Ever since the rally in health care mergers and acquisitions began in 2014, we’ve been waiting for the inevitable slam-on-the-brakes quarter. That rally was sparked by the advent of newly insured families and individuals entering the healthcare market, beginning on January 1, 2014. Thanks to the Affordable Care Act, passed in 2010, health care M&A topped 1,000 transactions that year and has never looked back.

Isn’t it about time for the party to end? Not according to our data for the first six months of 2016, compared with the same period in 2014 and 2015. (But if you read our monthly M&A roundup on page 18, you may have second thoughts.)

In the first half of 2016, deal volume surpassed the same period in 2015 and 2014. More than 770 deals were announced in the first half of 2016, which is 7% higher than in the first half of 2015 (723 deals), and 25% higher than the first half of 2014 (617).

Spending has gone in the opposite direction, although not as dramatically, between 2014’s first half and 2016. In H1:14, nearly $186.0 billion was committed to finance the 617 transactions. This year, spending slid 9% in the first half, to approximately $169.0 billion. The first half of 2015 was even lower, at $162.4 billion.

What’s different about the healthcare market today, compared with 2014, is which sectors are seeing the most investor interest. The services side consistently makes up a greater share of the overall deal volume, and H1:16 was no exception. Deal volume on the services side comprised 61% of the total (474 deals), up from 60% (431) in H1:15 and 58% (357) in H1:14.

The Long-Term Care sector, which includes skilled nursing facilities, assisted and independent living communities and continuing-care retirement communities, saw deal volume grow 34%, to 171 transactions in H1:16, compared with 153 transactions in H1:14. Deal value in this sector hasn’t kept pace. Based on disclosed prices, spending on the 171 deals in 2016’s first half was just $4.9 billion, down 55% compared with $10.9 billion in the first half of 2014. So while investors are still buying long-term care properties and facilities, the big deals were done early on, in 2014. There were no billion-dollar-plus deals disclosed in the first half of 2015 or 2016, compared with three in the first half of 2014. A portion of today’s deal volume is a direct result of at least one of those billion-dollar deals long ago: Brookdale Senior Living’s(NYSE: BKD) $2.8 billion acquisition of Emeritus Corporation, as some of the less desirable properties have changed hands.

The Behavioral Health Care sector is another example of a change in investor sentiment. Deal volume in H1:16 was 108% higher (25 deals) compared with H1:14 (12 deals), and even 79% ahead of H1:15 (79 deals). The Mental Health Parity law helped kick-start interest in this sector back in 2014, and the current crisis in opioid abuse, together with other substances, is attracting a lot of capital. Billion-dollar deals are now common in this once low-key sector. In H1:16, $2.4 billion was spent, up 257% from the same period in 2014 ($693 million).

On the technology side, the usual powerhouses of M&A growth—Biotechnology, Medical Devices and Pharmaceuticals—all showed slight declines in deal volume (between 2% and 3%) compared with first half of 2014. This year’s breakout sector is eHealth, which includes revenue cycle management, electronic health records and data analytics. Some 56 mergers and acquisitions were announced in the first half of 2016, up 83% versus H1:14 (52 deals).

The party may be ending, or just taking a breather. We’ll know more after the November elections. □
The four technology sectors contributed 53 deals (48%) of July’s deal volume, and the usual lion’s share of spending: nearly $4.0 billion (78% of the month’s total).


The Biotech sector picked up steam in July, posting 18 deals, up 16% compared with June’s eight transactions. Spending was down 24%, to $572.6 million, compared with June.

The largest deal in this sector was from Bio-Teche Corporation (NASDAQ: TECH), which paid $250 million for privately held Advanced Cell Diagnostics (ACD). ACD develops and commercializes cell- and tissue-based diagnostic tests for personalized medicine, as well as proprietary consumables for genomic analysis.

This transaction marks Bio-Techne’s entry into the genomics field and market. ACD’s technology serves both research and diagnostic markets, expanding the company’s presence in the clinical lab setting.

GE Healthcare, a subsidiary of GE (NYSE:GE), announced its acquisition of privately-held Biosafe Group SA, a Swedish developer, manufacturer and supplier of products for cell processing in the areas of adult stem cell banking. The combined biological, engineering and industrial capabilities should advance cell therapy and cellular immunotherapy.

GE’s interest in cellular research is not new. In January 2016, GE Ventures completed a $31.5 million co-investment with the Canadian government to create the BridGE@CCRM Cell Therapy Centre of Excellence in order to promote new technologies for the product of new cellular therapies in Toronto. In April, GE Ventures and the Mayo Clinic announced the launch of Vitruvian Networks Inc., a platform company committed to accelerating access to cell and gene therapies through cloud-ready software systems and manufacturing services.

Kite Pharma Inc. (NASDAQ: KITE) announced two separate license deals in the last week of July. On July 25, it acquired the exclusive worldwide rights to technology that advances the development of off-the-shelf allogeneic T-cell therapies from renewable pluripotent stem cells, also known as the ATO system, in a deal with the University of California, Los Angeles. In connection with this agreement, Kite entered into a sponsored research agreement with UCLA to support ongoing preclinical research for the ATO system.

Two days later, Kite entered into a license agreement with the National Institute of Health for the license to its fully human anti-CD19 chimeric antigen receptor-based product candidate directed against B-cell malignancies.

This was not Kite’s first deal with NIH, as they purchased a license to T-cell receptor candidates in June of 2014 for an undisclosed amount. Then, in 2015, Kite Pharma entered into another license deal for T-cell receptors with the Netherlands Cancer Institute. This deal followed Kite’s $21 million purchase in March of 2015 of T-Cell Factory B.V., a company focused on discovering and developing tumor-specific T-cell receptors.


The digital health sector couldn’t keep up the burning pace it was running in June. Just seven transactions were announced in July, compared with 25 in June. Disclosed spending was up 18%, however, to $689 million, versus $582 million the previous month.

Royal Philips (NYSE: PHG), a leader in diagnostic imaging, image-guided therapy, patient monitoring and health informatics, acquired Georgia-based Wellcentive, Inc., a privately-held provider of cloud-based population health management and data analytics solutions for physicians and their organizations, for an undisclosed price. Wellcentive imports, aggregates and analyzes clinical, claims and financial data across healthcare and hospital systems.

This deal follows Royal Philips’ recent acquisition of PathXL Ltd., which offers a range of digital pathology image analysis, workflow software and educational tools to the research and education segments of the pathology and bio-pharma markets.

This transaction marks the fourth acquisition of a population health company in 2016.

The largest deal (with a disclosed price) was from private equity firm Thoma Bravo, LLC, which acquired Imprivata® (NYSE: IMPR), a healthcare IT security company, for $544 million. Imprivata’s technology enables healthcare organizations worldwide to access, communicate and transact patient information securely while also addressing critical compliance and security challenges.

Medical Devices

The Medical Device sector posted nine deals in July, up 50% compared with June’s six announced transactions. Spending was far lower, down 84% to $455 million, compared with the previous month.

The largest deal of the month targeted an ophthalmology company, InnFocus Inc., which develops products for glaucoma surgery. Its lead product, MicroShunt, is a drainage device implant that drains eye fluid and reduces intraocular pressure (IOP). MicroShunt has shown significant and sustainable lowering of IOP when used alone or in combination with cataract surgery in clinical trials conducted outside of the United States. Late-stage clinical studies are underway in the United States and Europe in advance of a pre-market approval application to the Food and Drug Administration, which is planned in the near future.

The acquirer, Japanese pharma company Santen Pharmacuetical Co. Ltd., paid $225 million to add InnFocus’s products to its glaucoma pipeline.

Zimmer Biomet Holdings (NYSE: ZBH) went across the pond to acquire Medtech SA (Euronext: ROSA), which specializes in the design, development and marketing of innovative robotic applications to assist surgeons during their medico-surgical interventions. The $132.9 million price is equal to €120,000,000 or €50.00 per share for 1,406,151 Medtech shares, representing 58.77% of the outstanding share capital of Medtech. ZBH also acquired convertible bonds at €50.03 per bond and warrants at €17.17 per warrant.

As soon as possible, Zimmer Biomet will launch an all-cash simplified tender offer to acquire the remaining outstanding shares of Medtech for the same price per share (€50.00). The company intends to continue operations of Medtech at its current headquarters in France, and also intends that this location become a center of excellence for Zimmer Biomet’s robotic development activities.


The Pharma sector is typically the “heavy lifter” among the tech sectors, delivering the highest number of transactions and dollar amounts every month. July’s results bear that out, with 19 transactions and nearly $2.2 billion in spending.

The largest deal in this sector was also the largest in July, at $1.26 billion. China-based Shanghai Fosun Pharmaceutical (SHA: 600196) acquired Indian drug maker Gland Pharma Ltd., a portfolio company of KKR (NYSE: KKR), which develops and manufactures generic injectables, with a focus on the Indian and U.S. markets. KKR first invested in Gland in 2014.

The deal will strengthen Fosun Pharma’s global presence and enable it to provide more high quality products and services. Following the close of the transaction, Gland will remain headquartered in Hyderabad.

Japanese generic drug maker Nichi-Iko Pharamceutical Co. (TSE: 4541), announced the second largest deal, paying $736 million for Sagent Pharmaceuticals (NASDAQ: SGNT), based in Schaumburg, Illinois. Sagent develops, sources, manufactures and markets injectable pharmaceuticals in North America.

The all-cash tender offer, for $21.75 per share, represents a premium of approximately 40.3% to Sagent’s closing price of $15.50 per share on July 8, 2016.

The transaction enhances Nichi-Iko’s platform in the U.S. market to commercialize its biosimilar product pipeline and increase its presence in injectables.

On July 5, 2016, Bristol-Myers Squibb (NASDAQ: BMY) acquired the privately-held, Swedish pharma company Cormorant Pharmaceuticals AB for $95 million. The driver behind this acquisition was gaining full rights to Cormorant’s HuMax-IL8 antibody program, which may result in an additional $425 million in development and regulatory milestone payments.

Cormorant had acquired HuMax-IL8 from GenMab A/S in 2012 and has since taken it into development. It is a phase 1/2 monoclonal antibody that offers the potential to boost immune response and increase the effectiveness of existing cancer medicines through combination therapy.

The addition of HuMax-IL8 enhances BMY’s existing pipeline of clinical candidates through its potential synergistic qualities when coupled with other drugs.

Although a leader in immuno-oncology, BMY has focused on several other disease areas recently. On March 23, 2016, the company paid $225 million to acquire privately-held Padlock Therapeutics, Inc., which included full rights to its protein/peptidyl arginine deiminase inhibitor discovery program, enabling a potentially transformational approach to treating rheumatoid arthritis and other autoimmune diseases. On February 1, BMY entered into a joint venture with Pfizer (NYSE: PFE) to develop and commercialize a blood coagulant in Japan, for $15 million.

Japan’s Takeda Pharmaceutical Company Ltd. (OTCQB: TKPYY) has been busy bolstering its role as a global leader in gastroenterology. On June 8, the company agreed to pay $15 million for Theravance Biopharma’s (NASDAQ: TBPH) license to TD-8954, a selective 5-HT4 receptor agonist being investigated for potential use in gastrointestinal motility disorders, including enteral feeding intolerance.

Less than a month later, Takeda bought the rights to develop ATC-1906 from Altos Therapeutics for an undisclosed amount. ATC-1906 is currently in Phase 1 studies for the treatment of gastroparesis and its symptoms.

Four days later, on July 5, Takeda paid approximately $28 million to TiGenix N.V. (EBR:TIG) for the ex-U.S. license to Cx601, which is used for the treatment of perianal fistulas in patients with Crohn’s disease. Cx601 was granted orphan designation in 2009 by the European Commission. Based on the results of the ADMIRE-CD Phase 3 clinical trial, TiGenix announced that it submitted the Marketing Authorization Application to the European Medicines Agency for Cx601 in March of 2016. □