Alexion Pharmaceuticals’ $40 billion sale to AstraZeneca (Nasdaq: AZN) and Immunomedics’ $20 billion sale to Gilead Sciences (Nasdaq: GILD) last year helped set a high bar for healthcare deal expectations. Will the party keep going? Trends including vertical integration and telemedicine are propelling this year’s deal flow thus far.
“The value of deals was robust in the first half of 2021, and not just M&A for scale or competitive reasons,” says Melinda Durr, principal at EY Parthenon at a media roundtable yesterday. “We’re seeing activity to address operational gaps and pivoting business into new openings.”
Healthcare payers are looking to consolidate amongst themselves and to become more vertically integrated, seeking assets across benefits and healthcare provision.
Streamlining administrative operations and automating processes are technology-related paths to future upside. Some payers, for instance, have so much variation in plans that they can have hundreds in operation in a single state.
For healthcare providers, that means a renewed focus on clinical care beyond the office setting. The pandemic forced providers to think about care in a new way when in-office volumes declined. Home care and telehealth are attractive avenues of expansion.
Dealmakers are already off to a robust start. Mednax (Nasdaq: MD) $50 million sale of its American Anesthesiology unit to North American Partners in Anesthesia last year could be a sign of deals to come: acquirers with streamlined processes can add scale through opportunistic purchases.
Telemedicine is seeing a boom as well. Teladoc Health’s $14.8 billion merger with Livongo closed late last year in a deal to span patients’ healthcare across a lifespan.
“What might be next,” Durr says, “Is seeing nontraditional health companies signal interest in the sector. Tech companies are signaling interest in driving a different operating model, forcing a rethink of what is their strategic value and how do they deliver to the end user.”