-15 Apr-15 Jul-15 S&P 500 Dow Jones U.S. Health Care Index HW&Co. HCLS Index Top 25 Equity Offerings (by proceeds) Closing Date Issuer Ticker Transaction Type Gross Proceeds ($ mm) 07/29/15 Adeptus Health Inc ADPT Follow-On $410.6 07/22/15 Radius Health Inc RDUS Follow-On 345.0 07/08/15 Clovis Oncology Inc CLVS Follow-On 316.3 07/15/15 Ultragenyx Pharmaceutical Inc RARE Follow-On 303.6 07/27/15 NantKwest Inc NK IPO 238.3 07/30/15 AMAG Pharmaceuticals Inc AMAG Follow-On 230.9 07/09/15 Atara Biotherapeutics Inc ATRA Follow-On 207.0 07/01/15 Natera Inc NTRA IPO 180.0 07/21/15 Dynavax Technologies Corp DVAX Follow-On 143.8 07/23/15 Exelixis Inc EXEL Follow-On 135.0 07/14/15 MacroGenics Inc MGNX Follow-On 130.4 07/29/15 vTv Therapeutics Inc VTVT IPO 117.2 07/15/15 Chiasma Inc CHMA IPO 117.1 07/07/15 K2M
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