Trends in the healthcare sector
You just advised Integer on a $600 million transaction. There is a growing dynamic in the healthcare sector, in which sectors is this particularly pronounced?
One topic that will continue to shape the healthcare sector over the next few years is the digital health megatrend. We see very strong startup activity there, which manifests itself in large-volume financing rounds, for example. The most recent example from our practice is the Series A financing totaling $270 million from BioNTech, the largest unlisted biopharmaceutical company in Europe.
Basically, the trend towards large-volume healthcare transactions is not new — on the contrary, it has been going on for years. However, since the healthcare industry is in turn highly differentiated, consolidation in the various sectors has taken place and is still taking place at different speeds and at different times: For years, there has been an unbroken trend toward consolidation in the pharmaceutical sector; in the hospital sector, the trend has slowed somewhat, as most of the large chains have already consolidated. There is currently a consolidation trend in the mail-order pharmacy market; it remains to be seen to what extent the new government will influence the market by changing the legal framework.
The European medical technology industry will have to meet significantly stricter regulatory requirements from 2020, triggered by the new EU Medical Devices Regulation. Based on these legal developments, we expect an increasing trend towards consolidation, especially in the MedTech market. The new requirements relating to proof of efficacy/obviousness before market entry and documentation/monitoring obligations pose organizational and financial challenges for small and medium-sized companies in particular. This strengthens the position of large companies and corporations with their established quality management structures and practiced regulatory departments.
At the same time, the need for capital is increasing, especially for small and medium-sized enterprises. Both of these factors generally form a good starting position for M&A transactions. This is because the upcoming regulatory changes are merely a temporary phenomenon; demand for innovative medical devices will in all likelihood continue to grow. An investment in a well-positioned medical device company as a “base” can be a good foundation for further strategic acquisitions in order to form a medtech company with a solid product core that is strongly positioned in regulatory terms and also attractive for attracting qualified personnel.
Some industries, including the healthcare sector, energy and telecommunications, for example, are subject to particularly strict regulatory requirements and are constantly undergoing far-reaching changes as a result of new legislation. This presents us with difficult regulatory issues in healthcare transactions. Therefore, it plays a major role to have a well-rehearsed transaction team that includes experts on regulatory issues in the healthcare sector. As a full-service law firm, we regularly work very closely across disciplines with our attorneys who specialize in the healthcare sector and have proven industry expertise. In this way, we guarantee that our clients also receive comprehensive and tailored advice for the highly complex regulatory issues that arise in transactions in the healthcare sector.