What moves the healthcare market: M&A transactions in 2023 and outlook for 2024
Magnus Höfer, Christoph Osterbrink and Dr. Christopher Klein
Once again this year, we would like to provide a selective review of last year’s deals and an outlook on the most important influencing factors.
But first a look at deal activity: The number of publicly disclosed M&A transactions in the healthcare sector worldwide fell by almost 20% from 2022 to 2023 to around 2,500. The same downward trend was reflected in DACH transactions (deals with at least one party domiciled in the DACH region). We were able to identify and analyze 135 M&A transactions in the past year. Incidentally, the cumulative (publicly known) volume of all DACH-related healthcare transactions in 2023 was also significantly lower than in the previous year, provided that the acquisition of Vifor by CSL Behring, which was completed in 2022 (closing in August 2022), is included accordingly.
Pharma & Biotech
Internationally, the acquisition of Seagen, a company specializing in antibody drug conjugates, by BioNTech’s partner Pfizer for USD 43 bn was the highlight of the year (announced in March, closed in December 2023), while there was only one European player in the top 10 transactions, namely Roche with the acquisition of Telavant for USD 7.1 bn with a view to its antibodies in development against inflammatory bowel diseases. In general, the main pressure remains on big pharma and biotech to replenish their product portfolios, which have been weakened by patent expiries, which is the motivation behind many transactions in the DACH region.
To support its oncology strategy, Boehringer Ingelheim acquired T3 Pharmaceuticals from Allschwill/Basel for CHF 450 million in November 2023. The company’s technology platform is based on live bacteria related to the plague pathogen, which can deliver any proteins such as immunomodulators into cancer cells. This transaction joins a series of previous acquisitions, such as that of ViraTherapeutics from Rum/Innsbruck in 2018 (therapy with oncolytic vesicular stomatitis viruses), that of NBE-Therapeutics from Basel in 2020 (antibody-drug conjugates) and that of Abexxa Biologics in 2021 (antibodies to intracellular antigens), i.e. all in the field of immunotherapies against cancer. Interestingly, all four target companies had previously been pre-selected as part of the Boehringer Ingelheim Venture Fund portfolio and successfully supported over several years.
Speaking of cancer antibodies, the takeover of Synimmun from Tübingen by Veraxa Biotech from Heidelberg in December 2023 should also be mentioned here, while the attractiveness of the cell and gene therapy area is also attested to by the takeover of Zurich-based DiNAMIQS by CMO player Siegfried from Zofingen in May 2023.
VectivBio, domiciled in Basel, was created in 2020 as a spin-out from Therachon with EUR 31 million in seed capital. Its main asset is apraglutide, a GLP2 analog that is being clinically tested as an alternative to teduglutide for the treatment of inflammatory bowel disease. Similar to the GLP1 analogs used to treat diabetes and obesity, GLP2 analogs are peptides that are the focus of many development projects. Gastrointestinal specialist Ironwood Pharmaceuticals acquired VectivBio, which has been listed on the stock exchange since 2021, in June 2023 (completion of the takeover bid) for over CHF 1 billion.
Almost unnoticed, the Indian ophthalmology company Sentiss Pharma took over Akorn AG in Hettlingen/Winterthur in June 2023 as a result of the insolvency of the US parent company Akorn Inc. Together with the decline of Lannett, this is a reminder of the vulnerability of the generic pharmaceutical industry. Despite high price pressure, supply bottlenecks, the well-known dependence on non-European suppliers and loud calls for help from Berlin and Brussels during the coronavirus pandemic, unfortunately little has changed (politically) to date.
After initial hype with 180 companies in Germany alone, the cannabis market is currently consolidating noticeably. Munich-based SymBiotic, for example, followed on from its acquisitions in 2021 and, in line with its buy & build strategy, acquired CannaCare from Hamburg in August 2023 and Bushdoctor from Brunn am Gebirge in December 2023, the latter for EUR 18 million. SymBiotic currently has a market capitalization of just under EUR 50 million. In 2022, Dermapharm from Grünwald/Munich acquired the Cannabinoid Compound Company from Neumarkt from Canopy Growth for EUR 80 million; Canopy acquired the latter from Bionorica in 2019, i.e. during the hype period, for almost three times the amount (EUR 226 million).
Speaking of Dermapharm: in June 2023, the company acquired significant shares in the pharmaceutical factory Montavit from Absam/Innsbruck. The Bavarian manufacturer of branded pharmaceuticals is thus not only strengthening its urology portfolio, but also accelerating its internationalization. After the family-owned company Montavit had recently slipped into insolvency with liabilities amounting to EUR 45 million, the acquisition secured its continued existence.
More focus for the seller – an attractive new segment for the buyer: With the acquisition of the peanut allergy business Palforzia in September 2023, Stallergenes Greer from Baar/Zug succeeded in entering the market for the treatment of food allergies and thus broadening its portfolio of allergy immunotherapies. On the other hand, the seller Nestlé from Vevey can now concentrate all the more on its core food business.
The subsidiary of French adhesives specialist Adhex Pharma completed the acquisition of Tesa Labtech in Langenfeld/Düsseldorf and Hamburg in 2023. Adhex Pharma is a developer and manufacturer of transdermal patches and transmucosal films. Based on the old R&D unit of Fournier , Adhex Pharma has already expanded through the earlier acquisition of the transdermal division of Arzneimittelwerke Warngau/Munich and competes with Lohmann Therapie-Systeme from Andernach am Rhein, Germany, which is owned by dievini Hopp (previously owned by Novartis).
The following two transactions can also be subsumed under the topic of adhesion in a broader sense: In May 2023, the French implant specialist Cousin Surgery acquired PlantTec Medical from Lüneburg, whose main product 4DryField is based on potato starch and is used for adhesion prophylaxis and hemostasis. The medical product mediNIK, on the other hand, adheres to kidney stones, encloses them in a two-component gel and enables them to be removed endoscopically. The developer and marketer Purenum was acquired by the Klosterfrau subsidiary Farco-Pharma in June 2023 in order to expand its urology portfolio. Incidentally, this transaction also represented an exit for High-Tech Gründerfonds (HTGF), which was also able to place Adivo from Munich in the hands of Zoetis, the world’s largest animal health company, and Lino Biotech from Adliswil/Zurich in the hands of Miltenyi from Bergisch-Gladbach in 2023.
The local start-up scene, especially biotechnology, continues to suffer from a clogged exit channel and difficult financing conditions. This made the EUR 255 million private financing round of ITM Isotope Technologies Munich from Garching/Munich with renowned PE investors and the Athos Family Office pipeline and capacities for the production of radionuclides and radiopharmaceuticals. In addition, the increasing attractiveness of radiopharmaceuticals is evidenced by recent start-up activities(Aiceum in Berlin, Pentixpharm in Würzburg, ArtBio in Basel-Oslo) and the acquisition of RayzeBio by Bristol Myers Squibb in December 2023 for USD 4.1 bn.
Suppliers & Service Providers
The sale of PharmaLex to AmerisourceBergen for EUR 1.3 billion, which was completed in 2023, was noteworthy. PE investor Auctus had acquired Yes Pharma and PharmaLex in 2014-15, at that time with 400 employees and cumulative sales of EUR 35 million. Fueled by a consistent buy & build strategy in Germany, then Europe and most recently overseas (almost 40 acquisitions!), the service provider specializing in the approval of pharmaceuticals and medical devices has grown to over 3,000 employees and sales of over EUR 700 million, making it a global player (within AmerisourceBergen).
Another serial acquirer is currently Biosynth, which supplies the life science industry as a global player with KKR as a strong financial investor behind it. The acquisition of Eucodis Bioscience from Vienna in 2022 was followed by conjugate developer Celares from Buch/Berlin in July 2023 and specialty chemicals manufacturer VIO Chemical from Zurich in December 2023. From the perspective of Eucodis, Celares and VIO, these were certainly well-timed exits.
Consolidation also progressed in the area of contract research organizations (CROs), for example with acquisitions from abroad: target companies were Alcidis from Giessen in January, CRI from Munich in July, Dr. Kottmann from Hamm in August and P.R.I.S.M.A. from Langenfeld in October 2023.
As part of a partnership, the majority stake in Zurich-based Biognosys (ETH spin-off from 2008) went to global spectroscopy specialist Bruker in January 2023. The fresh capital from the US company will enable the establishment of a laboratory in the USA and thus geographical expansion from a Swiss perspective, as well as unlocking the synergy potential between Bruker’s high-throughput proteomics methods and Biognosys’ Spectronaut software for proteomics and epiproteomics.
The Melsungen-based company Faubel is a supplier of labels for pharmaceutical products, in particular with drug safety solutions for manufacturers of injectables such as the Integrated Syringe Label. Faubel was sold to the Canadian packaging group CCL Industries for CAD 190 million in July 2023. This, at first glance, unexpected transaction makes perfect sense for a sector unfamiliar buyer keen to diversify into the pharmaceutical segment and teaches us to think outside the box when drawing up a longlist of potential buyers.
Faubel’s potential customer is Baxter Biopharma Solutions for infusion therapy products with sites in Halle-Künsebeck/Bielefeld and Bloomington (USA). Advent and Warburg Pincus took over this company in September 2023 as a CDMO spin-out from Baxter. The transaction was one of the largest in the past year with a volume of USD 4.3 billion. The current workforce of around 1,700 employees will generate sales of USD 600 million, resulting in a sales multiple of 7.
Medtech & Digital Health
The Swedish Asker Healthcare Group continued to be very active in terms of acquisitions in 2023, with increased activity in the DACH region. Asker has been consistently pursuing the goal of building a broadly diversified and entrepreneurially managed European healthcare group in the areas of medical consumables, medical devices and services for several years now. To this end, Asker acquired the medical technology service provider CRS medical and, via the recently acquired Rudolf Heintel GmbH in Austria, Andre Surgical and Eumedics medical.
Swiss dentistry manufacturer Straumann Holding was not idle in 2023 either: The latter first acquired GalvoSurge Dental, also based in Switzerland, for CHF 32 million, then a minority stake in the Chinese startup Lianyao Medical Equipment , which focuses on digital imaging solutions.
Henke-Sass Wolf GmbH from Tuttlingen acquired the long-standing supplier and development partner Zünd Präzisionsoptik – including its Zünd subsidiary Optivac – from the Swiss multi-family office Verium.
Christian Diener GmbH, also based in Tuttlingen, took over Koscher & Würtz, which is based in neighboring Spaichingen. The Dutch company Gilde Healthcare is thus continuing the strategy it began in 2022 of building a leading international group of specialist contract manufacturers of precision surgical instruments, particularly in the fields of orthopaedic and spinal surgery, endoscopy and neurosurgery.
Meanwhile, the private equity company IK Partners sold its shares in the Klingel Medical Group from Pforzheim to the Swedish medical technology company Elos Medtech. IK Partners acquired Klingel in 2018 and has since tripled its turnover by expanding its production technologies and successfully acquiring Gehring Cut, Bächler Feintech, Puracon and Ruetschi.
Maxburg Capital Partners acquired a majority stake in the Germering/Munich-based manufacturer of medical products based on laser and light technology as part of the upcoming succession of MLase. In partnership with the management, Maxburg plans to expand the product portfolio and further promote growth.
Last year, financial investor Cinven announced its intention to acquire the remaining 57% of SYNLAB for EUR 10 per share, which would result in an implied equity value of around EUR 2.2 billion (or 8.8 x EBIT) for the Munich-based laboratory services provider.
Mindray Medical Netherlands, an indirect subsidiary of Shenzhen-listed Mindray Bio-Medical Electronics, acquired 75% of the shares in DiaSys Diagnostic Systems from Holzheim/Limburg from the founding family Gorka for EUR 115 million after the transaction received approval under foreign trade law. The implied enterprise value thus amounts to EUR 153 million, with sales of EUR 72.8 million and a net profit of EUR 4.7 million. As part of the transaction, DiaSys is spinning off its subsidiaries DiaSys Technologies France and peS, as these two mainly develop devices for in-vitro diagnostics and their business is not very complementary to that of the Group.
CompuGroup Med acquired 51% of the shares in m.Doc, which offers a digital healthcare platform for patient communication and care. m.Doc was founded in 2016 and employs around 110 people at its sites in Cologne and Lisbon. In addition to founder Kulin, who is leaving the company, various private investors, including former Ratiopharm CEO Professor Dr. Gerald Huber and Thieme-Verlag, have also been involved to date,
Munich-based NOVENTI Health has sold its Berlin-based subsidiary NOVENTIcare, a specialized provider of software solutions for the healthcare industry, to the Canadian Volaris Group. With this transaction, the NOVENTI Group intends to focus more strongly on its core business, which comprises the development and sale of software solutions for inventory management, prescription billing and practice management.
Pohl-Boskamp from Hohenlockstedt, known primarily for its ENT medicines, took over Duisburg-based MyNoise in May 2023. The latter had previously licensed out its tinnitus app Kalmeda, which is based on cognitive behavioral therapy, to the former, which was rewarded with a successful market entry including regular reimbursement by statutory health insurance companies in 2020. Another example of the M&A road to the digital world is the acquisition of InstaDeep by Mainz-based BioNTech for around EUR 500 million, which was completed in July 2023. The takeover of the London-based company with its almost 300 employees is intended to strengthen BioNTech’s position in AI-based drug development.
Patient & Elderly Care
Round Hill Capital from the UK and Auxenia from Berlin acquired the property of Pflege-Residenz-Beuren for EUR 32 million in May 2023. The operating company was sold to cosiq, a Berlin-based company specializing in residential and specialist care for the elderly, on a 20-year lease.
In July 2023, Berlin-based TSC Real Estate, a specialist in senior and healthcare real estate, acquired the Klinik an der Weißenburg in Uhlstädt/Jena – the only specialist hospital for rheumatology in Thuringia. The operator is the GmbH of the same name, which belongs to the Australian group Sonic Healthcare, which offers diagnostic services in addition to hospitals and has also made a name for itself in terms of consolidation in the laboratory services sector.
Sonic Healthcare took over Synlab Suisse, based in Lucerne, from the Munich-based Synlab Group, which had come under pressure, for CHF 150 million in July 2023, followed by MVZ Medizinische Laboratorien Düsseldorf for EUR 180 million and finally Diagnosticum from Neukirchen/Zwickau for EUR 190 million in December.
On the other hand, private hospital groups parted ways with individual hospitals. In the summer of 2023, for example, two clinics of the Osnabrück-based Paracelsus Group changed hands: the one in Hemer/Iserlohn went to Diakonie (now under the name DGD Stadtklinik Hemer) and the Paracelsus-Klinik Reichenbach to KL Real Estate for the purpose of converting the historic Vogtland hospital into assisted senior living. In other cases, opportunities arose from insolvencies, such as the takeover of the Imland clinics in Rendsburg and Eckernförde in August 2023 by Schön-Kliniken from Munich. In any case, the local hospital landscape will continue to thin out and consolidate, as Denmark and other European neighbors are already demonstrating.
An important driver of this trend is the outpatientization of surgical services that traditionally take place in hospitals. One example is the sale in December 2023 of a majority stake in the Narconova practice group from Rhede/Bocholt, which is one of the leading providers of anaesthesiology care and the operation of outpatient surgery centers in North Rhine-Westphalia. As part of an auction process, the Ortivity practice group from Munich, which specializes in outpatient and surgical orthopaedics, was awarded the contract because both the bid parameters and the future strategy convinced the seller.
Outlook for 2024
The year 2024 promises exciting developments and challenges in the field of healthcare M&A. Many deals and succession issues have piled up over the past three years and are now pressing for implementation. We also see many companies, especially pharmaceutical companies, and investors such as private equity and family offices with well-filled war chests. At times of higher interest rates, strategic buyers with an affinity for equity (e.g. SMEs) in particular are enjoying their advantage over financial investors, most of whom also make use of significant debt financing (e.g. private equity). In the pharmaceuticals and biotechnology sector, the oncology, diabetes and weight loss, rare diseases, cell and gene therapies and precision medicine segments remain attractive topics.
In the medical technology sector, we expect more deals in 2024 that are aimed at growth, access to technology such as artificial intelligence (AI), innovation and market leadership. Scope deals will account for the lion’s share and dominate over scale deals. In addition, companies will continue to focus on divestments in order to optimize their portfolios. While some companies have already invested in America and/or Asia, many others will wait and see while they discuss what level of investment they should make there and how they could establish a production site.
We expect transaction activity in the hospitals and care homes segment to remain subdued, although the hospital reform introduced by German Health Minister Lauterbach could spark new momentum.
Finally, a general increase in deal activity in 2024 depends on whether buyers and sellers are able to bring their diverging valuations closer together, the geopolitical situation (war of aggression in Ukraine, conflict in Gaza and the Middle East, political developments in the USA, etc.) does not deteriorate further and the global economy (stock market performance) remains crisis-proof and stable. In our opinion, the world will not be completely immune to a financial crisis in 2024.
Many – statistically more than half of all – M&A transactions do not deliver on their value proposition: The best antidote to this is excellent market knowledge and networking, a clearly defined mission and vision as well as a regularly reviewed strategy including an M&A roadmap and operational excellence along the M&A process. In addition, (the compatibility of) corporate culture(s), knowledge and experience in the application of the entire deal-making toolbox (besides M&A also joint ventures, partnerships, licenses, etc.) as well as a well-planned and executed (post-merger) integration are essential and increasingly critical success parameters.
Entrepreneurial vision, a strategic approach, solid deal expertise, a broad network and an affinity for technology – this is the DNA of Steinbeis M&A.
