Life Sciences: What are we seeing in the market?

29 June 2020

Life Sciences businesses have been commanding lots of column inches of late, and deservedly so as we look to tame COVID-19. Behind those headlines, there is a massive global industry on which we all rely on. With market size of ~$1tn, over 20k prescription drugs in circulation, and around 40 new/novel drugs approved every year by the FDA. The evidence of the last 3 months is that the sector is proving itself to be resilient and performances have been positive. Importantly for Private Equity, deals are still getting done. In the UK over the last 2 months we have seen 5 deals of interest to PE complete:

  • Buy-out of Fishawack by Bridgepoint
  • Public to Private of Huntsworth led by CD&R
  • Acquisition of Rosemont Pharmaceuticals by Inflexion
  • Sale of Veriton Pharma to SERB
  • Waterland investment in IMC (Integrated Medhealth Communication)

Three ‘medical communications’ businesses and two ‘spec pharma’, and the evidence is that the multiples are holding up. This is further supported by the performances of quoted companies in the sector. Our composite EV/EBITDA index for Contract Research Organisations (CRO) collapsed from a pre-lockdown multiple of 16.8x on 19 February to 10.7x on 18 March but has subsequently rebounded to 16.4x as of 23 June. This improvement in CRO multiples since the low point in mid-March (53%) has outperformed the wider S&P 500 index by 24% points over the same period.

So, on the face of things the sector is looking positive, however, it is right to acknowledge that each of these deals was substantially negotiated pre lockdown.

Beyond these, there is a whole suite of, especially pharma services, deals stacking up for Q4 launches so the prospect of further activity in the sector is looking positive. If you are seeking growth and resilience, my advice would be to focus on:

  • Essential medicines – obvious, but focus on supply chains
  • Pharma services that are delivered remotely – there is still a lot of positive activity and it does not just have to be COVID-19 related
  • CROs exposed to oncology – According to some commentary, over 50% of studies have been postponed; oncology and COVID-19 studies (of which ~22k and 1.4k respectively have continued at last count)
  • Technology that enables remote working/studies – there will inevitably be a move to these, in any event, the movement has just been promoted
  • Tele-health – for very similar reasons


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