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The Healthcare Investor

Insights on Issues & Trends that Impact Investments in Healthcare & Life Science Businesses

Health Care Deal Trends Emerge From JP Morgan 2016

Posted in Healthcare Services Investing

“We’re looking for a symbiotic platform that will have a disruptive effect in a rapidly expanding ecosystem.” A private equity colleague of ours described this conversation, which he overheard at the most recent J.P. Morgan health care conference in San Francisco. Upwards of 30,000 deal professionals are reported to have descended on the city for the conference, and the town was ablaze in deal analysis and discussion. While perhaps this wasn’t exactly the conversation that was overheard, we can report (accurately) that once again we enjoyed, and are thoroughly exhausted from, several days of deal-making and conversation about trends and predictions for the coming year in health care private equity transactions.

To read about the trends from the conference in our latest Law360 column, written with our colleague Richard Grant, click here.

Less Than Three Weeks Until 13th Annual Healthcare and Life Sciences Private Equity and Finance Conference

Posted in Industry Events and Announcements

The McGuireWoods & RSM US 13th Annual Healthcare and Life Sciences Private Equity and Finance Conference is less than three weeks away. Register today!

This two-day healthcare-focused private equity, lending and finance conference which will take place February 23-24. The conference is being held at The Ritz-Carlton Chicago. It will explore new ways to successfully close transactions and achieve growth. The conference will include presentations by companies seeking investment or financing.

In the last few years we’ve had more than 500 attendees, the bulk of which are private equity sponsors, healthcare and life sciences operators, lenders and some vendors. Additional information and the registration form is available at our conference website at www.healthcareprivateequity.com.

If readers of The Healthcare Investor are interested in attending, contact Amber Walsh at awalsh@mcguirewoods.com for a registration discount.

Legal Considerations for Retail Clinics

Posted in Healthcare Services Investing

Retail clinics have grown substantially in number and popularity since their emergence in the early 2000s. Retail clinics are limited healthcare clinics that operate outside of physician offices and hospitals, typically in pharmacies, grocery stores, and ”big box” stores like Target and Walmart. These clinics traditionally provide treatment of simple, acute medical conditions such as sore throats, colds, flu, cough, and sinus infections. Retail clinics may also offer expanded services like preventative care and vaccinations, but they remain distinct from urgent care facilities that provide imaging and laboratory services to treat more severe conditions. There are currently over 1,800 retail clinics operating in the United States providing approximately ten million patient visits per year. The five largest operators of retail clinics, dominating 90% of the market share, are: CVS (MinuteClinic); Walgreens (Walgreens Healthcare Clinic); Kroger (The Little Clinic); Rite Aid (RediClinic); and Target (Target Clinic).

While retail clinics can offer significant benefits to patients and the overall healthcare system, the establishment and operation of retail clinics raises a wide range of legal issues that must be addressed, such as state licensure, corporate practice of medicine, and privacy laws.

To read a Bender’s Health Care Law Monthly article addressing several legal issues that investors would be wise to understand, co-authored with our colleagues Nathan Kottkamp and Lauren Ramos, click here.

Healthcare Regulatory Diligence: “What Does it Mean to Financial Underwriting?”

Posted in Healthcare Services Investing

It’s deal time! The 2016 JP Morgan Healthcare Conference has set the tone for another successful year for healthcare investing. A company’s financial health is a key factor in the underwriting process for any type of loan and, in the healthcare space, savvy investors also conduct through healthcare regulatory diligence.  Sophisticated investors, however, go beyond a “check the box” review of a company’s regulatory compliance and ask “what does this mean” to the company’s overall and long term financial health.

Healthcare regulatory diligence and risk underwriting should go hand-in-hand. Changing regulatory scenarios can have a significant financial impact on a company’s Earnings Before Deductions for Interest, Taxes, Depreciation and Amortization (EBITDA), a key factor in the calculation of net-debt-to-EBITDA ratio in the leveraged loan market or impact the quality of secured accounts receivables in the asset based loan market. Just a few examples of areas where regulatory reviews should be incorporated into the financial underwriting process include:

  • Pharmaceutical Drug Pricing and Competition: branded pharmaceuticals facing near term generic competition, significant patent litigation, Federal Trade Commission (FTC) or other significant government investigations related to drug pricing can have significant impact on future sales and market share. The same is true for generic manufacturers filing drug applications and considering market entry.
  • Reimbursement Changes: payment policy changes and reimbursement cuts can have a significant impact on companies that derive a large proportion of revenue from certain procedures or codes. Underwriting scenarios should model how decreased reimbursement may impact cash flow from accounts receivable over time.
  • Regulatory Approval and Coverage: failure to receive anticipated reimbursement coverage or regulatory approval for an innovative pharmaceutical, medical device, laboratory or other test or product can have serious financial implications if companies are forced to consider expenses related to unexpected product changes or reduced market share due to the inability to obtain reimbursement coverage.
  • Government Investigations:  healthcare companies are frequent targets of government investigations and False Claims Act litigation. Understanding the stage of the investigation and the type of claims at issue can often help underwriters “box in” a range of potential financial outcomes.

Take these scenarios to the next step and consider how the outcome of regulatory diligence should be incorporated into specific healthcare language in the credit agreement, such as representations and warrantees, notice or default provisions.

When conducting any type of healthcare regulatory diligence prior to making an investment, don’t forget to ask “what does this mean?” Carefully considering the outcome of healthcare regulatory diligence on a company’s financial strength will go a long way in protecting the long term value of your investment dollars.

Kate Waters Hardey is a partner in the Healthcare Group of McGuireWoods.

Karl Rove to Serve as Keynote Speaker at 13th Annual Healthcare and Life Sciences Private Equity and Finance Conference

Posted in Industry Events and Announcements

Karl Rove will be the keynote speaker at the 13th Annual Healthcare and Life Sciences Private Equity and Finance Conference.

This two-day healthcare-focused private equity, lending and finance conference which will take place February 23-24. The conference is once again being held at The Ritz-Carlton Chicago. It will explore new ways to successfully close transactions and achieve growth. The conference will include presentations by companies seeking investment or financing.

Rove served as senior advisor to President George W. Bush from 2000–2007 and deputy chief of staff from 2004–2007. He is a Fox News contributor, Wall Street Journal columnist and author of “The Triumph of William McKinley” and “Courage and Consequence.”

Learn more about the conference by clicking here. View the full agenda here, and register here.

If readers are interested in attending, please contact Amber Walsh at awalsh@mcguirewoods.com for a registration discount.

M&A, Cybersecurity Identified as Top Areas for Healthcare General Counsels

Posted in Healthcare Services Investing

A September 2015 Consero survey of general counsels (GCs) from mid-size to large U.S. hospital and health systems provides some interesting insight into the top issues facing legal departments.

Highlights include the following:

  • 94% of surveyed GCs said they are either involved or extremely involved in merger and acquisition activity.
  • The top five areas of focus for the coming months were M&A activity (36%); regulations/legislation (35%); cybersecurity/privacy (27%); litigation (24%); and compliance and ethics management (19%). Note: Multiple areas could be selected.
  • Cybersecurity/privacy was the top area of risk (39%) followed by HIPAA/HITECH compliance (36%); regulatory changes (33%); False Claims Act (22%) and antitrust risk (13%). Note: Multiple areas could be selected.
  • More than two-thirds of respondents did not believe their emergency preparedness plan covers all risk exposure adequately.
  • More than one-third of respondents said their health system had experienced a cybersecurity breach in the previous 12 months.

To receive an emailed link to download the report, fill out the form here.

Register Today: 13th Annual Healthcare and Life Sciences Private Equity and Finance Conference

Posted in Industry Events and Announcements

Registration is now open for the McGuireWoods & RSM US 13th Annual Healthcare and Life Sciences Private Equity and Finance Conference, which will take place February 23-24. The conference is once again being held at The Ritz-Carlton Chicago.

In the last few years we’ve had more than 500 attendees, the bulk of which are private equity sponsors, healthcare and life sciences operators, lenders and some vendors. Additional information and the registration form is available at our conference website at www.healthcareprivateequity.com.

This year, we have sponsorships from:

If readers are interested in attending, please contact Amber Walsh at awalsh@mcguirewoods.com for a registration discount.

Healthcare & Life Sciences Private Equity Deal Tracker: Scholar Rock Secures $36 Million in Funding

Posted in Healthcare Services Investing

Scholar Rock has announced it has secured $36 million in series B financing.

Scholar Rock, based in Cambridge, Mass., is a biotechnology company focused on developing drugs that selectively target supracellular activation of growth factors in the disease microenvironment. The company’s initial drug discovery programs target specific growth factors which are present in the microenvironments of diseases including fibrosis, musculoskeletal diseases, immuno-oncology and autoimmune diseases.

The financing round was led by Fidelity Management and Research Co., with participation from additional new investor Cormorant Asset Management.

All existing investors in Scholar Rock also participated in the financing round, including Polaris Partners, Timothy Springer, ARCH Venture Partners, EcoR1 Capital and The Kraft Group.

OrbiMed Launches $950 Million VC Healthcare Fund

Posted in Healthcare Services Investing

OrbiMed has announced the closing of its next venture capital fund with $950 million in limited partner commitments.

OrbiMed, headquartered in New York City, is an investment firm dedicated to the healthcare sector, with over $16 billion in assets under management.

The firm indicated its new fund, OrbiMed Private Investments VI, will invest in all stages and sectors of the healthcare industry, with a particular focus on biopharmaceuticals, medical devices, diagnostics and healthcare IT companies located in North America and Europe.

The fund is expected to invest in approximately 30 companies in amounts generally ranging from $10 million-$75 million.

Healthcare & Life Sciences Private Equity Deal Tracker: Allena Pharmaceuticals Secures $53 Million in Funding

Posted in Healthcare Services Investing

Allena Pharmaceuticals has announced it has secured $53 million in series C financing.

Allena, based in Newton, Mass., is biopharmaceutical company focused on developing and commercializing nonsystemic oral protein therapeutics to treat metabolic and orphan diseases.

The financing round was led by Partner Fund Management. Additional new investors included Fidelity Management & Research Company and Wellington Management Company. Allena’s existing investors also participated.

Allena indicated it intends to use the proceeds to advance ALLN-177, its lead product candidate designed to treat secondary hyperoxaluria in patients with a history of calcium oxalate kidney stones, into phase 3 clinical trials.