Shield sector focus: Healthcare

The Healthcare sector comprises a wide range of segments including Medical Devices, Hospitals and Care Homes (for the elderly, the disabled and the emotionally disturbed), Pharmaceuticals, Biotechnology, Pharmacies and related recruitment services.

Shield Corporate Finance professionals have extensive experience gathered over many years of M&A work across the Healthcare sector on a pan-European and transatlantic basis.

Shield's current mandates in the sector include:

Sale of a leading web-based partnering and licensing company in the life science industry
Sale of a care home business
Sale Preparation for a pharmaceutical consultancy
Value-Building for a Continental European company offering sales and marketing services to pharmacies and biotech firms

Shield advised Cambridge Pharma on its sale to US giant IMS Health. Shield's intervention led to a tripling of the price achieved in relation to the initial offer from a different bidder (see 7min video case study). In addition, Shield has been involved in deals in the field of medical devices, diagnostic testing and the provision of pharmacy locums.

Shield's Chief Executive, David Young, regularly presents Pharma Valuation workshops on behalf of Euromoney and was formerly Merrill Lynch's Head of European Healthcare M&A and a senior member of the JP Morgan Chemicals & Pharmaceuticals M&A team, with responsibility for Biotech and Agro-Chemicals in Europe. In their former employment, Shield professionals have advised on numerous Healthcare deals, including those involving such household names such as Beecham, Smithkline, Sankyo and Zeneca.

Healthcare sector M&A comment

The steady growth in sector M&A activity has been fuelled by a spate of patent expiries on blockbuster drugs, coupled with disappointments in the late-stage R&D pipelines of several big Pharma companies.

These pressures have spurred the growth of licensing agreements between companies. It is estimated that around one fifth of ethical sales by the top 20 pharma companies are now derived from licensed products. As competition for late-stage compounds intensifies, we have seen a sharply increased interest in early-stage licensing, where more opportunities exist, albeit at higher risk..

The American Jobs Creation Act of 2004 helped by giving pharma companies the opportunity to repatriate up to $75 billion in earnings from international havens to the United States at a fraction of the normal tax rate - providing funds for investment, including acquisitions.

Recent large deals in the sector include AstraZeneca's acquisition of MedImmune for $15.6bn, Shering-Plough's acquisition of Organon for $14bn, Bayer's acquisition of Schering for $21.5bn, Merk's acquisition of Seronco for $13.3bn and Teva's $7.4bn acquisition of IVAX.

Population ageing and scientific advances continue to drive up the cost of healthcare systems, forcing governments and healthcare providers increasingly to mandate generic substitution at the pharmacy level. The biosimilar market (generic medicines derived from biotechnology) is also likely to grow strongly as the legal framework in both Europe and the US is developed.

In common with many other sectors, outsourcing and off-shoring to emerging markets, particularly India and China, is becoming increasingly common, in order to reduce both drug development and manufacturing costs. At the same time, western healthcare companies are also looking to increase revenues from emerging markets to take advantage of their huge populations, economic growth and increased spending on healthcare.