INSIGHT: Health-Care Deals Up in Q1, but Expect Uncertainty from Virus

Bloomberg Health Law & Business News

Gary W. Herschman and Anjana D. Patel, Members of the Firm, co-authored an article in Bloomberg Health Law & Business News, titled “INSIGHT: Health-Care Deals Up in Q1, but Expect Uncertainty from Virus.” The piece was also co-authored by Hector M. Torres, Managing Director at FocalPoint LLC, and Larry Kocot, Principal at KPMG LLP.

Following is an excerpt:

Despite the negative macroeconomic impact and growing uncertainty stemming from the Covid-19 crisis, the number of announced or closed health-care deals in March continued at a brisk pace (140), up from the 123 deals announced or closed in February.

The month of March caps strong health-care transaction activity in Q1 of 2020, with 476 total deals announced or closed. Absent the Covid-19 crisis, deal activity was broadly estimated to surpass last year’s deal activity (1,588); however, given the impact of the pandemic on all aspects of life in the U.S., the pace of new deal activity is expected to slow over the second quarter (and maybe through the entirety of the summer) as the country adjusts to a new normal.

The Covid-19 pandemic has catalyzed some health-care industry subsectors to increase both productivity and innovation (e.g., life sciences and pharmaceuticals, health-care IT and software, medical devices and supplies), while investment and growth in other sectors (e.g., physician practices and services)is likely to slow down considerably given the practical challenges of curtailing in-person patient visits for non-emergent health-care services and elective surgeries.

For example, deals in certain physician specialties (eye care, urology, dermatology, orthopedics, etc.) are likely to slow down for now, but accelerate as conditions stabilize (see comments below). Moreover, both availability and pricing of debt financing may also put downward pressure on overall near-term deal activity.