VOLUME 20 | ISSUE 4 He alth Ca re M A News · report from Accenture—and CMS’s April announcement that Medicare Advantage payment rates will increase an average of 1.25% in 2016

Health Care M&A News Inside the Health Care M&A Market

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VOLUME 20 | ISSUE 4

I t’s official. The first quarter of 2015 set a new record for deal making, with 355 transactions announced. Not only is that performance better than all other first quarters in our database, it also squeaked by Q4:14’s

deal total of 351 (up 1%). Compared with the same quarter a year ago, deal volume increased 25% (see chart on page 3). Even more impressive is that the fourth quarter’s deal volume also set a new record, marking the busiest fourth quarter since 2000, when we began tracking 13 health care sectors.

Deal value in Q1:15 reached $104.9 billion, an immense sum for a first quarter (see chart on page 4). The total was 109% greater than Q1:14, which clocked in at $50.1 billion, but not enough to surpass the record set in the first quarter of 2009, at $127.4 billion (that was due in large part to Pfizer’s (NYSE: PFE) $68 billion acquisition of Wyeth, Inc., and Merck & Co.’s (NYSE: MRK) $41 billion bid for Schering-Plough). By contrast, the first quarter of 2015 boasted four deals ranging between $12.8 billion

2015 Kicks Off with Another RecordQ1:15 Deal Volume Even Tops Q4:14

H ealth care is a global issue, but its delivery is inevitably local. That hasn’t stopped U.S. healthcare companies from crossing borders to seek new markets and new opportunities. In 2013, we recorded

90 transactions involving a U.S. healthcare company acquiring a foreign one, resulting in $40.7 billion. One year later, U.S. companies annouced 120 deals, and spent nearly $83 billion. We should note that, in these figures we are not counting deals for the global rights or licenses to bio-technology or pharmaceutical products or candidates.

The more dramatic shift has occurred in inbound deals for healthcare targets. A sharp drop in transaction volume, tumbling from 113 deals (2010) to just 37 deals (2013), was coupled with a decline in deal value, from $66.8 billion to $22.7 billion in the same years. Last year that trend reversed itself sharply, with 84 inbound deals generating $110 billion.

Cross-Border M&A SurgesOpportunities Abound, But Be Careful Who You’re in Bed With

Continued on page 2

Continued on page 11

Fast Start to 2015FIrst quarter results are in. The deal making frenzy stayed strong, and new acquirers appeared in some sectors. ................ Page 1

Cross-Border M&A It’s not just pharmaceutical and biotechnology companies that are making deals across borders. With every opportunity comes some risk, however......................................... Page 1

March Deal ActivityA year ago, the deals seemed to dry up, but that was only the calm before a very big storm of M&A activity. This year, there’s no sign of letting up. .......................................... Page 19

DepartmentsTechnologyDeal Summaries ................................. Page 6Additional Transactions ................... Page 10Health Care Technology ................... Page 16

ServicesDeal Summaries ............................... Page 12Additional Transactions ................... Page 15Health Care Services ....................... Page 17

APRIL 2015

In This Issue

Health Care M&A News

2 www.healthcaremanda.com

and $21 billion, a marked contrast to recent Q1’s, which typically featured a handful of billion-dollar deals in the $1 billion-to-$3 billion range.

As strong as it was, dollar-wise, the first quarter of 2015 didn’t exceed the previous quarter’s combined total of $138.4 billion, which surpassed all previous Q4 totals.

ServiceS vS. Technology SecTorS

Health care services represented 57% (203 deals) of the quarter’s transactions, slightly lower than in the previous quarter. In Q4:14, the services side made up 60% of the total deal volume, which was on the high side even for a segment that usually dominates in deal volume.

Continued from page 1 However, two technology sectors contributed the highest percentage of transactions in the first quarter. Biotechnology accounted for 17% (61 deals) and Pharmaceuticals made up 12% (42 deals). Last year’s enormous run-up in transactions between clinical-stage biotech companies with promising drug candidates and large pharmaceutical companies looking for their next big blockbuster is still going strong in early 2015.

Add to that the return of an old strategy, to pare down and focus on high-growth potential businesses. Johnson & Johnson (NYSE: JNJ) is leading the way for Big Pharma, with its divestitures of Ortho-Clinical Diagnostics in Q1:14 for $4 billion and Cordis Inc. a year later, for $1.94 billion. Speculation that Pfizer will cleave itself in two has been circulating for some time, and hasn’t died down. At the same time, strategic acquirers may find themselves in another acquirer’s sites. Such is the case this month with Mylan N.V. (NASDAQ: MYL), which made an unsolicited offer for fellow generic drug maker Perrigo plc (NYSE: PRGO) at $205 per share, which some analysts considered a low-ball bid. Generic giant Teva Pharmaceuticals (NYSE: TEVA), among others, turned its attention to the deal, which could result in either Mylan or Perrigo (or both) being acquired by another party. This dance may end in a brawl.

noTable acTiviTy

Those sectors aside, there were some interesting trends emerging in other sectors, though on a much smaller scale. For example, Behavioral Health Care had its strongest M&A showing since Q4:13, with eight deals announced. The interesting story behind the deals was that the usually dominant Acadia Healthcare Company (NASDAQ: ACHC) announced only one deal in the first quarter. Granted, Acadia is still digesting CRC Health Group, which it acquired in October 2014 for almost $1.2 billion.

Instead, American Addiction Centers, Inc. (NYSE: AAC) announced three transactions, totaling $22.1 million. Three other deals were announced by private equity firms—Flexpoint Ford and Revelstoke Capital Partners—and one portfolio company, Webster Capital’s

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Deal Volume in Q1:15, vs. Q4:14 and Q1:14

Q1:15 Q4:14 Q1:14

Share Change Change

Services

Behavioral Health Care 8 2% 6 33% 1 700%

Home Health & Hospice 16 5% 20 -20% 19 -16%

Hospitals 23 6% 32 -28% 25 -8%

Labs, MRI & Dialysis 4 1% 6 -33% 12 -67%

Long-Term Care 65 18% 84 -23% 65 0%

Managed Care 10 3% 4 150% 5 100%

Physician Medical Groups 21 6% 17 24% 13 62%

Rehabilitation 8 2% 6 33% 2 300%

Other Services 48 14% 37 30% 29 66%

Services subtotal 203 57% 212 -4% 171 19%

Technology

Biotechnology 61 17% 45 36% 29 110%

eHealth 26 7% 32 -19% 22 18%

Medical Devices 23 6% 27 -15% 27 -15%

Pharmaceuticals 42 12% 35 20% 36 17%

Technology subtotal 152 43% 139 9% 114 33%

Grand total 355 100% 351 1% 285 25%

Source: Health Care M&A News, April 2015

Epic Health Services. Six deals were announced in this sector in Q4:14, and American Addiction Centers counted as one of those acquirers (as mentioned, Acadia was the other publicly traded acquirer). The rest were privately held companies, which isn’t unusual. It’s just another indication of the strong interest in this market among well-capitalized players. On April 6, CMS proposed extending the Mental Health Parity and Addiction Equity Act of 2008 to managed Medicaid organizations, Medicaid alternative benefit plans, and Children’s Health Insurance Programs, beyond the commercial payors now covered under the act. If enacted, the tailwinds in this sector could draw in even more interest.

Managed Care is another sector poised for a busy year. With 10 deals announced in the first quarter, it posted its strongest quarterly performance since the fourth quarter of 2011, which also had 10 transactions. That was the beginning of a banner year for managed care

M&A, as Cigna (NYSE: CI) acquired HealthSpring Inc. for $3.8 billion and UnitedHealth Group (NYSE: UNH) paid $2 billion for XLHealth Corp., both in Q4:11. That was followed in 2012 by Aetna’s (NYSE: AET) $7.3 billion deal for Coventry Health Care, Inc.; Wellpoint’s (NYSE: WLP) $4.9 billion for Amerigroup Corp.; and finally, UnitedHealth’s $4.3 billion for the Brazilian insurer, Amil Participações S.A. in Q4:12.

Three years on, the buzz is driven by growing enrollments in state, federal and private health insurance exchanges—private health insurance exchanges enrolled an estimated 6 million people in Q1:15, according to a report from Accenture—and CMS’s April announcement that Medicare Advantage payment rates will increase an average of 1.25% in 2016.

Mid-sized managed care companies are in most analysts’ sights, including Centene Corp. (NYSE: CNC); Humana



Dollar Volume* in Q1:15, vs. Q4:14 and Q1:14

Q1:15 Q4:14 Q1:14

Share Change Change

Services

Behavioral Health Care $83,162 0% $1,188,000 -93% $30,500 173%

Home Health & Hospice $138,500 0% $2,550,100 -95% $62,859 120%

Hospitals $692,850 1% $594,000 17% $607,900 14%

Labs, MRI & Dialysis $70,000 0% $5,623,350 -99% $4,723,600 -99%

Long-Term Care $1,740,817 2% $8,768,410 -80% $5,620,188 -69%

Managed Care $15,000 0% $600,000 -98% — 100%

Physician Medical Groups — 0% $58,600 -100% $2,400 -100%

Rehabilitation $7,200 0% $1,075,000 -99% — 100%

Other Services $21,636,981 21% $2,405,931 799% $1,643,900 1216%

Services subtotal $24,384,511 23% $22,863,391 7% $12,691,347 92%

Technology

Biotechnology $35,162,084 34% $1,748,817 1911% $2,398,922 1316%

eHealth $153,299 0% $628,838 -76% $45,550 237%

Medical Devices $5,279,300 5% $19,969,000 -74% $3,184,756 66%

Pharmaceuticals $39,895,240 38% $93,141,100 -57% $31,810,241 25%

Technology subtotal $80,489,924 77% $115,487,756 -30% $37,439,469 115%

Grand total $104,874,435 100% $138,351,147 -24% $50,130,816 109%* = in thousands. Numbers may not add up, due to rounding. Source: Health Care M&A News, April 2015

Inc. (NYSE: HUM), one of the top providers of Medicare Advantage plans in 2014; and Molina Healthcare, Inc. (NYSE: MOH), which has been acquiring Medicare and Medicaid programs around the country.

In Q1:15, Centene made two acquisitions of its own, one for Agate Resources, a privately held healthcare management company in Oregon, and the other for LiveHealthier, which provides health management technology and services to large employers, unions, and government organizations. No prices were disclosed. Three other publicly traded insurers, Cigna, American International Group (NYSE: AIG) and National General Holdings Corp. (NASDAQ: NGHC), also made one acquisition apiece.

Several subsegments in the Other Services category are in particular demand, such as specialty pharmacies, pharmacy benefits managers, and technology companies that support the health care supply chain. These players are focused on increasing scale, streamlining direct-to-consumer distribution and using data to drive efficiencies, which is everything that managed care and hospitals, among others, are hoping will help their operations and future growth. In Q1:15, OptumRx paid $12.8 billion for Catamaran Corp. (NASDAQ: CTRX), while Magellan Health (NASDAQ: MGLN) paid $55 million for 4D Pharmacy Management.

We’ll cover every sector and segment in more depth in The Health Care M&A Report, First Quarter 2015, which is due out later this month. Stay tuned. □

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Deals on Demand are available in the following sectors: Biotechnology, eHealth, Medical Devices, and Pharmaceuticals.



Deal Summaries: Technology Biotechnology

TARGET LISTING ACQUIRER LISTING DATE PRICE

License to MultiStem® therapy NASDAQ: Chugai Pharmaceutical Co. T:4519 3/2/2015 $10,000,000 Cleveland, Ohio ATHX Tokyo, Japan

In Brief: Athersys, Inc. sold the license in Japan to its proprietary cell therapy product, MultiStem®, which is used to treat tissue damage and other problems following ischemic stroke. The product is currently in Phase 2 clinical trials in the United States and Europe.

Kinase-focused drug platform Private Alexion NASDAQ: 3/3/2015 $15,000,000 Cambridge, Massachusetts Cheshire, Connecticut ALXN

In Brief: Blueprint Medicines will identify and optimize drug candidates and will conduct all research activities prior to the filing of an IND with the FDA. Alexion will be responsible for the development and commercialization of the drug candidates.

License to remoglifozin Private Islet Sciences, Inc. OTCQB: 3/3/2015 $5,000,000 Raleigh, North Carolina Raleigh, North Carolina ISLT

In Brief: Brighthaven Ventures LLC is selling the exclusive rights to its SGLT2 inhibitor, remoglifozin, which is currently in Phase 2b development for the treatment of Type 2 diabetes and non-alcoholic steatohepatitis (NASH).

Pharmacyclics Inc. NASDAQ: AbbVie Inc. NYSE: ABBV 3/4/2015 $21,000,000,000 Sunnyvale, California PCYC North Chicago, Illinois

In Brief: Pharmacyclics’ only product on the market is Imbruvica, a highly effective treatment for hemotologic malignancies. This acquisition broadens AbbVie’s pipeline and establishes the company in the hematological oncology space.

SuppreMol GmbH Private Baxter Healthcare Corp. NYSE: BAX 3/4/2015 $225,000,000 Martinsried, Germany Deerfield, Illinois

In Brief: SuppreMol specializes in developing treatment therapies for autoimmune and allergic diseases. Its pipeline includes lead candidate SM101, a treatment for idiopathic thrombocytopenic purpura, a blood disorder.

Targacept, Inc. NASDAQ: Catalyst Biosciences, Inc. Private 3/5/2015 $250,000,000 Winston-Salem, North Carolina TRGT S. San Francisco, California

In Brief: Targacept currently has three products in Phase 2b clinical trials, for the treatment of nervous system and gastrointestinal diseases. The combined company will be named Catalyst Biosciences Inc., with the NASDAQ ticker symbol CBIO.

T-Cell Factory B.V. Private Kite Pharma, Inc. NASDAQ: 3/17/2015 $21,000,000 Amsterdam, The Netherlands Santa Monica, California KITE

In Brief: T-Cell Factory discovers and develops tumor-specific TCRs for broad application in cancer treatment, based on its proprietary TCR-GENErator platform. This acquisition strengthens Kite’s TCR product platform and establishes a European presence for the company.

iDD Biotech antibody assets Private Genmab A/S OMX: GEN 3/18/2015 $2,644,075 Lyon, France Copenhagen, Denmark

In Brief: iDD Biotech SAS is selling the pre-clinical stage antibodies that are directed to DR5, also known as Trail Receptor 2, an emerging cancer target. The acquisition of antibody assets is synergistic with Genmab’s strategy to create a broad pipeline of differentiated therapeutic products for the treatment of cancer.

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HealthCareMandA 7

Deal Summaries: Technology Biotechnology (cont’d)


Collaboration with Innovent Private Eli Lilly and Company NYSE: LLY 3/20/2015 $56,000,000 Suzhou, China Indianapolis, Indiana

In Brief: Chinese biotech, Innovent Biologics, has a pipeline of proprietary drugs and establishes in/out-licensing deals with pharmaceutical companies. Lilly and Innovent will collaborate to develop at least three cancer treatments over the next decade.

License to ADC technology NASDAQ: Takeda Pharmaceutical Co. OTCQB: 3/23/2015 $20,000,000 Waltham, Massachusetts IMGN Osaka, Japan TKPYY

In Brief: ImmunoGen Inc. develops targeted anti-cancer therapeutics using its antibody-drug conjugate (ADC) technology. Takeda gains the exclusive license to use the technology to develop and commercialize two undisclosed targets, with the option for a third target.

Collaboration with Intrexon NYSE: Merck Serono Private 3/24/2015 $115,000,000 Germantown, Maryland XON Rockland, Massachusetts

In Brief: Merck Serono, the biopharmaceutical arm of Merck KGaA, has an exclusive agreement to develop and commercialize chimeric antigen T-cell (CAR-T) cancer therapies using Intrexon’s proprietary suite of technologies.

Cellular Dynamics International NASDAQ: Fujifilm Holdings Corp. Tokyo: 4901 3/30/2015 $307,000,000 Madison, Wisconsin ICEL Tokyo, Japan

In Brief: Cellular Dynamics’ technology platform enables the production of high quality, fully functioning human cells on an industrial scale. After transforming its business structure, Fujifilm is entering the area of iPS cell-based drug discovery support services.

Collaboration with Aduro Biotech Private Novartis AG NYSE: NVS 3/30/2015 $225,000,000 Berkeley, California Basel, Switzerland

In Brief: Aduro Biotech has entered into a multi-year alliance with Novartis that uses its next-generation cancer immunotherapies targeting the STING (Stimulator of Interferon Genes) pathway. It adds firepower to Novartis’ diverse portfolio of immunotherapies.

Auspex Pharmaceuticals, Inc. NASDAQ: Teva Pharmaceuticals NYSE: TEVA 3/30/2015 $3,200,000,000 La Jolla, California ASPX Petach Tikva, Israel

In Brief: Auspex specializes in applying deuterium chemistry to known molecules to create novel therapies that treat disorders of the central nervous system. In 2014, it reported positive results from its Phase 3 clinical trial for SD-809 in Huntington’s disease.

Deal Summaries: Technology eHealth


PPP Private Constellation Healthcare LSE: CHT 3/17/2015 $20,000,000 New York, New York Houston, Texas

In Brief: PPP is a holding company with three subsidiaries, each focused on revenue cycle management, located in Florida, New Jersey and New York. With this acquisition, Constellation gains a foothold in those markets.



Deal Summaries: Technology eHealth (cont’d)


GPH Cordiva NYSE: SHL Telemedicine Ltd. OTC: SMDCY 3/23/2015 $8,299,390 Munich, Germany ALR Tel Aviv, Israel

In Brief: GPH Cordiva is a subsidiary of Alere Inc. It operates a nationwide telemedicine program which cares for approximately 10,000 patients with chronic heart failure. This acquisition complements SHL’s focus on cardiovascular and related diseases.

Deal Summaries: Technology Medical Devices


Urology business NASDAQ: Boston Scientific Corporation NYSE: BSX 3/2/2015 $1,600,000,000 Minnetonka, Minnesota ENDP Natick, Massachusetts

In Brief: American Medical Systems, a subsidiary of Endo International, is selling its men’s health and prostate health businesses, which treat urologic conditions such as benign prostatic hyperplasia, male stress urinary incontinence and erectile dysfuction.

Cordis NYSE: Cardinal Health Inc. NYSE: CAH 3/2/2015 $1,944,000,000 Fremont, California JNJ Dublin, Ohio

In Brief: Cordis, a subsidiary of Johnson & Johnson, is a global manufacturer of cardiology and endovascular devices. Although the United States is its largest market, 70% of total sales come from other countries. It will become part of Cardinal’s medical segment.

Optos plc LSE: Nikon Corporation OTC: NINOY 3/3/2015 $400,000,000 Denfermline, Scotland OPTS Tokyo, Japan

In Brief: Optos specializes in the design of retinal-imaging machines used for testing eyes and detecting high blood pressure and certain types of cancers. Nikon is expanding into the medical industry as part of its long-term growth strategy.

Deal Summaries: Technology Pharmacueticals


Ikaria, Inc. Private Mallinckrodt plc NYSE: MNK 3/5/2015 $2,300,000,000 Hampton, New Jersey Dublin, Ireland

In Brief: Ikaria is being sold by a group of investors led by Madison Dearborn. It is a global critical-care company focused on developing and commercializing innovative therapies and delivery systems to treat critically ill infants in hospital neonatal intensive care unit settings.

Zohydro® ER franchise NASDAQ: Pernix Therapeutics Holdings NASDAQ: PTX 3/10/2015 $100,000,000 San Diego, California ZGNX Morristown, New Jersey

In Brief: Zogenix is selling its controversial, all-hydrocodone pain management drug business, including an abuse-deterrent pipeline and all related intellectual property. This acquisition effectively doubles Pernix’ sales platform.

Rights to EZH2 inhibitor Private Epizyme, Inc. NASDAQ: EPZM 3/12/2015 $40,000,000 Tokyo, Japan Cambridge, Massachusetts

In Brief: Eisai Co. sold the rights to EPZ-6438, the EZH2 inhibitor, which is currently in Phase 1/2 clinical studies for the treatment of B-cell non-Hodgkin’s lymphoma and INI1-deficient solid tumors. Eisai could earn an additional $70 million in potential milestone payments.

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HealthCareMandA 9

Deal Summaries: Technology Pharmacueticals (cont’d)


4 oncology programs NYSE: Ignyta, Inc. NASDAQ: 3/17/2015 $13,275,000 Petach Tikva, Israel TEVA San Diego, California RXDX

In Brief: Ignyta paid for Teva’s oncology programs with 1.5 million of its shares valued at $8.85 per share, approximately 6% of the company. Concurrently, Teva and other investors will purchase an additional 1.5 million shares of Ignyta common stock at $10 per share.

License to telotristat etiprate NASDAQ: Ipsen Euronext: IPN 3/18/2015 $5,000,000 The Woodlands, Texas LXRX Paris, France

In Brief: Lexicon Pharmaceuticals is selling the Canadian rights to its treatment for carcinoid syndrome. Ipsen already owns the worldwide rights (excluding Japan and the United States). The two companies will work to get regulatory approvals in Europe, Canada and other countries.

Cholbam Private Retrophin, Inc. NASDAQ: 3/18/2015 $36,000,000 Baltimore, Maryland San Diego, California RTRX

In Brief: Asklepion Pharmaceuticals LLC is selling Cholbam, which the FDA just approved as a treatment for patients with bile acid synthesis disorders due to single enzyme defects. Retrophin paid $27 million in cash and 661,278 shares of common stock valued at $9 million.

License to HM71224 Private Eli Lilly and Company NYSE: LLY 3/19/2015 $50,000,000 Seoul, South Korea Indianapolis, Indiana

In Brief: Hanmi Pharmaceutical Co. is licensing one of its autoimmune drug candidates, which is ready to enter Phase 2 studies. The parties plan to investigate the molecule as a potential treatment of rheumatoid arthritis, lupus nephritis, Sjorgens syndrome and other conditions.

License to Movantik™ NYSE: AZN Daiichi Sankyo Co. Tokyo: 4568 3/19/2015 $200,000,000 London, United Kingdom Tokyo, Japan

In Brief: AstraZeneca will be responsible for manufacturing Movantik tablets, a daily oral treatment for opioid-induced constipation in adults with chronic non-cancer pain. Both companies will be responsible for commercialization. The U.S. launch is expected in April 2015.

License to 3 ED treatments OTCBB: Tabuk Pharmaceutical Mfg. Private 3/23/2015 $85,600,000 San Diego, California INNV Riyadh, Saudi Arabia

In Brief: Innovus Pharmaceuticals is selling the rights to EjectDelay®, a topical treatment for premature ejaculation, and two other erectile dysfunction treatments. Tabuk will market and sell the products in Saudi Arabia and certain other Middle Eastern and North African countries.

Hyperion Therapeutics, Inc. NASDAQ: Horizon Pharma plc NASDAQ: 3/30/2015 $1,1000,000,000 Brisbane, California HPTX Dublin, Ireland HZNP

In Brief: Hyperion Therapeutics has two orphan disease products, Ravicti and Buphenyl, on the market that are used to treat urea cycle disorders, inherited metabolic disorders that affect about 2,100 people in the United States.



Additional Transactions Technology

SECTOR TARGET ACQUIRER DATE

BIOTECHNOLOGY License to neuroscience drug Denovo Biopharma, LLC 3/3/2015 Immuno-oncology targeted antibodies TG Therapeutics, Inc. 3/4/2015 Mariel Therapeutics, Inc. Ember Therapeutics, Inc. 3/12/2015 Pulmatrix, Inc. Ruthigen, Inc. 3/16/2015 Collaboration with Vaccinex Five Prime Therapeutics 3/19/2015 Canadian rights to CF101 Cipher Pharmaceuticals Inc. 3/23/2015 SciVac Ltd. Levon Resources Ltd. 3/24/2015 Global rights to ABC294640 RedHill Biopharma Ltd. 3/31/2015

eHEALTH Mindprint, Inc. 8K Miles 3/9/2015 Indura Software, Inc. Procura, LLC 3/12/2015 Corilus BV AAC Capital Holding BV 3/16/2015 CentrosHealth Clinical Ink 3/18/2015 HealthUnity Corporation ZeOmega Inc. 3/23/2015 e-MDs Marlin Equity Partners 3/31/2015

MEDICAL DEVICES CRISI Medical Systems Becton, Dickinson and Company 3/2/2015 ClearCanvas Synaptive Medical 3/9/2015 2 medical device companies Brookhaven Medical, Inc. 3/10/2015 NeoMetrics Heraeus Medical Components 3/18/2015 Sphono, Inc. Medtronic plc 3/26/2015

PHARMACEUTICALS Australian opiates business Sun Pharma 3/3/2015 License to tipifarnib Kura Oncology, Inc. 3/12/2015 Rights to osteoarthritis drug candidate Pharmalink AB 3/18/2015 Spanish hospital business Intas Pharmaceuticals, Ltd. 3/18/2015 Tyme Inc. Tyme Technologies, Inc. 3/19/2015 XO1 Limited Janssen Pharmaceuticals, Inc. 3/19/2015 Rights to oral health products Silanes 3/24/2015 License to anamorelin Mundipharma 3/26/2015 Russian rights to Green Cross’ biologics Nanolek 3/26/2015 License to IVR technology Columbia Laboratories, Inc. 3/30/2015 Actavis’ Australian generics business Amneal Pharmaceuticals LLC 3/30/2015

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HealthCareMandA 11

Last month we hosted “Cross-Border M&A, The Opportunities, The Risks,” part of The Health Care M&A Webcast Series. Our panel of experts discussed the upside of going abroad, and shared their insights on what they’ve learned, and what the landscape looks like in 2015.

Michael Meyers, managing director and head of investment banking at T.R. Winston & Company, set the stage, noting that the low cost of capital and very significant cash balances of “about 11% of total assets” have driven the deals in the large cap pharmaceutical, specialty pharmaceutical and biotechnology sectors. “That is nearly a 10-year high. Just before the recession in 2007, we saw cash balances as a percentage of assets at about 2%.”

Steven Kaye, a partner at Arnall Golden Gregory, deals in healthcare real estate activities and acquisitions, an area that has also benefited from the low cost of capital, and debt. “We’re seeing a continued upswing in activity from inbound sources, large dollars coming in from Western Europe, as well as some Middle Eastern countries and Australia. Some of those dollars are represented by sovereign funds of a variety of sources, but a fair amount on the private equity side.”

Partnerships with foreign operators are another way to conduct business overseas. Scott Brinker, chief investment officer at Health Care REIT, noted, “The capital we provide is global, but the ability to provide the right types of services at the right price points, and to interact with the residents in our buildings and the visitors, you really need to have the local culture right. Success is driven as much by the quality of the operations inside the building as it is by the real estate. We spend an equal amount of time making sure that we’re acquiring or developing assets in the right markets or the right locations, investing in physical plants that will stand the test of time as a long-term investor.”

“Certainly in cross-border transactions, there are legal,

political and operational aspects that come into play and need to be considered when analyzing transactions,” Meyers added. “Examples include employment and benefit aspects that can very a great deal by region or by country. Also, competition, commission considerations, aspects of shareholder rights or investor rights that need to be considered. All are very important aspects that can represent real challenges from a cost and from an operational execution perspective.”

Gordon Dee Smith, CEO of Strategic Insight Group, a private intelligence firm, knows a lot about the risks involved in negotiating and consummating foreign transactions. Finding the right local partner is critical, and is either a deal maker or a deal breaker. Moving from the developed world to developing countries takes U.S. acquirers into new territory, literally.

“In many of those places, there is a very limited number of families who control and influence what’s going on,” Smith cautioned. “And if you don’t have the right partner, from that standpoint, it doesn’t matter how much money and expertise and effort you put into the market. You will never gain traction.” Also, read the U.S. Foreign Practices Act for yourself. Don’t get a summary from someone else.

No matter the health care sector, Kaye noted, the concerns are similar. “If we all developed a list of what the risk factors are, it would probably look the same, but what is important in one industry might not be as critical in another. Understanding the market generally as to your industry is important, but it’s equally important to drill down to understand the [foreign] business model, how it plays out in that local environment, and how those differences are impacting your analysis on an acquisition going forward.”

But human nature may be the biggest foiler of all. The reason deals so often come apart, Smith said, is simple, and avoidable. “It’s the factor of just meeting somebody, liking them, starting to talk, trusting them and getting in bed with them without knowing what they’re doing. Of all the factors [that can derail a deal], it’s the primary cause of an unhappy outcome.” Don’t say we didn’t warn you. □

Continued from page 1



Deal Summaries: Services Behavioral Health Care


Quality Addiction Management Private Acadia Healthcare Company NASDAQ: 3/2/2015 $53,000,000 Waukesha, Wisconsin Franklin, Tennessee ACHC

In Brief: Quality Addiction Management operates seven comprehensive opioid-dependence treatment centers in Wisconsin, which see approximately 2,600 patients per day. In 2014, Acadia began to branch out from its primary focus on inpatient psychiatric medical centers.

Sunrise House Foundation, Inc. Nonprofit American Addiction Centers NYSE: AAC 3/30/2015 $6,600,000 Lafayette, New Jersey Brentwood, Tennessee

In Brief: Sunrise House Foundation operates 92 rehab beds and 18 detox beds on its main campus in Lafayette, and two outpatient treat-ment programs. A total of 30 halfway house beds are in Franklin and Plainfield, New Jersey facilities.

Deal Summaries: Services Hospitals


Mercy Suburban Hospital Nonprofit Prime Healthcare Services Private 3/2/2015 $30,000,000 East Norristown, Pennsylvania Ontario, California

In Brief: Trinity Health, through its Mercy Health System in Conshohocken, Pennsylvania, is selling Mercy Suburban Hopital, a 126-bed acute-care facility in suburban Philadelphia. Prime has agreed to acquire the related physician practices and ambulatory sites.

Aspen Healthcare Ltd. Private Tenet Healthcare Corp. NYSE: THC 3/23/2015 $215,000,000 London, United Kingdom Dallas, Texas

In Brief: Welsh, Carson, Anderson & Stowe is selling its portfolio company, Aspen Healthcare, which operates nine private, acute-care hospitals, a cancer clinic and ambulatory surgery centers. Aspen began as a two-hospital system that was acquired by USPI in April 2000.

Fortis Surgical Hospital Private Concord Medical Services NYSE: CCM 3/27/2015 $39,800,000 Singapore Beijing, China

In Brief: Established in 2012, this 39-bed hospital specializes in minimally invasive procedures and offers the full spectrum of clinical interventions, including laparoscopic and robot-assisted surgeries. CCM plans to rename it Singapore Concord Cancer Hospital.

Carroll Hospital Center Nonprofit LifeBridge Health Nonprofit 3/27/2015 $250,000,000 Westminster, Maryland Baltimore, Maryland

In Brief: LifeBridge has committed to invest $250 million in capital at the 193-bed Carroll Hospital Center, including new construction and renovation, as well as the development and expansion of medical services.

Deal Summaries: Services Long-Term Care


4 skilled nursing facilities Private Regional owner/operator Private 3/1/2015 $27,500,000 Various locations, South Carolina

In Brief: Health Care Corporation is selling its four skilled nursing facilities in South Carolina. These four properties had been granted large increases to their daily Medicaid rates in 2015, which were expected to increase revenues and EBITDA by an estimated $1.1 million.

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HealthCareMandA 13

Deal Summaries: Services Long-Term Care (cont’d)


The Haven at Springwood Private Regional private equity firm Private 3/17/2015 $11,850,000 York, Pennsylvania

In Brief: The Haven was built in 2004 by Hogg Construction (the owner) as an assisted living community with 89 AL units and 10 memory care units. It is licensed for 123 beds and occupancy averages close to 96%. There are a total of 65,515 square feet on 4.49 acres.

35 senior living properties TSX: HCP, Inc. NYSE: HCP 3/17/2015 $849,000,000 Various locations CSH.UN Irvine, California

In Brief: Chartwell Retirement Residences has been divesting its U.S. senior living assets. This portfolio includes 33 owned and two leased properties located in Florida (13), Texas (9), Colorado (6), Ohio (3) and one each in Michigan, Virginia, Rhode Island and Tennessee.

Assisted living portfolio Private SilverStone Health Care Private 3/25/2015 $65,000,000 Sun City and Yuma, Arizona Alexandria, Virginia

In Brief: The portfolio includes a 430-unit campus in Sun City on 26 acres. There is a 108-unit assisted living building that is full, an 88-unit Alzheimer’s building that is full and a 244-unit building at 75% occupancy, plus a 148-unit assisted living memory care facility in Yuma.

Ainsley Courte Assisted Living Private Regional owner/operator Private 3/26/2015 $6,600,000 Cypress, Texas

In Brief: Ainsley Courte is a 46-unit assisted living and memory care community. Occupancy has been about 84% at the all-private-pay community. The property was built in 2003 with 36,427 square feet.

Memory Care at 7 Lakes Private MBK Senior Living Private 3/30/2015 $13,300,000 Loveland, Colorado Irvine, California

In Brief: This assisted living community is 100% memory care. It opened in 2012 and has struggled with occupancy, reaching about 80% currently. It has 25,441 square feet on 2.74 acres.

6 assisted living communities Private Care Investment Trust LLC Private 3/31/2015 $54,475,000 Various states New York, New York

In Brief: Known as the Hollinger North Portfolio, this group includes three assisted living communities in Maryland, plus one each in New Jersey, Pennsylvania and Virginia. Average occupancy is 94%, and the facilities were built between 1986 and 2002, with renovations.

Deal Summaries: Services Other Services


Life Time Fitness, Inc. Private Private equity investors Private 3/16/2015 $4,000,000,000 Chanhassen, Massachusetts California and Texas

In Brief: A Healthy Way of Life Company is selling Life Time Fitness to Leonard Green & Partners and TPG, together with other key investors, LNK Partners and Life Time Fitness chairman, president and CEO Bahram Akradi, who will remain in his role.



Deal Summaries: Services Other Services (cont’d)


4D Pharmacy Management Private Magellan Health, Inc. NASDAQ: 3/18/2015 $55,000,000 Troy, Michigan Scottsdale, Arizona MGLN

In Brief: 4D Pharmacy Management Systems is a full-service pharmacy benefits management company serving managed care organizations, employers and government-sponsored benefit programs, such as Medicare Part D plans.

Concentra Inc. NYSE: Joint venture NYSE: SEM 3/23/2015 $1,055,000,000 Addison, Texas HUM New York and Pennsylvania

In Brief: Humana Inc. is selling Concentra, which operates urgent care, occupational medicine, physical therapy and primary care programs, to MJ Acquisition Corp., a joint venture formed by private equity firm Welsh, Carson, Anderson & Stowe and Select Medical Corporation.

United Surgical Partners Private Tenet Healthcare Corporation NYSE: THC 3/23/3015 $425,000,000 Dallas, Texas Dallas, Texas

In Brief: Welsh, Carson, Anderson & Stowe is selling a 50.1% stake in United Surgical Partners International. Tenet will acquire the remaining 49.9% over the next five years through a put/call structure. The deal creates the largest U.S. provider of ambulatory surgery.

Entrust Specialty Pharmacy Private Fred’s Inc. NASDAQ: 3/25/2015 $66,000,000 Nashville, Tennessee Memphis, Tennessee FRED

In Brief: Fred’s is acquiring Reeves-Sain Drug Store Inc., a specialty and retail pharmacy company that includes EntrustRx, the specialty pharmacy operation, and the single Reeves-Sain retail pharmacy in Murfreesboro. EntrustRx is licensed in all 50 states.

Catamaran Corporation NASDAQ: OptumRx NYSE: UNH 3/30/2015 $12,800,000,000 Schaumburg, Illinois CTRX Minnetonka, Minnesota

In Brief: OptumRx, the free-standing pharmacy care business of UnitedHealth Group, is buying Catamaran, a pharmacy benefit management services and healthcare information technology company. The combination is expected to create a dynamic competitor in the PBM market.

Additional Transactions Services


BEHAVIORAL HEALTH CARE Clarity Service Group Epic Health Services 3/5/2015 Summit Behavioral Healthcare Flexpoint Ford, LLC 3/12/2015 HOME HEALTH CARE Family Hospice and Palliative Care UPMC 3/19/2015 PSA Healthcare J.H. Whitney Capital Partners, LLC 3/23/2015

HOSPITALS 5 Oklahoma hospitals Community Health Services 3/2/2015 2 South Carolina hospitals Medical Properties Trust, Inc. 3/3/2015 Saint Catherine Medical Center Sovereign Health Group 3/10/2015 Teton Medical Center Benefis Health Group 3/18/2015 Peconic Bay Medical Center North Shore-LIF Health System 3/27/2015

LABORATORIES, MRI & DIALYSIS Imaging HealthCare Specialists Scripps Health 3/20/2015

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HealthCareMandA 15

Additional Transactions Services


LONG-TERM CARE 2 skilled nursing facilities Texas operator 3/2/2015 10 skilled nursing facilities Greystone Healthcare Management 3/9/2015 Woodbriar of Wilmington Synergy Health Centers 3/10/2015 3 skilled nursing facilities Joint venture 3/12/2015 Silver Hills Assisted Living Independent owner/operator 3/16/2015 Shadowmoss Plantation Oxton Senior Living, LLC 3/19/2015 Country Manor Memory Care Cerulean Partners, LLC 3/25/2015 2 assisted living communities Health Care REIT, Inc. 3/25/2015 Casa de Rosa Assisted Living Center Investment group 3/25/2015 3 senior living communities HCP, Inc. 3/30/2015 MANAGED CARE Mackenzie Taylor Benefits Consultants NFP 3/9/2015 Clear Benefits PlanSource 3/18/2015

PHYSICIAN MEDICAL GROUPS Radiology Associates of Hollywood Sheridan Healthcare Inc. 3/10/2015 PGC Endoscopy Center of Excellence LLC Physicians Endoscopy 3/11/2015 Excel Anesthesia, P.A. U.S. Anesthesia Partners 3/11/2015 Harbor Medical Associates Partners HealthCare System, Inc. 3/12/2015 IVF New Jersey Reproductive Medicine Associates 3/18/2015 Mosaic Anesthesia & Perioperative Services MEDNAX, Inc. 3/23/2015 GTA Health Solutions IPC Healthcare, Inc. 3/26/2015

REHABILITATION Industrial Medicine, P.C. Nova Medical Centers 3/4/2015 Dynamic Rehabilitation Pure HealthyBack Inc. 3/11/2015 Matt Smith Physical Therapy ATI Physical Therapy 3/24/2015

OTHER SERVICES Accelecare Wound Centers, Inc. Healogics, Inc. 3/2/2015 Dental Services Group Cressey & Co. LP 3/2/2015 Mederi AG Veeva Systems 3/3/2015 2 Chinese medical centers iKang Healthcare Group, Inc. 3/3/2015 Health At Work Intersections Inc. 3/5/2015 2 specialty pharmacies ScripsAmerica, Inc. 3/6/2015 WA Health Care iKang Healthcare Group, Inc. 3/6/2015 AmerisourceBergen Technology Group Intelligent Hospital Systems, Inc. 3/9/2015 Denver Dermatology Consultants, P.C. ADCS 3/9/2015 HomecareCRM SigmaCare 3/10/2015 Air Medical KKR & Co. LP 3/11/2015 LMC Diabetes & Endocrinology Research Manna Research 3/12/2015 Diagnosticni Center Bled ARX Equity Partners 3/16/2015 CHS Pharmacy Geneva Woods Pharmacy Inc. 3/19/2015 Top Dental Lifco 3/25/2015 Quantum Solutions India PAREXEL International Corp. 3/30/2015



Health Care Technology NewsMarch was a busy month on the technology side of healthcare, with a combined deal value of $33.35 billion. Biotechnology and Pharmaceuticals are driving the action, as the big companies are looking for new sources of growth and are paying dearly to get it.

bioTechnology

Deal value totaled $25.45 billion in this sector last month, thanks almost entirely to AbbVie’s (NYSE: ABBV) $21 billion acquisition of Pharmacyclics (NASDAQ: PCYC). The target’s only product is Imbruvica (ibrutinib), a highly effective treatment for hematologic malignancies that hit the market late in 2013. Reports that Pharmacyclics management was considering a sale surfaced in late February, and floated a price of $19 billion. A three-way bidding war broke out between AbbVie, Johnson & Johnson (NYSE: JNJ) and Pfizer (NYSE: PFE), ending with AbbVie’s commitment to pay $261.25 per PCYC share, comprised of a mix of cash (58%) and ABBV stock (42%). Several analysts felt AbbVie overpaid, but CEO Richard Gonzalez said he believes Imbruvica can generate peak annual sales of $7 billion, after splitting revenues with J&J, its marketing partner. And therein lies the rub.

ehealTh

Deal flow was quiet in eHealth last month, and only two deals disclosed prices, for a total of $28.3 million. The targets ranged from revenue cycle management and electronic health record providers to software solutions for clinical research organizations. Alere Inc. (NYSE: ALR) sold a German subsidiary, GPH Cordiva, which operates a nationwide telemedicine program focused on patients suffering from chronic heart failure. The buyer was SHL Telemedicine Ltd. (OTC: SMDCY), based in Tel Aviv, which develops telemedicine systems and provides medical call-center services, with a focus on cardiovasular and related diseases. The price was €7.6 million, or approximately $8.3 million in cash.

Constellation Healthcare Technologies (LSE: CHT) which is based in Houston, Texas but began trading on

the London Stock Exchange last December, paid $20 million for PPP, a privately held holding company with three operating subsidiaries, each focused on revenue cycle management products in Florida, New Jersey and New York.

Medical deviceS

Two billion-dollar deals boosted deal value to $3.94 billion in March. Boston Scientific Corp. (NYSE: BSX) paid $1.6 billion to acquire the men’s health and prostate health business of American Medical Systems, which is a subsidiary of Endo International plc (NASDAQ: ENDP).

Late last summer, J&J put Cordis on the block, a global manufacturer of cardiology and endovascular devices. Drug wholesaler Cardinal Health (NYSE: CAH) agreed to pay $1.9 billion for the company, or approximately $1.594 billion, net of the present value of tax benefits. Cardinal expects to boost its own cardiovascular business, while J&J has been paring down its portfolio to focus on high-growth businesses.

PharMaceuTicalS

It’s strange to say that $3.9 billion in reported deal value makes a slow month, but considering the values posted some months in 2014 (like the $76.6 billion last November), this sector went to sleep in March. Two deals topped the billion-dollar mark. Horizon Pharma plc (NASDAQ: HZNP) acquired Hyperion Therapeutics (NASDAQ: HPTX), a commercial-stage biopharmaceutical company, for $1.1 billion. Hyperion owns the worldwide rights to two orphan disease drugs, Ravicti and Buphenyl, that are used to treat inherited metabolic disorders, and Horizon expects they will add approximately $100 million to its adjusted EBITDA in 2016, including cost synergies of more than $50 million.

Madison Dearborn Partners made a grand exit with the sale of Ikaria, Inc. to Mallinckrodt plc (NYSE: MNK) for $2.3 billion. Ikaria is a global critical care company with a specific focus on therapies and delivery systems to treat critically ill infants in hospital neonatal intensive care units. The deal significantly strengthens Mallinckrodt’s

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HealthCareMandA 17

footprint in hospitals, and extends its presence from its current base of diagnostic radiology and multimodal pain management in surgical specialties.

Health Care Services NewsThe services sectors contributed 53% of the month’s deal volume (68 deals), and 38% of the deal value ($20.0 billion). The dollar total was helped by the $18.4 billion spent on targets in Other Services, especially the ones that streamline costs, boost efficiencies and promote population health that are being stalked by a host of acquirers. Long-Term Care, with only 17 deals announced in March, seemed absolutely pokey compared with the M&A activity posted throughout 2014. The sector still managed to contribute $1.04 billion for the month.

hoSPiTalS

With nine deals announced in March, this sector is showing continued strength. The acquirers included four for-profit entities, three not-for-profits and two

private hospital/healthcare companies. The targets were five not-for-profits, two for-profits and one privately held hospital. The remaining deal was for five hospitals in Oklahoma that were jointly owned by Health Management Associates (since acquired by Community Health Systems (NYSE: CYH)) and Integris Health, the state’s largest health network.

Concurrent with its deal for a chain of ambulatory surgery centers owned by Welsh Carson Anderson & Stowe (see the Other Services section below), Tenet Healthcare Corp. (NYSE: THC) made a cross-border acquisition of London-based Aspen Healthcare Ltd., which operates nine private, acute-care hospitals, a cancer clinic, and ambulatory surgery centers. Aspen began as a two-hospital system that was acquired in April 2000 by United Surgical Partners International (USPI), with backing from Welsh Carson. USPI grew the system before Welsh, Carson restructured the USPI group in 2012, which resulted in sit becoming an independent company majority owned by Welsh Carson. Tenet paid $215 million.

The only bankruptcy deal last month involved 107-bed



Saint Catherine Medical Center Fountain Springs, in Ashland, Pennsylvania. The facility filed for Chapter 11 bankruptcy protection in April 2012, which was converted to Chapter 7 liquidation shortly afterward. Enter Sovereign Health Group, which acquired the 20.7-acre property for $550,000.

oTher ServiceS

The largest deal in this sector was for Catamaran Corp. (NASDAQ: CTRX), which provides pharmacy benefit management services and healthcare information technology solutions. The company agreed to be acquired by OptumRx, the pharmacy care business of UnitedHealth Group (NYSE: UNH). The deal clearly hinged upon Catamaran’s management team taking over. Upon closing, Mark Theier, Catamaran’s chairman and CEO, will become CEO of OptumRx, and its current CEO, Jeff Wicks, becomes president. Also, Jeff Park, Catamaran’s executive vice president of operations, will become COO for OptumRx. The team will integrate Catamaran’s technology platform with OptumRx’s data and analytics capabilities. For $12.8 billion, you can bet shareholders are expecting to see some fireworks.

Welsh Carson Anderson & Stowe had an unusually busy month, as their name popped up in several deal announcements. In addition to the Aspen exit mentioned above, the private equity firm sold a 50.1% stake in United Surgical Partners International (USPI) to Tenet Healthcare, for $425 million. Tenet will have a path to full ownership of USPI over the next five years through a put/call structure. The joint venture starts off with interests in 244 ambulatory surgery centers, 16 short-stay surgical hospitals and 20 imaging centers in 29 states. The deal creates the largest provider of ambulatory surgery in the United States, and complements Tenet’s own chain of MedPost Urgent Care centers, launched in June 2014.

Then there was Welsh Carson’s joint venture with Select Medical Corp. (NYSE: SEM), called MJ Acquisition Corporation. MJ spent $1.05 billion to acquire Concentra Inc., a chain of urgent care, occupational medicine, physical therapy and primary care services available through more than 300 medical centers and 170 onsite clinics in 40 states. The seller was Humana (NYSE: HUM), which acquired the company as part of a strategy to offer convenient care for its membership base. Apparently, that didn’t work out so well. □

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March Madness Kicked in for Health Care M&A Deal Volume and Value Stayed Strong in March

One year ago, deal making in most of the health care sectors we follow seemed to hit a wall, with 94 transactions, and just $4.5 billion. The excep-

tion was Long-Term Care, which was still picking up steam with 27 transactions, and accounted for 29% of all deals announced that month. In hindsight, March proved to be the nadir for health care M&A in 2014.

March 2015 won’t suffer the same fate, as 128 deals were announced (up 36% compared with a year ago) and combined spending reached $53.4 billion (up nearly 1100%). Even compared with the previous month, February 2015, total transactions rose 31% and spending was 26% higher than the $42.3 billion reported.

The action has shifted slightly from the Services sectors, which accounted for 53% of the deal volume last month, but a robust 65% a year earlier. Long-Term Care deals are slowing—or getting back to more normal levels.

Last month’s hottest categories were Biotechnology, Pharmaceuticals, and Other Services. Drug makers are chasing early- and late-stage clinical programs, and that trend shows no sign of slowing. In the case of the Other Services, specialty pharmacy deals dominated that sector last month, but there were a handful of deals for clinics, from urgent care to dermatology practices. Not to mention KKR’s (NYSE: KKR) air ambulance investment. The sky’s the limit, for now. □

Deal Volume, March 2015 vs. February 2015 and March 2014

March 2015 Deals

February 2015 Deals

March 2014 Deals

Share of total Change Change

Services

Behavioral Health Care 4 3% 2 100% 1 300%

Home Health & Hospice 2 2% 3 -33% 7 -71%

Hospitals 9 7% 3 200% 4 125%

Labs, MRI & Dialysis 1 1% 1 0% 5 -80%

Long-Term Care 17 13% 21 -19% 27 -37%

Managed Care 2 2% 0 200% 0 200%

Physician Medical 7 7% 5 40% 6 17%

Rehabilitation 4 3% 2 100% 2 100%

Other Services 22 17% 15 47% 9 144%

Services subtotal 68 53% 52 31% 61 11%

Technology

Biotechnology 22 17% 16 38% 10 120%

eHealth 8 6% 8 0% 6 33%

Medical Devices 8 6% 11 -27% 6 33%

Pharmaceuticals 22 17% 11 100% 11 100%

Technology subtotal 60 47% 46 30% 33 82%

Grand total 128 100% 98 31% 94 36%

Source: Health Care M&A News, April 2015



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VOLUME 20 | ISSUE 4 He alth Ca re M A News · report from Accenture—and CMS’s April announcement that Medicare Advantage payment rates will increase an average of 1.25% in 2016