3 questions to smart minds
Photo: Martin Viciano Gofferje

Trends in the healthcare sector

For this 3 questions to Dr. Martin Viciano Gofferje

Gleiss Lutz, Berlin
Photo: Martin Viciano Gofferje
17. May 2018

In 2016, three of the four largest acqui­si­ti­ons by private equity funds in the health­care sector were public-to-private tran­sac­tions. In April 2017, two private equity (PE) funds bid €5.3 billion for Germany’s Stada Arznei­mit­tel AG, not an isola­ted case. A trend can be obser­ved world­wide: the acqui­si­tion of listed health­care compa­nies by PE funds. Such public-to-private (P2P) tran­sac­tions have alre­ady played a key role in 2016, with the volume of new invest­ments by PE funds in the health­care sector incre­asing by almost 60 percent to $36.4 billion. In three of the four largest acqui­si­ti­ons, invest­ment compa­nies purcha­sed shares traded on the stock exch­ange. — What are the current trends?

For this 3 ques­ti­ons to Dr. Martin Viciano Gofferje, Part­ner, Corporate/M&A, Gleiss Lutz, Berlin

1. 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?

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.

2. Can you iden­tify a trend for the next few years?

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.

3. What are the special problems in health­care transactions?

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.

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