volume 16, issue 12 the december 2011 health care m&a€¦ · inside the health care m&a...

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Health Care M&ATHE

MONTHLY

Volume 16, Issue 12 December 2011

InsIde the health Care M&a Market

INSIDE THIS ISSUE

The Big Spenders Of 2011

A total of 37 buyers spent $1.0 billion or more on mergers and acqui-sitions in 2011. Combined, they spent of total of $168.0 billion to fund 90 transactions. While financial buyers were present in the 2011 M&A market, it was strategic buyers who dominated the deal making.

...M&A Trends Of The Year

Health care services led the deal volume for 2011 while health care technology captured the largest dol-lar volume. Turbulence in the equity markets midyear affected deal mak-ers and deals, mostly in Q3:11. Many cross-sector transactions took place as payors and providers assembled the various components to build afford-able care organizations. Page 1

...In The Departments

Services

Health Care Services Page 4Deal Summaries Page 5Additional Transactions Page 7Transaction Updates Page 7

Financing

Venture Capital Page 11Other Financings Page 11

Technology

Health Care Technology Page 12Deal Summaries Page 13Additional Transactions Page 15Transaction Updates Page 16

Against the constant din of doom and gloom headlines emanat-ing from the general media

this year, the 2011 health care merger and acquisition market illustrated the proverb, “When the going gets tough, the tough get going,” by posting the second highest level of activity for the past decade. Based on preliminary figures (and omitting all December deals), 2011 recorded approximately 900 deals worth a combined total of $236.7 billion. This tops 2010’s full-year dollar volume of $207.9 billion by 14% and comes in second only to the $268.4 billion for 2006. Clearly,

A review of merger and acquisi-tion activity of 2011 reveals a number of recurring themes.

The first is that the health care services segment outstripped the corresponding technology segment in deal volume throughout the year, reversing the earlier trend in which the technology sectors enjoyed a greater share of the action. Facility-based sectors, such as Hospitals and Long-Term Care, tended to attract the highest levels of deal mak-ing. After all, one can buy a company, keep the operations and sell off the real estate to help finance the deal, as any seasoned deal maker will tell you. To

the BIg spenders Of 201137 Billion-Dollar Buyers spenD $168.0 Billion

M&a trends Of the YearHealtH Care serviCes, MeDiCal DeviCes sHow strengtH

the buyers and their financial backers have seen worthwhile opportunities in this market to grow their business through M&A, and have not been shy in pursuing them.

Of the 900 deals announced so far in 2011, 500 were one-off transactions made by a single buyer; the remain-ing 400, worth about $124.0 billion, involved 143 buyers who made two or more deals. Multiple buyers thus cap-tured 44% of the 2011 market, in line with the multiple buyers in 2010 and 2009 who captured 46% and 42% of

put matters into perspective, however, it should be noted, that the services segment outspent technology in just one quarter, Q3:11.

As something of a secular growth story, the health care industry does not mechanically mimic the ups and downs of the equity markets. But neither is it immune from market turbulence, as Q3:11 so richly showed us. The link-age was most evident among financial buyers. During Q1:11, they accounted for 31% of all dollars spent on health care M&A, a level that dropped off in

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December 2011The Health Care M&A Monthly

The Health Care M&A MonthlyISSN#: 1091-9716

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BIg spenders Of 2011

their respective markets. The most prolific buyer in terms of deal volume was IPC The Hospitalist (NASDAQ: IPCM) with 11 deals. It was followed by RadNet (NAS-DAQ: RDNT) and Valeant Pharmaceuticals (NYSE: VRX) with eight deals each. AdCare Health Systems (AMEX: ADK), Health Care REIT (NYSE: HCN) and Mednax (NYSE: MD) each announced seven deals. The buyers who produced six deals include The Ensign Group (NASDAQ: ENSG), PerkinElmer (NYSE: PKI), Pfizer (NYSE: PFE) and Roche Holdings (VX: ROG). Those or-ganizations posting five deals include Bon Secours Char-ity Health System, Community Health Systems (NYSE: CYH), Johnson & Johnson (NYSE: JNJ), Meda AB (STO: MEDAA), Sabra Health Care REIT (NASDAQ: SBRA) and U.S. Healthworks. Note that with two excep-

tions, all the companies in this cohort are publicly traded; their access to the public equity markets, not to mention their often generous cash flow, equip them with the capital to undertake multiple deals. The two outliers here, Bon Secours Charity Health System and U.S. Healthworks, a not-for-profit and a private firm, respectively, announced several deals to enlarge their provider networks.

What theY paId

During 2011, 37 buyers committed $1.0 billion or more to the health care M&A market; 21 companies made multiple deals while the remaining 16 made one apiece. They are identified in the table opposite, along with the number of deals they made and the dollars they spent. Together they spent a combined total of $167.8 billion to finance 90 deals. So just 12% of the buyers accounted for 71% of all the health care M&A dollars for the year. Within this group, only eight deals were announced by financial buyers, such as REITs or private equity shops, worth a total of $30.7 billion. Strategic buyers continue to dominate the market.

Since our figures are derived from announced deals, rather than closed ones, future events—or nonevents—could alter these results. We note in particular that Express Scripts’ (NASDAQ: ESRX) $29.1 billion purchase of Medco Health Solutions (NYSE: MHS) is attracting nega-tive press from trade groups and scrutiny from antitrust regulators. If the deal fails to close, 2011 would rank as the fifth largest M&A market for the past decade. But for reasons cited in our August 2011 issue, we feel the transac-tion will likely survive regulatory review.

M&a trends Of the Year

Q2:11 as they presciently sold their investments into the rising stock market. Then Q3:11 saw the markets plum-met, after which financial buyers returned in search of companies shell-shocked by the plunge and ready to sell. And as bad as the markets seemed in the U.S., Europe, particularly the Eurozone, presented investors with even bleaker prospects. By the third quarter, American domes-tic buyers were outspending their foreign counterparts by 4:1 in the health care M&A market.

Changes to health care reimbursement, real or threat-

ened, are guaranteed to send a chill through the provider community as well as those who invest in it. Ask anyone in the Long-Term Care sector, who saw the RUGS-IV

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December 2011 The Health Care M&A Monthly

Company Dollars Deals Company Dollars Deals

Express Scripts $29.1 B 1 UnitedHealth Group $2.0 B 2 Johnson & Johnson $22.4 B 5 H. Lundbeck A/S $2.0 B 1 Takeda Pharmaceutical $14.5 B 3 TPG Capital $1.9 B 1 Gilead Sciences $11.0 B 2 DENTSPLY International $1.8 B 1 Teva Pharmaceutical $7.9 B 3 Vertex Pharmaceuticals $1.5 B 1 Ventas $7.5 B 3 Merck & Co. $1.5 B 4 Danaher Corporation $6.8 B 1 Pfizer, Inc. $1.5 B 6Apax Partners $6.3 B 1 Astellas Pharma $1.5 B 2 Health Care REIT $4.9 B 7 Highmark, Inc. $1.5 B 1 The Carlyle Group $3.9 B 2 Amylin Pharmaceuticals $1.5 B 1 Cigna Corp. $3.8 B 2 HCA, Inc. $1.5 B 1 Thermo Fisher Scientific $3.5 B 2 Les Laboratoires Servier $1.5 B 2Clayton, Dubilier & Rice $3.2 B 1 Kindred Healthcare $1.4 B 4 Valeant Pharmaceuticals $3.2 B 8 Eli Lilly & Co. $1.2 B 1 The Blackstone Group $3.0 B 1 Forest Laboratories $1.2 B 1 Endo Pharmaceuticals $2.9 B 1 Aetna, Inc. $1.1 B 4Roche Holdings $2.6 B 6 Nestle, SA $1.0 B 2Terumo Corporation $2.6 B 2 Amgen $1.0 B 1 Fresenius Medical Care $2.1 B 3 Alkermes, Inc. $962.0 M 1

tOp BuYers In 2011 health Care M&aBY dOllar VOluMe

protocol revised downward in late July, which sent their stocks into a nose-dive. Despite the rhetoric of repeal, health care companies have been buying up the compo-nents to build accountable care organizations, or ACOs. Managed Care organizations spent the first half of the year acquiring e-Health companies and consumer health businesses to develop better metrics to enhance quality of care and outcomes while lowering costs. By the same to-ken, Hospitals have been snapping up Physician Medical Groups at a frantic pace in an effort to create viable ACOs.

The Medical Device industry proved to be the stalwart among the individual sectors of the health care M&A market in 2011. It generated 153 deals worth $61.1 billion, accounting for just over one-quarter of all M&A dollars for the year. It was followed by Pharmaceuticals with 100 deals worth $42.1 billion and Biotechnology with 75 deals worth $31.1 billion. We may attribute Medical Devices’ success in part to the fact that it seems less sensitive to “headline risk” than either pharma or biotech, but we also suspect that big pharma companies were husbanding their resources to meet the gaps left by looming patent cliffs. For example, Pfizer’s Lipitor, the single largest revenue-generating drug ever, went off patent a few weeks ago, and the company wants to replace the $1.0 billion per month in revenue its blockbuster formerly generated.

Among the services, Long-Term Care generated 142

deals worth $16.0 billion; Managed Care, 19 deals worth $7.9 billion; and Hospitals, 82 deals worth $7.3 billion. Fuller discussion of trends for 2011, as well as figures for the full year will appear in subsequent publications, beginning with our January 2012 issue.

As we were going to press, an article from The Wall Street Journal caught our eye with a headline that man-aged to be both alarmist and nonsensical at the same time: “M&A Market Barely Above Water for 2011.” Even though the $2.4 trillion dollar value for all corporate merg-ers and acquisitions through November is 1.4% above the comparable period in 2010, the market, so the article implies, is on the verge of “drowning.” We were unaware that there is some predetermined level below which the market sinks and dies. Would $2.3 trillion signal the death of the M&A market? It strikes us as a bizarre way of try-ing to say something meaningful about what amounts to a truism, that not every year can be a record-breaker. (And, of course, health care in 2011 is well above the previous year’s level.) This represents to us a troubling trend that has persisted through the year and that we wish would go away in 2012 and beyond: headlines and stories in the general media about the M&A market that are not grounded in the relevant financial and historical contexts, and that ignore the underlying forces and conditions that have been promoting activity in this market for decades and will continue to do so for the foreseeable future.



Sector Deal Volume Combined PriceManaged Care 4 $ 2,000,000,000Labs, MRI & Dialysis 1 45,700,000Long-Term Care 7 45,650,000Hospitals 3 17,760,000Home Health 3 3,200,000Physician Medical Groups 12 —Behavioral Health 2 —Rehabilitation 2 —Other Services 6 650,000,000Total 40 $ 2,762,310,000

the MOnth In M&a at a glanCe:health Care serVICes, nOVeMBer 2011

BehaVIOral health Care

November saw two acquisitions in the Behavioral Health sector; in both cases, the target was a business that provided addiction treatment programs. In the first, CRC Health Corporation, a Bain Capital portfolio company, bought Mountain Health Solutions in Asheville, North Carolina for an undisclosed amount. The target operates outpatient addiction treatment programs from two fa-cilities in the state, and is focused on medication-assisted treatments. This purchase expands CRC’s facility network in North Carolina, where it already operates Structure House in Durham, acquired last year. In the second deal, California-based Elements Behavioral Health is buying The Recovery Place, a drug and alcohol treatment center in Fort Lauderdale, Florida. It offers a variety of residen-tial, day and outpatient addiction programs. We wonder whether admissions spike during Spring Break.

At the beginning of November, Acadia Healthcare Co., (NASDAQ: ACHC) closed on its $66.5 million ac-quisition of PHC, Inc. Shortly thereafter, it filed with the SEC to sell $65.0 million of its common stock in a public offering. Proceeds are earmarked to fund future acquisi-tions. Although the proposed purchases are in “various stages of development and consideration,” no concrete details have yet emerged.

hOMe health Care

Of the three deals announced in the Home Health sector in November, only one came with a purchase price. Partners Healthcare Group, LLC, a newly formed provider in Atlanta backed by Fulcrum Equity Partners, announced its first acquisition. It is paying $3.2 million to buy AAA Home Health, a provider of home health and hospice services based in New Iberia, Louisiana. AAA Home Health will serve as a platform for further acquisi-tions by Partners Healthcare. This deal was funded by Fulcrum Equity Partners, also based in Atlanta.

In a somewhat unusual tie-up between a managed care company and a home health services provider, Humana (NYSE: HUM) is acquiring SeniorBridge, a provider of chronic care services based in New York and offering in-home care to the elderly from 44 offices. For 2011, the tar-get is projected to generate $72.0 million in revenue. The acquired business complements HUM’s Humana Care, a

Health Care Services

Florida-based unit that provides care management to the chronically ill. HUM hopes to leverage SeniorBridge’s services across its health plan membership.

hOspItals

November’s Hospital M&A market has proved to be something of a grab-bag. In Cincinnati, Hamilton County is selling The Drake Center, a 166-bed long-term acute care facility, which in 2010 generated revenue of $57.5 million and a loss of $14.0 million. The County has struck a deal to sell Drake to UC Health, which operates two hospitals in Cincinnati, for $15.0 million in cash. The sale of this LTAC is part of Hamilton County’s attempt to deal with the budgetary problems stemming from the losses incurred by its two taxpayer-supported sports sta-diums and the attempt to provide those taxpayers with a property tax rebate, not a motivation we often see. The price to revenue multiple of 0.26x, which would ordinar-ily signal a bankruptcy deal, is justified, so the County alleges, by the fact that Drake has generated losses for several years. Even so, there is public outcry over selling County property at below assessed value. Earlier in the year, The Drake Center sold its inpatient rehab unit to HealthSouth (NYSE: HLS).

In Carthage, Mississippi, Leake County is selling Leake Memorial Hospital, a 25-bed critical access hospi-tal, to Baptist Health System in Jackson for $2.76 million, which in effect amounts to forgiveness of the debt that Leake Memorial owes Baptist Health. The price to rev-enue multiple is 0.24x, reflecting the fact that the hospital has been losing money since 2009. The larger resources




deal suMMarIes—servICes hOMe health Care

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcEAAA Home Health, Inc. Private Partners Healthcare Group, LLC Private 11/15/2011 $3,200,000 New Iberia, Louisiana Atlanta, Georgia

In BrIef: Partners Healthcare Group is paying $3.2 million to acquire AAA Home Health, a provider of home health and hospice services in Louisiana. AAA will serve as a platform for Partners’ future home health care acquisitions.

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcELeake Memorial Hospital Nonprofit Baptist Health System Nonprofit 11/1/2011 $2,760,000 Carthage, Mississippi Jackson, Mississippi

In BrIef: Leake County is selling Leake Memorial Hospital, a 25-bed critical access hospital, to Baptist Health System for $2.76 million.

The Drake Center Private UC Health Nonprofit 11/29/2011 $15,000,000 Cincinnati, Ohio Cincinnati, Ohio

In BrIef: Hamilton County is selling The Drake Center, a 166-bed long-term, acute care hospital, to UC Health for $15.0 million. Proceeds from the sale will be used to prop up the County’s stadium funds and to rebate property taxes.

deal suMMarIes—servICes hOspItals

deal suMMarIes—servICes laBOratOrIes, MrI and dIalYsIs

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcECML Imaging operations TSE: RadNet, Inc. NASDAQ: 11/8/2011 $45,700,000 Mississauga, Ontario CLC Los Angeles, California RDNT

In BrIef: CML HealthCare is selling the bulk of its U.S. imaging operations to RadNet for a price of $45.7 million. The assets include two subsidiaries and 21 imaging facilities located in Maryland, Delaware and Rhode Island.

deal suMMarIes—servICes lOng-terM Care

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcESkilled nursing facility Private LTC Properties, Inc. NYSE: 11/1/2011 $17,500,000 Colton, California Westlake Village, California LTC

In BrIef: LTC Properties is paying $17.5 million for a 156-bed skilled nursing facility that serves the Riverside-San Bernardino-Ontario market.

Catered Living of Cockeysville Private The Autumn Group Private 11/1/2011 $3,800,000 Cockeysville, Maryland Mechanicsburg, Pennsylvania

In BrIef: The Autumn Group is paying $3.8 million, or 2.6x revenue, to acquire Catered Living of Cockeysville, a 30-unit assisted living facil-ity that is currently licensed for 32 beds.

Curry Manor Private Tierra Senior Living Private 11/1/2011 $5,900,000 Roseburg, Oregon Portland, Oregon

In BrIef: A local owner is selling Curry Manor, a 34-unit assisted living facility, to Tierra Senior Living for $5.9 million, or 2.3x revenue. This is the buyer’s first seniors housing asset.

Two Alzheimer’s SNFs Private Sabra Health Care REIT NASDAQ: 11/1/2011 $14,200,000 Abilene, Texas Irvine, California SBRA

In BrIef: Sears Methodist Retirement System is selling two Alzheimer’s skilled nursing facilities, one in Abilene, the other in Waco, Texas, to Sabra Health Care REIT for $14.2 million, or 1.25x revenue.



deal suMMarIes—servICes lOng-terM Care (Cont.)

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcE

deal suMMarIes—servICes Other

Uvalde Healthcare & Rehab Center Private K&Y Investments Private 11/1/2011 $1,650,000 Uvalde, Texas Los Angeles, California

In BrIef: An out-of-state owner is selling the Uvalde Healthcare & Rehab Center, a 115-bed skilled nursing facility, to K&Y Investments for a price of $1.65 million.

Creekside Senior Living Private Pathway Senior Living Private 11/21/2011 $2,600,000 Green Bay, Wisconsin Des Plaines, Illinois

In BrIef: A receiver is selling Creekside Senior Living, a 59-unit assisted living facility, to Pathway Senior Living for $2.6 million. The price to revenue multiple for this deal is 4.8x.

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcEKentucky Lake Surgery Center Private Henry County Medical Center Nonprofit 11/1/2011 $7,000,000 Paris, Tennessee Paris, Tennessee

In BrIef: Henry County Medical Center is paying $7.0 million to buy The Kentucky Lake Surgery Center, LLC, an outpatient surgery center.

American Dental Partners, Inc. NASDAQ: JLL Partners, Inc. Private 11/7/2011 $398,000,000 Wakefield, Massachusetts ADPI New York, New York

In BrIef: The private equity firm of JLL Partners is paying $398.0 million, or 1.4x revenue, to acquire American Dental Partners, a dental prac-tice management firm that manages 27 dental group practices with 282 dental facilities in 21 states.

HealthTrans Private SXC Health Solutions Corp. NASDAQ: 11/17/2011 $250,000,000 Denver, Colorado Lisle, Illinois SXCI

In BrIef: SXC Health Solutions is paying $250.0 million in cash, or 0.9x revenue, to acquire HealthTrans, a provider of claims processing and pharmacy benefit management services.

deal suMMarIes—servICes Managed Care

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcEXLHealth Corp. Private UnitedHealth Group NYSE: 11/22/2011 $2,000,000,000 Baltimore, Maryland Minnetonka, Minnesota UNH

In BrIef: MatlinPatterson Global Advisors is selling XLHealth, a Medicare Advantage plan that serves approximately 113,000 members in six states, to UnitedHealth Group for an estimated $2.0 billion.

The Health Care M&A Monthly has a quarterly supplement which details all publicly announced health care services mergers and acquisitions. Because many companies do not reveal details of their acquisitions, especially price and terms, at the time of the announcement, those details, when available, and additional information about the target company and acquirer are provided in the quarterly report after researching SEC documents and other primary sources.


of the buyer will allow Leake Memorial to refurbish its emergency room and undertake other capital projects. But what is going on with these County-owned facilities and their low price to revenue multiples?

Universal Health Services (NYSE: UHS) announced its first acquisition since the $3.1 billion purchase of Psy-chiatric Solutions in 2010. It is acquiring Knapp Medical

Center, a 226-bed acute care facility in Weslaco, Texas for an undisclosed price. This deal further expands UHS’s network of hospitals in the area; the company currently operates four acute care hospitals, a psychiatric facility and a surgery center 20 miles west of Weslaco. With a market that is predicted to grow by 9% over the next five years, Knapp Medical proved to be attractive enough to UHS to divert some of the cash it was paying out in its share buyback program to fund an acquisition.



Sector target acquirer DateBEHAVIORAL HEALTH CARE Mountain Health Solutions CRC Health Corporation 11/1/2011 The Recovery Place Elements Behavioral Health 11/2/2011HOME HEALTH CARE Family Care Incorporated of Virginia CareSouth Health System, Inc. 11/3/2011 SeniorBridge Humana, Inc. 11/29/2011HOSPITALS Knapp Medical Center Universal Health Services, Inc. 11/30/2011LONG-TERM CARE Pocatello Care and Rehabilitation Center The Ensign Group, Inc. 11/27/2011MANAGED CARE Senior Whole Health TA Associates, Inc. 11/15/2011 Central Health Plan of California, Inc. AHMC Healthcare, Inc. 11/17/2011 QualCare, Inc. Atlantic Health Systems 11/30/2011PHYSICIAN MEDICAL Bexar Pediatric Surgery Associates, PLLC Mednax, Inc. 11/1/2011 GROUPS Vine Street Clinic Memorial Health System 11/1/2011 Osler Medical Wuesthoff Health System 11/4/2011 Austin Anesthesiology Group, LLP Mednax, Inc. 11/8/2011 Ravinia Associates in Internal Medicine NorthShore University HealthSystem 11/8/2011 The Keokuk Clinic Great River Health Systems 11/9/2011 Pacific Urology Diablo Valley Oncology and Hematology 1/11/2011 Cardiovascular Associates of Marin Marin General Hospital 11/14/2011 North Coast Cancer Care, Inc. Cleveland Clinic Health System 11/16/2011 Premier Healthcare Resources, LLC Millennium HealthCare Solutions, Inc. 11/16/2011 Issaquah Medical Group Overlake Hospital Medical Center 11/18/2011 Hennepin Faculty Associates Hennepin County Medical Center 11/30/2011REHABILITATION The Rehab Specialist United Seating & Mobility 11/14/2011 Polaris Hospital Company, LLC HCP & Company 11/29/2011 OTHER NorthStar EMS Acadian Ambulance Service 11/3/2011 Echo Specialty Pharmacy Salveo Specialty Pharmacy, Inc. 11/28/2011 Outpatient surgery center Baptist Healthcare System 11/29/2011

addItIOnal transaCtIOns—servICes

Sector target acquirer announceD upDateBEHAVIORAL PHC, Inc. Acadia Healthcare Company, Inc. 5/24/2011 11/1/2011 HEALTH Peabody, Massachusetts Franklin, Tennessee

reCent develOpMents: This merger closed on November 1, 2011. The merged company is to trade on the Nasdaq under the ticker ACHC.

HOSPITALS Resurrection Health Care Provena Health 2/3/2011 11/1/2011 Chicago, Illinois Mokena, Illinois

reCent develOpMents: This merger closed on November 1, 2011, creating an organization with 14 hospitals and 3,581 beds.

HOSPITALS Two Tulsa hospitals Ardent Health Services 6/28/2011 11/11/2011 Tulsa, Oklahoma Nashville, Tennessee

reCent develOpMents: It was revealed that Ardent paid $154.0 million in cash to acquire two acute care hospitals in the Tulsa market.

addItIOnal transaCtIOns—servICes

MedCath Corp. (NASDAQ: MDTH) recently sold its minority interest in Harlingen Medical Center in Texas and HMC Realty, LLC to Prime Healthcare Services. MDTH sold its 34.8% ownership interest in 112-bed Harlingen Medical Center and its 36.1% interest in HMC Realty. The transaction values MDTH’s combined owner-ship interest in the two entities at $9.0 million.

SunLink Health Systems (AMEX: SSY) and Foun-dation Healthcare Affiliates, LLC recently ended their

merger discussions. Differences in philosophies and business models, it is said, contributed to the termination.

Trover Health System, a hospital operator based in Madisonville, Kentucky, is negotiating a merger with Louisville-based Baptist Healthcare, which operates five hospitals in the state. Baptist Healthcare beat out both LifePoint Hospitals (NASDAQ: LPNT) and Owensboro Medical System in the bidding process. A final announce-ment is expected in the spring.



laBOratOrIes, MrI & dIalYsIs

November’s lone deal in the Laboratory sector involves RadNet’s (NASDAQ: RDNT) $45.7 million acquisition of CML Healthcare’s (TSE: CLC) U.S. imag-ing operations. The assets include two subsidiaries which operate 21 imaging facilities in Maryland, Delaware and Rhode Island, and perform 400,000 imaging procedures each year. This acquisition, valued at approximately 0.65x revenue, expands RDNT’s presence in Maryland and Delaware from 61 to 77 centers and provides the company with a platform in Rhode Island for further growth. In conjunction with this deal, RDNT raised its senior secured revolving credit facility from $100.0 million to $121.25 million. With this deal, CLC, a Canadian company, is ef-fectively withdrawing from the U.S. market.

lOng-terM Care

In November’s largest Long-Term Care deal, LTC Properties (NYSE: LTC) is acquiring a 156-bed skilled nursing facility in Colton, California that derives its rev-enue primarily from managed care contracts and specialty government reimbursement. The purchase price is $17.5 million, which works out to $112,180 per bed. The prop-erty was leased back to a third-party health care operator within LTC’s existing portfolio pursuant to a 12-year lease agreement. The lease has two 10-year renewal options.

Sears Methodist Retirement System is selling two Al-zheimer’s skilled nursing facilities: Windcrest Alzheim-er’s Care Center in Abilene, Texas, and Wesley Woods Alzheimer’s Care Center in Waco. Each facility has 120 beds, and each specializes in dementia care. The buyer is a REIT, which is paying $14.2 million, or 1.25x annual-ized revenue. The seller is an owner-operator of CCRCs, so these two centers did not fit with its core mission. The buyer will lease the facilities to Encore Healthcare which already operates several properties in Texas. Senior Living Investment Brokerage handled the transaction.

Portland, Oregon-based Tierra Senior Living is paying $5.9 million, or 2.3x revenue, to acquire Curry Manor, a 34-unit assisted living facility located in Rose-burg, Oregon. The seller is a local owner. The property consists of an original “mansion” that was built in 1893, with wings subsequently added to give it an effective age of 1990. Curry Manor provides higher acuity dementia care. The buyer arranged a bridge to HUD loan. No broker was involved in this transaction; this is the buyer’s first seniors housing asset.

The Autumn Group, based in Mechanicsburg, Penn-sylvania, is acquiring Catered Living of Cockeysville for $3.8 million. Located in Cockeysville, Maryland, the target is a 30-unit assisted living facility licensed for 32 beds. The facility consists of two buildings, each with 15 units, a residential kitchen and dining room. The transac-tion is valued at 2.6x revenue. With this acquisition, the buyer now manages six properties.

Pathway Senior Living, a seniors housing and care company based in Des Plaines, Illinois, is paying $2.6 million to acquire Creekside Senior Living, a 59-unit assisted living facility located in Green Bay, Wisconsin, that was in receivership. Built in 2004, it was 75% occu-pied at the time of sale; it has 34 two-bedroom units and 25 one-bedroom units. Despite being in receivership, the price to revenue multiple is a lofty 4.8x, which suggests the purchase price was based on the financial performance the facility may ultimately achieve once some changes are put in place. The facility was originally intended for independent living, but defaulted on its $5.23 million loan in 2006. The receiver hired a seniors housing manager who began converting units to assisted living. The buyer plans to license the facility for RCAC to attract higher paying residents and will lose the low-paying residents through attrition. Sabra Health Care REIT (NASDAQ: SBRA) financed the acquisition in a sale/leaseback and will fund up to $1.6 million in improvements. Senior Living Invest-ment Brokerage handled the transaction.

The Clare at Water Tower, a showcase CCRC on

Chicago’s Gold Coast, filed for bankruptcy mid-month after defaulting on its bond debt in September. This CCRC is a 53-story high rise with 248 independent living units. Before opening in December 2008, 220 of those units had deposits on them; however, at the time of the bankruptcy filing, only 82 of those units were occupied, a 33% oc-cupancy rate. Apparently, the other potential residents, spooked by the Great Recession and perhaps unable to sell their residences at acceptable values, withdrew their entrance-fee deposits, crippling the Clare’s working capi-tal. The Bank of New York Mellon Corp. is the trustee of the $229.0 million bond offering. Loyola University, which owns the land on which the Clare is situated with a 99-year lease, is perhaps the largest unsecured creditor. A bankruptcy auction may be able to bring The Clare back from the edge, but the buyers will want to rethink the capital structure. Redwood Capital is acting as the debtor-in-possession lender, fronting $12.0 million in cash. This gives it the inside track if it ultimately wants to bid on the property.



Managed Care

Despite rumblings to repeal what is now being called Obamneycare and roll back recent reforms, the Medicare Advantage market remains an attractive one. United-Health Group (NYSE: UNH) is acquiring XLHealth Group from MatlinPatterson Global Advisors for an estimated $2.0 billion. Based in Baltimore, Maryland, XL-Health is a Medicare Advantage plan that serves 113,000 members in six states, and projects 2012 revenue of $2.0 billion. This acquisition gives UNH a strong platform in the Medicare Advantage market. XLHealth’s members are in Arkansas, Georgia, Maryland, Missouri, South Caro-lina and Texas. The company plans to expand to Illinois, Indiana, Iowa, New Mexico, New York and Wisconsin in 2012; UNH’s large coffers will allow it to do so. Jefferies Group provided XLHealth with financial advice.

An investor group is selling Central Health Plan of California, a Knox-Keene Health Care Service Plan, to AHMC Healthcare, which operates six hospitals in California, for an undisclosed price. Central Health Plan provides a Medicare Advantage HMO plan to 11,000 members in Los Angeles, Orange and San Bernardino counties. This acquisition gives the buyer, a hospital management company, access to Medicare Advantage en-rollees. It also allows AHMC the opportunity of building an ACO by using the health plan’s information to improve quality of care and lower costs.

Nashville-based Council Capital is selling its stake in Senior Whole Health (SWH) to Boston-based TA Associ-ates, a private equity firm focused on the middle market for an undisclosed price. SWH is a senior care organization that coordinates health care benefits and other services for both Medicare and Medicaid in Massachusetts and New York. It generates annual revenue of $300.0 million. This sale allows the seller to cash out of its investment in Senior Whole Health, originally made in 2004. The deal gives the buyer access to a business that focuses on the “dual eligible” market. UBS provided Senior Whole Health with financial advice on this transaction.

phYsICIan MedICal grOups

Mednax (NYSE: MD) announced two acquisitions in November. The company’s American Anesthesiology unit bought Austin Anesthesiology Group, a medical group practice based in Austin, Texas, specializing in adult and pediatric anesthesia services. The practice has 66 anesthe-siologists who practice at four area hospitals, outpatient

surgery centers and office-based locations. This is the buyer’s first anesthesia practice acquisition in Texas. The target’s annual anesthesia volume exceeds 85,000 cases. Also in Texas, MD’s Pediatrix Medical Group acquired Bexar Pediatric Surgery Associates, a six-physician medical group practice based in San Antonio and special-izing in pediatric surgery. Neither deal came with a price.

Hennepin Faculty Associates, a multispecialty physi-cian medical group practice based in Minneapolis with 1,000 physicians, is merging with Hennepin Healthcare System, which operates 477-bed Hennepin County Medi-cal Center and primary care clinics. This merger reunites two organizations that split about 30 years ago. It is be-lieved the merger will save $13.0 million over the next two years, with more savings going forward.

rehaBIlItatIOn

HCP & Company, a Chicago-based middle-market private equity fund, is acquiring a majority stake in Polaris Hospital Company. Founded in 2007 and based in Brent-wood, Tennessee, Polaris acquires, develops and operates hospitals, focusing on physical medicine/rehab services and behavioral health. This transaction gives Polaris the additional resources to expand its business. The company currently operates one hospital in Lubbock, Texas, and is developing another in Murfreesboro, Tennessee. Proceeds from this deal will assist in the development of the Ten-nessee facility and fund growth in new markets.

Other

Dental Practice Management. JLL Partners, a New York-based private equity firm, is acquiring and privatiz-ing American Dental Partners (NASDAQ: ADPI) for $398.0 million. ADPI manages 27 dental group practices which have 282 dental facilities with 2,402 operatories in 21 states. It generates revenue of $289.0 million, EBITDA of $49.0 million and income of $11.3 million.

Under terms of the offer, JLL will pay $19.00 per share in cash, which represents an 83% premium to the stock’s prior-day price. JLL will also assume $81.0 million in outstanding debt. The deal is consequently valued at 1.4x revenue and 8.1x EBITDA. The agreement has a 40-day go-shop provision. To finance it, JLL has secured financ-ing from KeyBank, CIT Healthcare and NXT Capital. BofA Merrill Lynch is providing ADPI with financial advice on this deal; a special committee of the board is receiving financial advice from Greenhill & Co.



Health Care Financing

venture CapItal

Biocartis, a company based in Lausanne, Switzerland, and developing compact molecular diagnostic systems for use in personalized medicine and infectious diseases, completed a €71.0 million ($100.0 million) Series C financing. Investors in the round included Debiopharma Group, Philips, Johnson & Johnson Development Cor-poration, The Wellcome Trust, Valiance, Biovest and members of Biocartis senior management, among others. Proceeds from the financing are earmarked to further the development and commercialization of Apollo, Bio-cartis’s first system. Apollo is a compact, scalable core system that allows multiple assays in many environments without the need of a specialist laboratory or trained tech-nicians. Biocartis is partnering with Philips Corporate Technologies on this product; other collaborators include bioMerieux and Janssen Pharmaceutica.

Agios Pharmaceuticals, a Cambridge, Massachusetts-based biopharma focused on discovering and developing drugs in the field of cancer metabolism, recently secured $78.0 million in an oversubscribed Series C financing. The proceeds will advance Agios’s portfolio of cancer metabo-lism therapeutics into the clinic. Several new, undisclosed investors, including three public investment funds, joined Agios’s strategic partner Celgene (NASDAQ: CELG) and existing investors ARCH Venture Partners, Flagship Ventures and Third Rock Ventures.

Rempex Pharmaceuticals, a San Diego-based bio-pharma focused on new treatments for resistant gram-negative infections, completed the initial close of a Series B financing, raising a total of $67.5 million. Incoming investors Frazier Healthcare Ventures and Vivo Ventures joined existing investors Adams Street Partners, Or-biMed Advisors and SV Life Sciences. The proceeds will help the company prepare for filing an NDA for its first product candidate in the second half of 2012.

arGEN-X, a Benelux-based biopharma focused on monoclonal antibody therapeutics, recently closed on €27.5 million ($37.0 million) in an oversubscribed Se-ries B financing round. This raise was led by OrbiMed Advisors and Seventure Partners, with the participation of existing shareholders BioGeneration Ventures, Credit Agricole Private Equity, the Erasmus Biomedical Fund, Forbion Capital Partners, Thuja Capital and VIB. Pro-

ceeds from the deal will be used to further the development of up to five programs based on the company’s proprietary SIMPLE Antibody platform, including two in preclinical development. The programs cover such therapeutic areas as autoimmune disorders, inflammation and oncology.

Pivot Medical, a Sunnyvale, California-based medi-cal device company engaged in the field of minimally invasive hip restoration, raised $32.0 million in a Series C financing. The round was led by new investor Adams Street, who was joined by Delphi Ventures, founding investor Montreux Equity Partners and existing investor Ivy Capital Partners. The funds thus raised will be used to help roll out Pivot Medical’s hip arthroscopy system in the U.S. and Europe, and to expand the company’s clinical research programs.

Radius Health, a Cambridge, Massachusetts-based pharma engaged in developing new drugs for osteoporosis and women’s health, recently closed on the second tranche of a $91.0 million, three-tranche financing, bringing in $27.65 million. The second tranche includes $21.4 million in equity financing from existing shareholders and $6.25 million in debt financing from GE Capital, Healthcare Financial Services and Oxford Finance, LLC. Proceeds from this tranche are to be used to continue advancing the ongoing phase 3 clinical study of the BA058 injection, for the treatment of osteoporosis. Radius originally acquired exclusive rights to the compound from Ipsen in 2005.

NanoString, a Seattle-based provider of life science tools for translational research and molecular diagnostics, secured $20.0 million in a Series D financing. New inves-tors GE, BioMed Ventures and Henri Termeer, former CEO of Genzyme Corp., joined existing investors Clarus Ventures, Draper Fisher Jurvetson and OVP Venture Partners. Among other uses, proceeds from the raise will be used to develop the company’s breast cancer assay based on the PAM50 gene expression signature. Results from the first clinical study of this assay are to be presented in early December.

Other fInanCIngs

Prospect Capital Corporation (NASDAQ: PSEC) is providing a $15.0 million secured second lien loan to support the acquisition of a specialty pharmacy services company in a private equity-backed transaction. The com-pany in question remains unidentified, but it is a mail-order pharmacy that offers solutions to address the complexities of the workers compensation market.



Sector Deal Volume Combined PriceBiotechnology 7 $ 14,940,000,000Pharmaceuticals 12 1,124,300,000Medical Devices 11 1,033,150,000e-Health 8 400,000,000Total 38 $ 17,497,450,000

the MOnth In M&a at a glanCe:health Care teChnOlOgY, nOVeMBer 2011

BIOteChnOlOgY

In the largest deal of November, one so large that it accounts for slightly more than one-half of all dollars spent on health care M&A, Gilead Sciences (NASDAQ: GILD) is buying Pharmasset, Inc. (NASDAQ: VRUS) for $11.0 billion. Based in Foster City, California, GILD discovers, develops and commercializes therapeutics to advance the care of patients with life-threatening diseases. The company is already the world’s largest manufacturer of HIV drugs, but it is also in search of a therapy that will create a paradigm shift in the treatment of hepatitis C, and it strongly believes that Pharmasset has the treasure map to find it. Based in Princeton, New Jersey, VRUS, a clinical-stage pharma, is involved in novel drugs to treat viral infections, focusing on hepatitis C. As befits its clinical-stage status, on a trailing 12-month basis, it gen-erated revenue of $897,000. This acquisition gives GILD one drug candidate for treating hepatitis C that is in phase 3 trials and two more that are in phase 2 trials. This portfolio thus places GILD in a strong position to transition to an all-oral regime for treating hepatitis C without resorting to injections of interferon. The change in delivery from an injectable to an oral drug would doubtless confer a significant competitive advantage on GILD.

And for this advantage, GILD is willing to pay up. Under terms of the deal, GILD is offering to pay $137.00 per share in cash, which represents an 89% premium to the stock’s prior-day price and a 55% premium to its 52-week high. The transaction is to be financed with cash on hand, bank debt and senior unsecured notes. Among those who think GILD may have paid a tad too much is Raymond Schinazi, the founder and largest individual shareholder of VRUS. In an interview, Mr. Schinazi estimates that GILD could have had VRUS in 2004 for $300.0 million, when it started soliciting take-over offers. Pharmasset is not the name of some town on Cape Cod, but one that Mr. Schinazi coined from ‘pharmaceutical’ and ‘asset’, with the intention of selling off those assets. Such was the original business plan. Mr. Schinazi walks away from this deal $440.0 million richer. Merry Christmas, indeed!

Barclays Capital and BofA Merrill Lynch provided GILD with financial advice on this deal; Morgan Stanley provided VRUS with similar advice.

In November’s second largest deal, Japan’s Otsuka

Health Care Technology

Holdings (T: 4578) is entering into an alliance with H. Lundbeck A/S (OMX: LUN) to develop and sell up to five psychiatric and neuroscience drugs. Under terms of the deal, valued at $2.0 billion, LUN will make a $200.0 million upfront payment and commit to making up to $1.8 billion in milestone payments and royalties. This alliance seeks to replenish both companies’ psychiatric drug offer-ings. LUN’s most important drug loses patent protection in 2012 (that’s next month) and Otsuka’s main schizophrenia drug loses U.S. patent protection in 2015. Under this al-liance, LUN gains rights to two compounds which could generate accumulated revenue of over $9.1 billion if fully developed and marketed while Otsuka gets three of LUN’s drugs in midstage development. Otsuka has strengths in antipsychotic drugs while LUN has strengths in anxiety and depression treatments.

Amylin Pharmaceuticals (NASDAQ: AMLN) and Eli Lilly & Co. (NYSE: LLY) have finally called it quits on their alliance to create a GLP-1 diabetes drug, one which began in 2002 and eventually involved lawsuits as LLY sought a new diabetes collaborator in Boehringer-Ingelheim. In effect, AMLN is buying out LLY’s stake in the alliance, resolving the litigation between the two. The company is paying as much as $1.45 billion, consisting of $250.0 million upfront and up to $1.2 billion in revenue-sharing payments. The assets AMLN is gaining include Byetta (exenatide) as well as the long-acting version By-dureon. LLY will immediately transition U.S. commercial operations to AMLN and will transfer operations outside the U.S. on a market-by-market basis over the next two years. AMLN is to make revenue-sharing payments to LLY equal to 15% of global net sales of exenatide products until the company has made aggregate payments of $1.2 billion plus interest.

Privately held PTC Therapeutics, based in South Plainfield, New Jersey, and the SMA Foundation are granting a license for their spinal muscular atrophy




deal suMMarIes—teChnOlOgY BIOteChnOlOgY

deal suMMarIes—teChnOlOgY e-health

deal suMMarIes—teChnOlOgY MedICal devICes

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcERights to diabetes drug portfolio NYSE: Amylin Pharmaceuticals, Inc. NASDAQ: 11/8/2011 $1,450,000,000 Indianapolis, Indiana LLY San Diego, California AMLN

In BrIef: In a transaction that is worth up to $1.45 billion, Eli Lilly is selling its stake in an alliance to develop and sell GLP-1 diabetes drugs to Amylin Pharmaceuticals. The drugs include Byetta and the long-acting version, Bydureon.

Psychiatric drug alliance T: H. Lundbeck A/S OMX: 11/11/2011 $2,000,000,000 Tokushima ,Japan 4578 Copenhagen, Denmark LUN

In BrIef: In a transaction worth up to $2.0 billion in upfront and milestone payments, Otsuka Holdings is entering into an alliance with Lund-beck to develop and sell up to five psychiatric and neuroscience drugs.

Pharmasset, Inc. NASDAQ: Gilead Sciences, Inc. NASDAQ: 11/21/2011 $11,000,000,000 Princeton, New Jersey VRUS Foster City, California GILD

In BrIef: To bolster its hepatitis C franchise, Gilead Sciences is offering $11.0 billion to acquire Pharmasset, a clinical-stage biopharma that is involved in discovering and developing novel, orally available drugs to treat viral infections, focusing on hepatitis C.

Spinal muscular atrophy program Private Roche Holding AG VX: 11/29/2011 $490,000,000 South Plainfield, New Jersey Basel, Switzerland ROG

In BrIef: In a deal that is worth as much as $490.0 million, PTC Therapeutics and the SMA Foundation are granting Roche Holding a license for their spinal muscular atrophy (SMA) program.

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcERespiratory delivery platform NYSE: Mylan Laboratories, Inc. NYSE: 11/9/2011 $17,500,000 New York, New York PFE Canonsburg, Pennsylvania MYL

In BrIef: Pfizer is selling the rights to its generic version of a dry powder inhaler delivery platform to Mylan Laboratories for $17.5 million.

IZI Medical Products, LLC Private Landauer, Inc. NYSE: 11/14/2011 $93,000,000 Baltimore, Maryland Glenwood, Illinois LDR

In BrIef: Riverside Partners is selling IZI Medical Products to Landauer for $93.0 million. IZI Medical provides medical consumable accesso-ries used in radiology, radiation therapy and image-guided surgery procedures.

TILL Photonics Private FEI Company NASDAQ: 11/14/2011 $20,000,000 Munich, Germany Hillsboro, Oregon FEIC

In BrIef: FEI Company is paying $20 million, or 2.5x revenue, to acquire TILL Photonics, a provider of high resolution, digital light micro-scopes and high speed imaging systems for live cell fluorescence microscopy.

Words+ NASDAQ: Prentke Romich Company Private 11/15/2011 $2,100,000 Lancaster, California SLP Wooster, Ohio

In BrIef: Simulations Plus, Inc. is selling its Words+ subsidiary to Prentke Romich for $2.1 million. Words+ offers computer-based communi-cation systems for those who experience loss of speech and/or other motor skills.

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcEHealthDataInsights, Inc. Private HMS Holdings Corp. NASDAQ: 11/7/2011 $400,000,000 Las Vegas, Nevada New York, New York HMSY

In BrIef: HMS Holdings is paying $400.0 million, or 4.7x 2012 projected revenue, to acquire HealthDataInsights, a company that provides technology-enabled claims review services to such clients as health plans and government payers.



Physio-Control NYSE: Bain Capital Partners, LLC Private 11/17/2011 $487,000,000 Redmond, Washington MDT Boston, Massachusetts

In BrIef: Medtronic is selling Physio-Control, a provider of emergency medical response technology, to Bain Capital Partners, a private equity company, for $487.0 million in cash.

Arriva Medical Private Alere, Inc. NYSE: 11/23/2011 $83,550,000 Coral Springs, Florida Waltham, Massachusetts ALR

In BrIef: Palm Beach Capital is selling Arriva Medical, a provider of diabetes testing supplies, to Alere for approximately $83.55 million, or 1.9x revenue. This acquisition expands the buyer’s repertoire of products for near-patient diagnosis.

eBioscience, Inc. Private Affymetrix, Inc. NASDAQ: 11/30/2011 $330,000,000 San Diego, California Santa Clara, California AFFX

In BrIef: In a transaction that is worth 4.5x revenue, Affymetrix is paying $330.0 million to acquire eBioscience, a provider of flow cytometry and immunoassay reagents for immunology and oncology research and diagnostics.

deal suMMarIes—teChnOlOgY MedICal devICes (Cont.)


deal suMMarIes—teChnOlOgY pharMaCeutICals

TArgET LISTINg AcqUIrEr LISTINg DATE PrIcESurmodics Pharmaceutical assets NASDAQ: Evonik Industries AG Private 11/1/2011 $30,000,000 Eden Prairie, Minnesota SRDX Essen, Germany

In BrIef: Surmodics has sold its Surmodics Pharmaceutical assets to Evonik Industries for $30.0 million in cash. This sale allows Surmodics to focus on its core medical device and IVD businesses.

Oceana Therapeutics, Inc. Private Salix Pharmaceuticals, Inc. NASDAQ: 11/8/2011 $300,000,000 Edison, New Jersey Morrisville, North Carolina SXLP

In BrIef: Oceana Therapeutics, LLC is selling Oceana Therapeutics, Inc., a provider of gastroenterology and urology therapeutics, to Salix Pharmaceuticals for $300.0 million in cash.

Spirig Pharma generic business Private Stada Arzneimittel AG DE: 11/9/2011 $104,400,000 Egerkingen, Switzerland Bad Vilbel, Germany STAGn

In BrIef: Stada Arzneimittel is paying approximately $104.4 million, or 2.3x revenue, to buy Spirig Pharma’s generic business which includes six prescription and 15 over-the-counter products.

Uman Pharma, Inc. Private CFR Pharmaceuticals S.A. Santiago: 11/10/2011 $26,500,000 Candiac, Quebec Santiago, Chile CFR

In BrIef: CFR Pharmaceuticals is acquiring a 51% interest in Uman Pharma for $26.5 million. Uman develops and manufactures cytotoxic and sterile injectable and solid dosage products for the oncology market.

Royalties on Fanapt OTCBB: Deerfield Management Company NASDAQ: 11/15/2011 $15,000,000 S. San Francisco, California TTNP New York, New York DFR

In BrIef: Titan Pharmaceuticals is selling its remaining future royalties on the sale of Fanapt to Deerfield Management Company for $15.0 mil-lion. Fanapt is an antipsychotic drug that is marketed by Novartis Pharma.

OTC drug portfolio NYSE: Meda AB STO: 11/17/2011 $110,500,000 New Brunswick, New Jersey JNJ Solna, Sweden MEDAA

In BrIef: Johnson & Johnson’s McNeil AB/Cilag GmbH International unit is selling a portfolio of three over-the-counter drugs to Meda AB for $110.5 million, or 3.6x revenue.



deal suMMarIes—teChnOlOgY pharMaCeutICals (Cont.)

addItIOnal transaCtIOns—teChnOlOgY

Sector target acquirer DateBIOTECHNOLOGY Artisan Pharma, Inc. Asahi Kasei Medical Co. Ltd. 11/22/2011 Excaliard Pharmaceuticals, Inc. Pfizer, Inc. 11/22/2011 Lectus Therapeutics pharma assets UCB, S.A. 11/22/2011E-HEALTH CPM HealthGrades 11/2/2011 MobileMD Siemens AG 11/4/2011 HealthConnect Systems Ebix, Inc. 11/16/2011 Poiesis Informatics, Inc. MedQuist Holdings, Inc. 11/23/2011 Health Central Remedy Health Media 11/29/2011 MDdatacor, Inc. Nordian Mutual Insurance Company 11/29/2011 The Breakaway Group Xerox 11/29/2011MEDICAL DEVICES ATEK Medical Group Vention Medical 11/1/2011 ExtraOrtho, Inc. Zimmer Holdings, Inc. 11/10/2011 Manhattan Isotope Technology, LLC Positron Corporation 11/14/2011 VIDAR Systems Corporation 3D Systems Corp. 11/21/2011PHARMACEUTICALS North American rights to Apokyn Britannia Pharmaceuticals Limited 11/2/2011 WellSpring Pharmaceutical Corp. Ancor Capital Partners 11/7/2011 I’rom Pharmaceutical Co. Lupin Ltd. 11/17/2011 MinoGuard XTL Biopharmaceuticals Ltd. 11/30/2011

Graceway Pharmaceuticals, LLC Private Medicis Pharmaceutical Corp. NYSE: 11/18/2011 $455,000,000 Bristol, Tennessee Scottsdale, Arizona MRX

In BrIef: Medicis Pharmaceuticals Corp. is acquiring Graceway Pharmaceuticals in bankruptcy proceedings for $455.0 million. The price to revenue multiple is 3.6x.

Right to Treximet migraine drug NASDAQ: CPPIB Credit Investments Private 11/23/2011 $75,000,000 Chapel Hill, North Carolina POZN Toronto, Ontario

In BrIef: Pozen is selling the U.S. royalties to its Treximet drug for the treatment of migraines in adults to CPPIB Credit Investments for $75.0 million upfront and, subsequently, 20% of any royalties received by the buyer.


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transaCtIOn updates—teChnOlOgY

Sector target acquirer announceD upDateBIOTECH Newron Pharmaceuticals S.p.A. Biotie Therapies Oy 9/27/2011 11/1/2011 Bresso, Italy Turku, Finland

reCent develOpMents: Biotie is terminating plans to acquire Newron since Merck Serono is returning to Newron its lead asset, safinamide, in development for treating Parkinson’s. Biotie is entitled to a break-up fee of €1.5 million from Newron.

(SMA) program to Roche Holdings (VX: ROG) in a deal that is worth up to $490.0 million. Under terms of the deal, ROG will make a $30.0 million upfront payment, and pay as much as $460.0 million on the completion of certain development and commercialization milestones. Double-digit royalties on sales are also stipulated in the deal. The program being licensed to Roche includes three preclinical compounds as well as potential backup com-pounds for treating SMA. The program is to become part of Roche Neuroscience. SMA is a rare genetic disorder and could be eligible for orphan drug status, which would confer certain financial benefits. Roche and PTC first col-laborated in 2009.

e-health

HMS Holdings Corp. (NASDAQ: HMSY) is ac-quiring HealthDataInsights (HDI), a Las Vegas-based technology-enabled provider of claims review services to health plans and government payers, for approximately $400.0 million. Under terms of the deal, HMSY will pay $384.0 million in cash at closing and $16.0 million in the assumption of unvested options. This acquisition, valued at 4.7x 2012 projected revenue, enlarges HMSY’s service offerings and revenue base, and expands its presence into the commercial health plan market. The deal is to be funded in part through a $350.0 million bank term loan and in part through corporate cash. Morgan Stanley and Citigroup Global Markets provided HDI and HMSY, respectively, with financial advice on this deal.

Xerox (NYSE: XRX) is acquiring The Breakaway Group, a Denver-based company, for an undisclosed price. The Breakaway Group offers a cloud-based service to health care professionals to accelerate the adoption of electronic health records, and is to be added to XRX’s ACS unit. This deal gives ACS the target’s PromisePoint technology, which can boost EMR adoption rates up to 70% faster than the industry standard.

Nordian Mutual Insurance Company (NMIC), bet-ter known as Blue Cross Blue Shield of North Dakota, is acquiring MDdatacor for an undisclosed price. Based in

Alpharetta, Georgia, the target is a technology firm that provides insurance companies and health care providers with data-driven solutions. Its web-based system supports quality improvement and pay-for-performance programs, health information and ACO initiatives, among others. The two companies began collaborating in 2008 on a pilot project that ultimately led to NMIC’s MediQHome program. This acquisition positions NMIC to better pre-pare for the reimbursement changes emanating from the Affordable Care Act, allowing the company to identify and incentivize quality of care programs.

MedICal devICes

Bain Capital is acquiring Medtronic’s (NYSE: MDT) Physio-Control unit for $487.0 million in cash. Based in Redmond, Washington, Physio-Control is a provider of emergency medical response technology for use in the intervention and treatment of cardio-respiratory and other medical emergencies. This transaction gives Physio-Control the singular focus it needs to grow as a company, rather than as a unit within a larger medical technology conglomerate fighting for resources. Also, it dovetails with Bain’s 2010 acquisition of Air Medical Group, a provider of emergency medical transport. MDT had been looking to sell the unit since 2006. Nonequity financing for the deal is being provided by Citigroup Global Markets and RBC Capital Markets. Goldman Sachs is providing MDT with financial advice while Citigroup and RBC are providing similar advice to Bain Capital.

Affymetrix (NASDAQ: AFFX) is acquiring eBiosci-ence, a San Diego-based provider of flow cytometry and immunoassay reagents for immunology and oncology research and diagnostics, for $330.0 million. The transac-tion is to be financed with 50% cash on hand and 50% in committed debt. This acquisition, valued at 4.5x revenue, expands AFFX’s molecular diagnostics business and diversifies its sources of revenue to complement its ge-nomics business. The addition of eBioscience creates new commercial opportunities in post-genomic applications of immunology, oncology and diagnostics, among other areas. For the cash part, AFFX has received a fully un-





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derwritten senior secure financing commitment of $190.0 million, led by GE Capital. Houlihan Lokey and Jefferies & Co. provided AFFX and eBioscience, respectively, with financial advice on this deal.

In a deal worth $93.0 million, Landauer (NYSE: LDR) is acquiring IZI Medical Products from private eq-uity firm Riverside Partners. Based in Baltimore, IZI pro-vides medical consumable accessories used in radiology, radiation therapy and image-guided surgery procedures. This acquisition,valued at nearly 5.0x revenue, expands LDR’s radiology offerings and enlarges the company’s addressable market in the U.S. and international markets. The structure of the deal also provides LDR with a future tax benefit with a net present value of about $18.6 mil-lion. Financing for the deal was obtained through LDR’s existing debt, with a new $175.0 million revolving debt facility with a term of five years. Robert W. Baird & Co. provided LDR with financial advice on this deal.

When Smith & Nephew (NYSE: SNN) had an unin-spiring conference call in November, rumors resurfaced that it would become a take-over target fetching as much as $11.0 billion. Apart from helping to buoy the company’s stock, nothing tangible has come of it.

pharMaCeutICals

Medicis Pharmaceutical Corp. (NYSE: MRX) is paying $455.0 million to acquire Graceway Pharma-ceuticals out of bankruptcy. Based in Bristol, Tennessee, Graceway has a product portfolio of prescription products in dermatology, respiratory and women’s health. The portfolio includes products on the market and in develop-ment. The marketed products generate annual revenue of about $125.0 million, so the price to revenue multiple is 3.6x. With this deal, MRX is expanding its dermatology franchise, and adding respiratory and women’s health to its therapeutic areas. Additionally, it gains access to three drug candidates in phase 2 and 3 trials, whose combined peak annual revenue could be as high as $500.0 million.

Salix Pharmaceuticals (NASDAQ: SLXP) is pay-ing $300.0 million in cash to buy Oceana Therapeutics. Based in Edison, New Jersey, Oceana is a provider of gastroenterology and urology therapeutics. The company offers treatments for fecal incontinence and vesicoureteral reflux. This acquisition expands SLXP’s product portfolio and diversifies its sources of revenue. Sales of Oceana’s Solesta treatment for fecal incontinence, it is believed,

could reach over $500.0 million as the number of the elderly continues to increase. Wells Fargo Securities and Jefferies & Co. provided SLXP and Oceana Therapeutics, LLC, respectively, with financial advice on this deal.

Meda AB (STO: MEDAA) continues to enlarge its generic drugs portfolio. In its fifth deal of 2011, it is acquiring three OTC drugs from Johnson & Johnson’s McNeil AB/Cilag GmbH International unit for €82.0 million ($110.0 million). The best known of the three is Treo; together, the three drugs generate annual revenue of about $31.0 million. With this acquisition, valued at 3.6x revenue, Meda becomes the largest company with OTC pharmaceuticals in Sweden.

Switzerland’s Spirig Pharma AG is selling its generic pharma operations to Stada Arzneimittel (DE: STAGn) for €78.0 million ($104.4 million). The portfolio in ques-tion includes 56 prescription and 15 OTC products. This acquisition, valued at 2.3x revenue, extends Stada’s posi-tion in the Swiss generic drugs market.

Canada’s CPPIB Credit Investments, which invests the assets of Canada’s pension plan, is paying $75.0 mil-lion to acquire future U.S. royalty rights to Treximet, a drug for the treatment of migraines in adults. The rights are being sold by Posen (NASDAQ: POZN), which originally licensed the drug from GlaxoSmithKline (NYSE: GSK). Besides the $75.0 million upfront payment, CPPIB will also pay POZN 20% of any royalties it receives. This al-lows the seller to monetize its future royalty streams and to participate to a limited extent in future royalties. Proceeds from the deal now permit POZN to forecast a profit for 2011. Since sales of Treximet account for 80% of POZN’s total revenue, this deal signals a radical change in direc-tion for the company, which might include entering a new therapeutic area or winding down operations.

To concentrate on its medical device and IVD busi-nesses, Suromodics (NASDAQ: SRDX) sold its phar-maceutical assets to Evonik Industries for $30.0 million in cash. This deal gives the buyer ownership of SRDX’s potential dosage technology platforms and services and bioresorbable lactide-glycolide polymers business, allow-ing it to better service its pharmaceutical clients.

Onyx Pharmaceuticals (NASDAQ: ONXX), the developer of the Nexavar kidney-cancer treatment, is ru-mored to be exploring strategic options, including a sale of the company. The company is reviewing its options with Centerview Partners, LLP.


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