Volume 3 – November 2019
Welcome to the November edition of the U.S. Healthcare Market Review, Results Healthcare’s monthly review of U.S. and macroeconomic trends, M&A and valuations in the healthcare sector.
Despite global volatility levels stabilizing and investor confidence picking up, we expect that investors in the healthcare sector will continue to tread with caution for the next quarter, as uncertainty over a global economic slowdown is still present.
Highlights from the U.S. Healthcare Market Review:
- U.S. economic confidence has picked up due to an easing of tension between the U.S. and China following October discussions delaying $112bn worth of tariffs and the possibility of settling on an improved trade deal. In addition, the U.S. labor market continues to stay healthy and resilient, with 128,000 jobs created in October. Q3 earnings for many U.S. public companies were above investor expectations, which resulted in both the S&P 500 and the DJIA hitting historic highs in early November. The most recent Fed cut in late October and a contraction in U.S. trade levels, however, show that uncertainty over U.S.-Chinese progress and a global economic slowdown are still lingering.
- Having been the worst performing sector in September due to the negative sentiment caused by policy positions advanced by some 2020 Democratic presidential candidates (i.e. “Medicare for All”), healthcare stocks bounced back to the top in October. In fact, six out of 10 S&P 500 top performers in October were healthcare companies. This performance is largely due to Q3 2019 earnings exceeding investor expectations, as well as increased investor hopes that new drugs may enter healthcare markets.
- The U.S. Federal Trade Commission’s recent recommended approval of Roche’s (SWX:ROG) $5bn purchase of Spark Therapeutics (NasdaqGS:ONCE) offers hope to investors over the recent clampdown on biopharmaceutical deals that are deemed anti-competitive. This may lead to increased M&A activity in the biopharmaceutical space, as Q3 witnessed some of the lowest number of biopharmaceutical deals and valuations in recent history (36 deals valued at $8.4bn).
- The patient-monitoring space has enjoyed a surge in M&A activity over the last 10 months, culminating with UnitedHealth Group (NYSE:UNH), a global managed healthcare firm, agreeing to acquire Vivify Health, a leading remote patient-monitoring provider, for an undisclosed amount. Large insurance providers and medical software firms will continue to seek profits from the nascent patient-monitoring sector, as it is buoyed by two of the fastest growing technology sectors, the Internet of Things (IoT) and machine learning.
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