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Health Care M&ATHE

MONTHLY

Volume 16, Issue 1 January 2011

InsIde the health Care M&a Market

While the health care industry was the second most active sector in the overall 2010

M&A market, following first place energy and power, the mainstream media did its best to hide this industry and its robust activity from the general public. This may be due in part to the fact that health care stocks, particularly those of drug companies, posted very modest gains for 2010, compared with go-go industries such as technology. Still, with headlines throughout the year linking the health of the economic recovery to this merger or that acqui-sition, we are puzzled why the health care industry should figure so dimly in

Last month we observed that the period between Thanksgiving and New Years rarely sees much

in the way of new M&A activity, with most of the news revolving around closing deals that were previously announced. So, December’s robust deal making caught us by surprise. December accounted for one-third of the fourth quarter’s deal volume, but nearly 60% of its dollar volume. As if to emphasize the 24/7/365 nature of the market, the last day of 2010 ended with a billion-dollar deal, one of 13 announced during the quarter.

Year Posts $206.5 Billion In Deals 913 Deals Reported In 2010 Health Care M&A Market

Fourth Quarter Ends Strong223 Deals Announced Worth $60.4 Billion

Based on data collected so far, a total of 223 deals were announced during the fourth quarter of 2010. The nine health care services sectors produced a combined total of 118 deals while the four corresponding technology sectors produced just 105, a reversal of the usual results between the services and technology segments. The top three sectors combined—an unusual trio of Medical Devices (36), Physician Medical Groups (26) and Long-Term Care (25)—accounted for 40% of the quarter’s deal making. One

the general business media. We hope to redress that imbalance here.

Based on preliminary results, the 2010 merger and acquisition market for the health care industry saw the an-nouncement of 913 transactions. While this figure represents a 3% decrease from the 945 deals announced in 2009, it remains well within the range of an-nual deal volume established over the past decade, as noted in the table on page 20. The health care technology segment posted 478 deals, or 52% of the year’s total, while the correspond-ing services segment accounted for the

Year Posts $206.5 BillionIn Deals

A total of 913 deals were an-nounced in the health care merger and acquisition market during 2010. Their combined total value is $206.5 billion, making 2010 the fifth most-active year in the past decade. Read here to see which industry sectors captured the greatest investor interest.

...Fourth Quarter Ends Strong

Deal making proceeded at a strong pace in the health care M&A market up through the very end of the year. The fourth quarter of 2010 generated a total of 223 deals in 13 sectors of the health care industry. Their combined total value was $60.4 billion. Page 1

...In The Departments

Services

Health Care Services Page 3Deal Summaries Page 5Additional Transactions Page 7

Financing

Venture Capital Page 11Other Financings Page 12

Technology

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

INSIDE THIS ISSUE

(continued on page 2)



January 2011The Health Care M&A Monthly

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

Published Monthly by: Irving Levin Associates, Inc.

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Four Quarterly Supplements And Special Database Access)© Copyright 2011 Irving Levin Associates, Inc.

All rights reserved. Reproduction or quotation in wholeor part without permission is forbidden.

This publication is not a complete analysis of every material fact regarding any company, industry or security. Opinions expressed are subject to change without notice. Statements of fact have been obtained from sources considered reliable but no representation is made as to their completeness or accuracy. This Firm or persons associated with it may at any time be long or short any securities mentioned in the publication and may from time to time sell or buy such securities. This Firm or one of its affiliates may from time to time perform investment banking or other services for, or solicit investment banking or other business from, any company mentioned in the publication. POSTMASTER: Please send address changes to The Health Care M&A Monthly, 268-1/2 Main Avenue, Norwalk, CT 06851.

Year Posts $206.5 Billion In Deals

remaining 435 deals (48%). Among individual sectors, Medical Devices had the highest tally, 165 deals, repre-senting 18% of the industry’s deal volume, followed by Pharmaceuticals with 125 deals (14%), Biotechnology with 114 (12%) and Long-Term Care with 97 (11%). The most meager results appear—not unexpectedly—in the services segment with Managed Care’s 13 deals, Reha-bilitation’s 12 and Behavioral Health’s seven.

According to prices revealed to date, these 913 deals are worth a combined total of $206.5 billion. At the annual level, the usual division between technology and services deals reasserted itself. The 478 technology deals are worth $142.4 billion combined, or 69% of the total, with the 435 services deals worth $64.1 billion (31%). The three larg-

est sectors in terms of dollar volume are Biotechnology with $56.0 billion, Medical Devices with $41.5 billion and Pharmaceuticals with $38.1 billion. All the services sectors recorded at least $1.0 billion in dollar volume, except for Physician Medical Groups and Rehabilitation. The facility-based sectors fared quite well, with Hospitals posting $17.4 billion and Long-Term Care posting $11.7 billion for the year. The chart opposite presents the per-centage contribution of each sector to the dollar volume of the overall health care M&A market in 2010, with the three lowest-volume sectors being aggregated.

The year 2010 recorded 43 billion-dollar deals, worth a combined total of $134.9 billion, or 68% of the total amount. Forty deals were announced with price tags in the range of $500.0 million up to $1.0 billion; their combined value is $27.8 billion. In the range of $100.0 million up to $500.0 million, 141 deals were announced worth a combined total of $35.5 billion. This pattern suggests that deal makers still favor the middle market; indeed, it may be this focus on the middle market rather than the splashy mega-deals that keeps the health care M&A market out of the mainstream media and general public.

According to our findings, then, 2010 ranks fifth in M&A activity for the past 10 years as measured by dollar volume (see the chart on the back page). We should note that two of the three biggest deals announced in 2010 remain provisional as we go to press: Sanofi-Aventis’ (NYSE: SNY) $18.5 billion bid for Genzyme Corp. (NASDAQ: GENZ) and Community Health System’s (NYSE: CYH) unsolicited offer to buy Tenet Healthcare Corp. (NYSE: THC) for $7.3 billion. While we suspect both have a good chance of being completed, even if they were removed from the total dollar amount, 2010 would still keep its fifth place rank.

Given the Great Recession and the attendant Credit Crunch, a fifth-place ranking actually strikes us as a good result for the 2010 health care M&A market. That it is not more generally perceived as such owes far more to the gloomy expectations and relentless, bearish sentiments of media pundits than to anything intrinsic to the health care industry or its activity during the year. We have never found Chicken Little to be a sound advisor for investors or business people, and we can only hope his influence will fade rapidly with the New Year. Based on business fundamentals, we see continuing and robust activity in health care M&A in 2011. The only major threat to it would be unfocused government efforts, from either side of the aisle, to “manage” the economy and business.

(continued from page 1)


January 2011 The Health Care M&A Monthly

Where The Health Care M&A Dollars Went In 2010

Behavioral1.7%

Managed Care2.0%

Laboratories1.1%

Biotechnology27.1%

Medical Devices20.1%

Pharmaceuticals18.4%

e-Health3.3%

Long-Term Care5.7%

Hospitals8.4%

Other Services11.1%

Home, PMG,Rehab

1%

Health Care Services

hoMe health Care

Recent M&A activity in the Home Health industry reflected private equity’s continuing participation in the sector both as seller and as buyer. New York-based Palladium Equity Partners recently acquired Jordan Healthcare Holdings, which provides home health care services throughout Texas from 28 locations. This deal gives Jordan Healthcare the resources to expand as a re-gional provider of home health care services with a new focus on skilled nursing services. Lazard Middle Market acted as financial advisor to Jordan in connection with the sale. CIT Group Inc., Ally Commercial Finance and F&M Bank provided senior financing facilities and Pros-pect Capital Management, LLC provided the mezzanine financing in this deal. No price was revealed.

On the sell side, Friedman Fleischer & Lowe, a PEG based in San Francisco, is selling Guardian Home Care, another Texas-based provided of home health and hospice services. The company operates 45 offices in Georgia, Tennessee and Texas. The seller bought the business in 2005, and is now cashing out on its investment. The buyer is AccentCare, a provider of home care services based in Irvine, California. This deal expands its presence in the South. With the help of Cain Brothers, AccentCare was recently acquired by Oak Hill Capital Partners, a PEG.

Sun Healthcare Group (NASDAQ: SUNH), through its SolAmor subsidiary, recently bought Coun-tryside Hospice Care of Anniston, Alabama. Countryside is a Medicare-certified company that provides hospice and palliative care services to a census of 200 patients in Alabama and Georgia; it is expected to generate revenue of $11.0 million for 2011. This acquisition expands SUNH’s hospice services in markets where it already operates skilled nursing facilities.

hospItals

In one of the more exciting and controversial an-nouncements of the year, Community Health Systems (NYSE: CYH) made an unsolicited offer to buy Tenet Healthcare Corp. (NYSE: THC) for $7.33 billion. If suc-cessful, this would create a hospital management company with 176 hospitals and $22.0 billion in revenue. CYH of-fered to pay $5.00 in cash and $1.00 in shares of its stock for each share of THC common stock. Adding THC’s $4.0 billion in debt jacked the price up to $7.3 billion. The deal offers THC shareholders a 40% premium to the stock’s prior-day price, yet THC’s board demurred, variously hinting that it wasn’t really up for sale or the price wasn’t high enough for its intrinsic value.

We understand, to an extent, THC’s attitude toward this offer. The price to revenue multiple is 0.8x and the corresponding price to EBITDA multiple is 7.4x, both figures at which a buyer could reasonably expect to get a well-run stand-alone hospital. Thus, the offer appears not



Sector Deal Volume Combined PriceHospitals 9 $ 7,432,045,000Long-Term Care 12 6,273,436,000Labs, MRI & Dialysis 3 8,000,000Rehabilitation 2 3,990,000Physician Medical Groups 9 —Home Health 3 —Behavioral Health 0 —Managed Care 0 —Other Services 10 2,594,900,000Total 48 $ 16,312,371,000

The Month in M&A at a Glance:Health Care Services, December 2010

to factor in a change-of-control premium, which THC’s management and board might well take as a jibe against their efforts to turn the company around.

This would be a strong strategic move for CYH, and bring it much closer in size to number one HCA. CYH’s purchase and integration of Triad Hospitals shows that management can pull off a deal of this size and complex-ity while still delivering for shareholders. By comparison, THC’s motivation for remaining an independent company strikes us as shaky. The company has been a net seller of hospitals over the past five years, as it slowly brings its finances into shape. But its plans for growing the business have been somewhat confused. Our readers will recall an illustrative episode from last year in which THC proposed buying Healthscope, Australia’s largest operator of hos-pitals and pathology services. Investors responded to this strategic non sequitur by pummeling THC’s stock, and while the company quickly retreated, that move under-scored a certain aimlessness in THC’s business plan. We imagine this deal can ultimately get done. CYH may have to sweeten the deal a tad, but THC’s $4.0 billion debt load tends to cap the upside.

In a sale-leaseback transaction, Select Medical Cor-poration is selling a portfolio of four long-term, acute

care hospitals (LTACs) to Healthcare Trust of America, a privately held REIT, for $102,045,000. With a combined total of 209 beds, these LTACs are located in Augusta, Georgia; Carrollton, Texas; Orlando, Florida; and Talla-hassee, Florida. All of the portfolio leases are structured as triple net leases and have an average remaining lease term of 11.5 years. The average age of the portfolio is only four years.




deal suMMarIes—servICes hospItals

TargET LISTINg acQUIrEr LISTINg DaTE PrIcETenet Healthcare Corp. NYSE: Community Health Systems, Inc. NYSE: 12/9/2010 $7,330,000,000 Dallas, Texas THC Franklin, Tennessee CYH

In BrIef: Community Health Systems is launching a $7.33 billion bid to acquire Tenet Healthcare Corp. and its 50 acute care hospitals.

Multi-state portfolio Private Healthcare Trust of America, Inc. Private 12/20/2010 $102,045,000 Denton, Texas Scottsdale, Arizona

In BrIef: Select Medical Corporation is selling a portfolio of four long-term, acute care hospitals to Healthcare Trust for $102,045,000. They are located in Augusta, Georgia; Carrollton, Texas; Orlando, Florida; and Tallahassee, Florida.

TargET LISTINg acQUIrEr LISTINg DaTE PrIcEOn Call Imaging, LLC Private RadNet, Inc. NASDAQ: 12/22/2010 $8,000,000 Poughkeepise, New York Los Angeles, California RDNT

In BrIef: RadNet is paying $8.0 million in upfront and contingent payments to acquire On Call Imaging, a provider of teleradiology interpreta-tion services to radiology groups, hospitals and imaging centers.

deal suMMarIes—servICes laBoratorIes, MrI & dIalysIs

deal suMMarIes—servICes long-terM Care

TargET LISTINg acQUIrEr LISTINg DaTE PrIcEBroadview Health Center Private Greystone Healthcare Management Private 12/1/2010 $4,800,000 Columbus, Ohio Tampa, Florida

In BrIef: Greystone Healthcare Management is paying $4.8 million, or 0.9x revenue, for Broadview Health Center, a 112-bed skilled nursing facility. This acquisition gives the buyer its second facility in Ohio.

New London Health Center Private Regional operator Private 12/8/2010 $12,000,000 Snellville, Georgia

In BrIef: A local owner is selling New London Health Center, a 144-bed skilled nursing facility, to a regional operator for $12.0 million. The price to revenue multiple is 1.4x.

HCR ManorCare real estate assets Private HCP, Inc. NYSE: 12/14/2010 $6,100,000,000 Toledo, Ohio Long Beach, California HCP

In BrIef: In a sale-leaseback transaction, HCR ManorCare is selling its real estate assets to HCP, a real estate investment trust, for $6.1 billion. The assets include 338 post-acute, skilled nursing and assisted living facilities located in 30 states.

Skilled nursing facility Private Fundamental Healthcare, Inc. Private 12/15/2010 $4,750,000 Houston, Texas

In BrIef: The Rosenbaum Trust is selling a 112-bed skilled nursing facility in Houston to Fundamental Healthcare for $4.75 million. The price to revenue multiple for this transaction is 0.7x.

Three assisted living facilities Private Premier Senior Living, LLC Private 12/15/2010 $24,000,000 Bucyrus, Ohio New York, New York

In BrIef: A local operator is selling three assisted living facilities in Brian, Bucyrus and Upper Sandusky, Ohio to Premier Senior Living for $24 million. They have a combined total of 163 units.

Carriage Court of Hilliard Private Servant Healthcare Investments Private 12/22/2010 $17,500,000 Hilliard, Ohio Orlando, Florida

In BrIef: The Wilkinson Group is selling Carriage Court of Hilliard, a 102-unit assisted living facility, to Servant Healthcare Investments, LLC for $17.5 million, or 3.9x revenue.



TargET LISTINg acQUIrEr LISTINg DaTE PrIcESix-clinic physical therapy group Private U. S. Physical Therapy, Inc. NASDAQ: 12/22/2010 $3,990,000 Mid-Atlantic Houston, Texas USPH

In BrIef: U.S. Physical Therapy is paying $3.99 million for a 70% interest in a six-clinic physical therapy group located in the Mid-Atlantic region. The price paid in this transaction implies a purchase price of $5.7 million for a 100% interest in the target business.

deal suMMarIes—servICes long-terM Care (cont.)

TargET LISTINg acQUIrEr LISTINg DaTE PrIcEChula Vista Care Center Private California-based operator Private 12/31/2010 $5,800,000 Mesa, Arizona California

In BrIef: A California-based operator is paying $5.8 million to buy Chula Vista Care Center, a 106-bed skilled nursing facility.

Four assisted living facilities Private Veritas Incare Private 12/31/2010 $17,000,000 Milton, Florida Olive Branch, Mississippi

In BrIef: Alliance Assisted Living is selling four assisted living facilities in Florida with a total of 156 units to Veritas Incare for $17.0 million. The price to revenue multiple for this transaction is 3.3x.

Ramsey Village Private Not disclosed Private 12/31/2010 $11,250,000 Des Moines, Iowa California

In BrIef: A national operator is selling Ramsey Village, a 139-unit CCRC, to an undisclosed operator for $11.25 million.

Six Texas skilled nursing faculties Private Publicly traded REIT 12/31/2010 $68,500,000 Beaumont, Texas

In BrIef: Centex Management Company is selling six skilled nursing facilities with 894 beds to a publicly traded REIT for $68.5 million.

deal suMMarIes—servICes rehaBIlItatIon

deal suMMarIes—servICes other

TargET LISTINg acQUIrEr LISTINg DaTE PrIcEAmerican Surgical Holdings, Inc. OTCBB: Great Point Partners I LP Private 12/20/2010 $30,400,000 Houston, Texas ASRG Greenwich, Connecticut

In BrIef: In a transaction that is approximately worth $30.4 million, Great Point Partners is acquiring American Surgical, a company that pro-vides professional surgical assistant services to patients, surgeons and health care institutions.

Martek Biosciences Corporation NASDAQ: Royal DSM, N.V. Euronext: 12/21/2010 $1,087,000,000 Columbia, Maryland MATK Heerlen, Netherlands DSM

In BrIef: In a deal valued at 2.4x revenue, Royal DSM is paying nearly $1.1 billion for Martek Biosciences, a company that develops and com-mercializes nutritional products from microbial sources.

ReSearch Pharmaceutical Services Private Warburg Pincus, LLC Private 12/28/2010 $227,500,000 Fort Washington, Pennsylvania New York, New York

In BrIef: Warburg Pincus is paying $6.10 per share, for a total of $227.5 million, to acquire ReSearch Pharmaceutical, a company that is in-volved in the contract research organization industry.

Medicare Part D business NYSE: CVS Caremark Corporation NYSE: 12/31/2010 $1,250,000,000 Rye Brook, New York UAM Woonsocket, Rhode Island CVS

In BrIef: Universal American Corporation is selling its Medicare Part D prescription drug services unit to CVS Caremark for $1.25 billion. This acquisition more than doubles the size of CVS Caremark’s Part D enrollment to 3.1 million members.



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.

addItIonal transaCtIons—servICes

Sector target acquirer DateHOME HEALTH Guardian Home Care AccentCare, Inc. 12/23/2010 Jordan Healthcare Holdings Palladium Equity Partners 12/27/2010 Countryside Hospice Care, Inc. Sun Healthcare Group, Inc. 12/29/2010HOSPITALS Bucyrus Community Hospital Avita Health System 12/9/2010 Two Essent hospitals Steward Health Care System, LLC 12/9/2010 Southwest Washington Health System PeaceHealth 12/10/2010 Battle Creek Health System Bronson Healthcare Group 12/14/2010 Holy Cross Hospital Vanguard Health Systems, Inc. 12/15/2010 Galichia Heart Hospital Wesley Medical Center 12/17/2010 Riley Hospital Anderson Regional Medical Center 12/28/2010LABORATORIES, MRI & Two imaging centers Kettering Health Network 12/16/2010 DIALYSIS Dominion Diagnostics, LLC Riverside Partners, LLC 12/20/2010LONG-TERM CARE Country Villa Not disclosed 12/14/2010 Austin House California-based investor 12/15/2010PHYSICIAN MEDICAL Pediatric Critical Care Associates, PS Mednax, Inc. 12/1/2010 Milford Anesthesia Associates, PC Emergency Medical Services Corp. 12/2/2010 Practice of Dr. Suzann Leslie Metropolitan Health Networks, Inc. 12/6/2010 Endion Hospitalist Systems Cogent Healthcare 12/8/2010 Wilmington Maternal-Fetal Medicine, PLLC Mednax, Inc. 12/13/2010 UltraHealthCare, PA Mednax, Inc. 12/14/2010 Neonatology Associates PC Mednax, Inc. 12/20/2010 Hospital Inpatient Management Services IPC-The Hospitalist Co. 12/28/2010 Desert Pediatric Hospitalists, PLC IPC-The Hospitalist Co. 12/29/2010REHABILITATION Xcel Orthopaedic Physical Therapy U.S. HealthWorks 12/17/2010OTHER Family Smiles Dentistry Great Expressions Dental Centers, Inc. 12/1/2010 Doctor’s Ambulance Service Emergency Medical Services Corp. 12/6/2010 Synergistic Resources, LLC General Cannabis, Inc. 12/6/2010 Principle Pharmacy Group Comprehensive Pharmacy Services 12/9/2010 Total Healthcare Group Medco Health Solutions, Inc. 12/13/2010 Smilecare Dental Associates Great Expressions Dental Centers, Inc. 12/29/2010

Where The Health Care M&A Dollars Went In Q4:10

Hospitals12.9%

Other Services13.1%

Pharmaceuticals13.9%

Long-Term Care15.7%

Medical Devices35.0%

Biotechnology7.7%

e-Health1.3%

Behavioral, Home,Labs, Managed Care,

PMG, Rehab0.4%



Q3:10 Q4:09 Q4:10 % %Sector Deals* Deals Change Deals ChangeServices Segment:Physician Groups 26 13 100% 13 100%Long-Term Care 25 26 -4% 40 -38%Hospitals 23 24 -4% 4 475%Home Health Care 7 9 -22% 12 -42%Labs, MRI, Dialysis 7 9 -22% 7 0%Rehabilitation 5 1 400% 6 -17%Behavioral Health Care 1 2 -50% 1 0%Managed Care 1 7 -86% 3 -67%Other 23 24 -4% 22 5% Services Subtotal 118 115 3% 108 9% Technology Segment: Medical Devices 36 45 -20% 49 -27%Pharmaceuticals 25 18 36% 29 -14%Biotechnology 25 34 -26% 61 -59%e-Health 19 22 -14% 20 -5% Technology Subtotal 105 119 -12% 159 -38%

Grand Total 223 234 -5% 267 -16%*Preliminary figures

The Health Care M&A Marketthing that hasn’t changed, however, is that the laggards continue to be drawn from the services segment: Behavioral Health Care and Managed Care managed to eke out just one deal apiece. The contribution of each sector to the overall M&A market appears in the table opposite along with comparisons to the previous (Q3:10) and year-ago (Q4:09) quarters.

According to prices revealed to date, a total of $60.4 billion was committed to M&A activ-ity during Q4:10. This figure represents an 11% drop from the $68.1 billion spent in the previous quarter but a 58% jump over the $38.3 billion spent in the year-ago quarter, Q4:09.

In Q4:10, the technology segment account-ed for $34.9 billion, or 58% of the total spent on health care M&A, with the services segment accounting for the remaining 42%. The services segment, particularly the facility-based Hospital and Long-Term Care sectors, reported stronger-than-usual results for the quarter, posting $7.8 billion and $9.5 billion, respectively. The percentage contribution of each sector to the total dollar amount is presented in the chart on page 7. Due to individually small results, the figures for six of the services sectors had to be aggregated.

As noted earlier, the fourth quarter posted 13 billion-dollar deals, at the heady pace of one deal per week. Their combined valued is $44.8 billion, or 74% of the quarter’s total dollar volume. With a combined total of $22.5 billion, seven of these big deals were in the services segment while the remaining six deals, with a total of $22.3 billion, were in the technology segment.

Fourth Quarter M&A Results

the help of Cerberus Capital Management. The acquisi-tion of these two hospitals enlarges the buyer’s network of acute care facilities in the Bay State. Essent acquired the Haverhill facility in 2001 for $10.0 million and the Ayer facility in 2002 for $8.6 million.

The Sisters of St. Casimir are selling Holy Cross Hospital, a 160-bed acute care facility in Chicago, to Vanguard Health for an undisclosed price. This acquisi-tion would add a third hospital to Vanguard’s Chicagoland acute care network. Under terms of the deal, the selling sponsors would have seats on the hospital’s advisory board and the hospital would continue to follow Catholic ethical and religious directives. No price has yet been disclosed.

Apparently, a suburban Chicago hospital is consid-ering merging with another health care system. Loyala University Health System, the parent of Loyala Univer-sity Medical Center, a teaching hospital, is mulling over whether to join forces with another system. Hmmm. We wonder whether Vanguard will be joining the talks.

Health Management Associates (NYSE: HMA) is selling Riley Hospital, a 140-bed acute care facility in Meridian, Mississippi, to 400-bed Anderson Regional Medical Center for an as-yet undisclosed price. HMA

Health Care Services

Nashville-based Essent Healthcare is selling its two Massachusetts hospitals to Steward Health Care System for an undisclosed price. The target facilities include 122-bed Merrimack Valley Hospital in Haverhill and 57-bed Neshoba Valley Hospital in Ayer. If the name is a bit un-familiar, Steward Health Care is the parent of six-hospital Caritas Christi Health, which it recently acquired with





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originally acquired Riley Hospital in January 1998 for $75.7 million, or 1.3x revenue. The current combination creates a larger organization with a broader service offer-ing than either component has individually.

laBoratorIes, MrI & dIalysIs

To expand into the teleradiology business, RadNet (NASDAQ: RDNT) recently paid $8.0 million to buy On Call Imaging, LLC, a Poughkeepsie, New York-based provider of teleradiology interpretation services to radiol-ogy groups, hospitals and imaging centers. The price to revenue multiple for the On Call deal is 0.8x.

long-terM Care

With 14 deals in December, the Long-Term Care sector witnessed a flurry of activity as brokers and deal makers tied up loose ends before the New Year. In a sale-leaseback transaction, HCR ManorCare is selling its real estate assets, including 338 post-acute, skilled nursing and assisted living facilities located in 30 states, to HCP (NYSE: HCP) for approximately $6.1 billion in cash, debt and stock. Under terms of the deal, analyzed extensively in our sister publication The SeniorCare Investor, HCR ManorCare and its affiliates will continue to operate the

assets under a long-term, triple-net master lease. CSCA Capital Advisors, Citi, UBS and Wells Fargo provided HCP with financial advice while JPMorgan provided HCR ManorCare with similar advice.

Centex Management Company is selling six skilled nursing facilities in Texas with 894 beds to a publicly traded REIT for $68.5 million, or 1.7x revenue and 7.4x EBITDA. The REIT will be leasing the properties to Texas-based TRISUN Healthcare, which already oper-ates 40 senior care facilities throughout Texas. Senior Living Investment Brokerage handled the deal.

AEW Senior Housing Investors paid $26.0 million to acquire Park Place at Winghaven, a 156-unit independent living facility in O’Fallon, Missouri. Built in 2006, the facility had 116 independent and 40 assisted living units. This purchase is valued at 4.7x revenue. AEW formed a joint venture with the existing manager, First Capitol, to make this purchase. Marcus & Millichap represented the seller in this transaction.

Servant Healthcare Investments is paying $17.5 mil-lion to acquire Carriage Court of Hilliard, a 102-unit as-sisted living facility in Hilliard, Ohio, from the Wilkinson Group. Built in 1998 on 4.5 acres, it was 95% occupied at



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the time of sale. The buyer assumed a $13,736,000 HUD loan with a 5.4% interest rate and 35-year amortization that was placed in July 2009.

rehaBIlItatIon

Just before Christmas, U.S. Physical Therapy (NAS-DAQ: USPH) announced buying a 70% interest in a six-clinic physical therapy group for $3.99 million. The group is based in the mid-Atlantic region and generates annual revenue of $4.8 million. This acquisition expands the buyer’s network of outpatient clinics on the East Coast. The price paid implies a purchase price of $5.7 million, as well as a price to revenue multiple of 1.2x, for a 100% interest in the target business.

other

Contract Research Organization. The private equity firm Warburg Pincus is acquiring ReSearch Pharma-ceutical Services (RPS) for $227.5 million in an all-cash transaction. Based in Fort Washington, Pennsylvania, RPS provides comprehensive phase 1-4 clinical development solutions to the pharma, biotech and device industries. Under terms of the deal, Warburg Pincus is paying $6.10 per share; the deal is valued at 0.7x revenue and 12.3x

EBITDA. This acquisition will underpin RPS’s rapid growth in the CRO industry. Jefferies & Company, Inc. is acting as exclusive financial advisor for RPS. As a result of this transaction, RPS is now withdrawing its S-1 filing for an initial public offering.

Medical Transport. Emergency Medical Services Corp. (NYSE: EMS) recently hired Goldman Sachs to help it explore its strategic alternatives. Through its American Medical Response unit, EMS provides medi-cal transport services, and through its EmCare Holdings business, it provides physician practice and staffing ser-vices. Trading at 16.6x future earnings, below the sector average of 21.5x, EMS could be seen as a relatively cheap acquisition target by another company or private equity group. News of the hiring brought speculators piling into the market, sending EMS stock up nearly 17%.

Pharmacy Services. On the last day of the year, CVS Caremark (NYSE: CVS) announced it was acquiring the Medicare Part D prescription drug services unit of Universal American Corp. (NYSE: UAM) for $1.25 billion. UAM’s business serves 1.9 million members, so this acquisition, valued at about 8.0x EBITDA, more than doubles the size of CVS’s Part D enrollment to 3.1 million members.



venture CapItal

Genocea Biosciences, a Cambridge, Massachusetts-based vaccine company, closed on a $35.0 million series B financing. New investors Johnson & Johnson Develop-ment Corporation, Skyline Ventures and MP Healthcare Venture Management joined existing investors Polaris Venture Partners, Lux Capital Management, SR One (GlaxoSmithKline’s venture capital arm), Cycad Group, Auriga Partners and Morningside Ventures. The pro-ceeds will support Genocea as it enters clinical develop-ment for its lead therapeutic vaccine for herpes simplex virus type 2 infections.

PneumRx, a medical device company based in Mountain View, California and focused on developing minimally invasive treatments for emphysema, just closed on $33.0 million in working capital commitments. This round—which was oversubscribed—was led by Forbion Capital Partners and co-led by Endeavour Visions, two European VC firms. The round also included a prominent, if unnamed, strategic corporate partner. The syndicate was joined by existing investors Adams Street Partners,

Telegraph Hill Partners, Alta Partners and Spray Ven-ture Partners. Bringing up the rear, Silicon Valley Bank and Leader Ventures also contributed to this capital raise.

PneumRX recently established a subsidiary in Ger-many, PneumRx GmbH; accordingly, it plans to use the proceeds from the round to expand commercialization of its RePneu Lung Volume Reduction Coil (LVRC) System in Europe. The LVRC system is a minimally invasive device intended to relieve emphysema and improve lung function by bronchiscopically implanting Nitinol coils into the lungs to compress damaged tissue.

In a series A financing led by SV Life Sciences and Third Rock Ventures, PanOptica, a biopharma based in New Jersey, recently raised $30.0 million. This allows the company to advance its PAN-90806 ophthalmic drug can-didate through phase 2 clinical trials. The drug is designed to treat age-related macular degeneration.

DBV Technologies, a French biotech focused on products to diagnose and treat food allergies, raised $25.5 million in a series C financing. The round was led by new investors InnoBioFund and Lundbeckfond Ventures. Shire and Alto Invest joined the round together with ex-isting investors Sofinnova Partners and Alk Abello. The

Health Care Financing



Sector Deal Volume Combined PriceMedical Devices 7 $ 15,290,850,000Pharmaceuticals 9 2,304,100,000Biotechnology 9 1,004,500,000e-Health 6 500,000,000Total 31 $ 19,099,450,000

The Month in M&A at a Glance:Health Care Technology, December 2010

Health Care Technology

BIoteChnology

Just as his predecessor did with the purchase of Wy-eth, Pfizer’s (NYSE: PFE) new CEO, Ian Read, appears to be placing his own stamp on the company by undertaking several acquisitions. In one of two recent biotech deals, PFE has entered into a $511.5 million agreement with San Diego-based Lpath, Inc. (OTCBB: LPTN) for a license to develop and commercialize iSONEP, LPTN’s lead monoclonal antibody product candidate. The candidate is being evaluated for the treatment of wet age-related macular degeneration and other ophthalmology disorders. Under terms of the agreement, PFE will make a $14.0 million upfront payment to LPTN, and commit to making up to $497.5 million in development, regulatory and com-mercial milestones. In a smaller deal, one worth $134.5 million, PFE is licensing certain novel peptide-based vac-cines from Australia’s Phylogica, Ltd. (ASX: PYC). To get access to PYC’s proprietary drug discovery platform, PFE is making an upfront payment of $500,000, and commit-ting up to $134.0 million in preclinical, clinical and other milestone payments.

Biogen Idec (NASDAQ: BIIB) is entering into a $427.5 million collaboration agreement with Switzer-land’s Neurimmune Holding to develop and commercial-ize novel human antibodies for the treatment of diseases and disorders of the central nervous system (CNS). These antibodies are designed for the treatment of Parkinson’s disease, Alzheimer’s disease and amyotrophic lateral sclerosis. Under terms of the deal, which builds upon a 2007 agreement, BIIB is to make a $32.5 million upfront payment and commit to up to $395.0 million in regulatory and sales milestone payments. This agreement enlarges BIIB’s pipeline of CNS drug candidates.

funds will be used to support the development of DBV’s epicutaneous immunotherapy technology, which reduces the risk of anaphylactic shock during the delivery of anti-gens to patients to desensitize allergic reactions.

Semprus Biosciences, a Cambridge, Massachusetts-based biotech, raised $18.0 million in a series B equity financing. SR One, Foundation Medical Partners, 5AM Ventures and Pangaea Ventures all took part in the round. Proceeds are intended to support technology that improves the long-term function of medical devices. The company’s Semprus Sustain Technology improves the surfaces of devices by reducing the attachment of bacteria and blood components.

QuantaLife, a Pleasanton, California-based life sci-ences company, recently closed on a $17.0 million series B financing. Paladin Capital Group, along with existing investors, was joined by Merieux Development and Vital Financial, LLC as new investors. The bulk of the proceeds will help establish commercial operations to introduce its first product, the Droplet Digital PCR platform, early in 2011. The product measures target nucleic acid molecules with great quantitative resolution and sensitivity.

EyeGate Pharma, a pharmaceutical company focused on ocular therapeutics based in Waltham, Massachusetts, secured an additional $5.9 million as part of its series D closing. With this additional tranche, EyeGate has raised a total of $28.5 million in series D financing. The funds are to be used to continue development of EGP-437, an investigational treatment for dry eye syndrome.

other fInanCIngs

LLM Capital Partners, LLC and John L. Shermyen have completed the successful initial public offering of L&L Corporation (OTCBB: LLAQ). It is a $40.0 million special purpose acquisition corporation (SPAC) focused on the health care services industry. With the help of leverage, L&L is looking to attract a private company in this space with an enterprise value of between $100.0 mil-lion and $125.0 million. Additional enticements, which distinguish it from other SPACs, include no need for a shareholder vote, less potential shareholder dilution in the deal and an accelerated time-frame of 18 months or less. This vehicle may be used to carry out a consolidation play, recapitalization or restructuring. It might also be used to fund rapid internal growth of a business or as a vehicle that is congenial to control-oriented financial sponsors or entrepreneurs. Anyone out there interested? (continued on page 15)



deal suMMarIes—teChnology BIoteChnology

deal suMMarIes—teChnology e-health

deal suMMarIes—teChnology MedICal devICes

TargET LISTINg acQUIrEr LISTINg DaTE PrIcEGTI Diagnostics Private Gen-Probe, Inc. NASDAQ: 12/16/2010 $53,000,000 Waukesha, Wisconsin San Diego, California GPRO

In BrIef: The Riverside Company is selling GTI Diagnostics, a specialty diagnostics company, to Gen-Probe for $53.0 million in cash.

Rights to BPH drug NASDAQ: Recordati SpA MI: 12/16/2010 $13,000,000 St. Laurent, Canada NYMX Milan, Italy RECI

In BrIef: In a deal worth a minimum of $13.0 million, Nymox Pharmaceutical Corp. is entering into an agreement with Recordati to license the development and commercialization rights to a phase 3 drug candidate for treating benign prostate hyperplasia.

Arresto Biosciences, Inc. Private Gilead Sciences, Inc. NASDAQ: 12/20/2010 $225,000,000 Palo Alto, California Foster City, California GILD

In BrIef: Gilead Sciences is offering $225.0 million for Arresto Biosciences, a company that develops medicines to treat fibrotic diseases and cancer by targeting enzymes involved in the synthesis of the extracellular matrix.

Neurodegenetive collaboration Private Biogen Idec, Inc. NASDAQ: 12/20/2010 $427,500,000 Zurich, Switzerland Cambridge, Massachusetts BIIB

In BrIef: In a deal worth up to $427.5 million, Neurimmune Holding AG is entering into a collaboration agreement with Biogen Idec to dis-cover and develop novel human antibodies that address three central nervous system targets to treat neurodegenerative diseases.

Rights for HIV drug candidate Private Bristol-Myers Squibb, Inc. NYSE: 12/20/2010 $286,000,000 Tokyo, Japan New York, New York BMY

In BrIef: Oncolys BioPharma is selling the worldwide rights for festinavir to Bristol-Myers Squibb for approximately $286.0 million. Festina-vir is a potential HIV treatment that is currently in mid-stage testing.

TargET LISTINg acQUIrEr LISTINg DaTE PrIcEPharos Life Corporation Private Syneron Medical Ltd. NASDAQ: 12/8/2010 $15,750,000 Cambridge, Ontario Yokneam, Israel ELOS

In BrIef: Syneron Medical is paying $15.75 million to buy Pharos Life, which manufactures home-use light therapy for esthetic procedures.

Dionex Corporation NASDAQ: Thermo Fisher Scientific NYSE: 12/13/2010 $2,100,000,000 Sunnyvale, California DNEX Waltham, Massachusetts TMO

In BrIef: Thermo Fisher Scientific is paying $2.1 billion, or 4.9x revenue, to acquire Dionex Corp., a company that designs, manufactures, markets and services analytical instrumentation and related accessories and chemicals.

Medison Private Samsung Electronics Co. Ltd. KS: 12/14/2010 $262,000,000 Seoul, South Korea Seoul, South Korea 005930

In BrIef: Samsung Electronics is paying approximately $262.0 million for a 43.5% stake in Medison, a company that manufactures ultrasound equipment and has a 6.2% share of the global ultrasound market.

TargET LISTINg acQUIrEr LISTINg DaTE PrIcEMedicity Private Aetna, Inc. NYSE: 12/7/2010 $500,000,000 Salt Lake, Utah Hartford, Connecticut AET

In BrIef: Aetna is paying $500.0 million in cash for Medicity, a health information exchange company which offers products that enable pro-viders, such as hospitals and physician practices, to securely access and exchange health care information.



deal suMMarIes—teChnology MedICal devICes (cont.)TargET LISTINg acQUIrEr LISTINg DaTE PrIcEMinority interest in Alcon, Inc. NYSE: Novartis AG NYSE: 12/15/2010 $12,900,000,000 Fort Worth, Texas ACL Basel, Switzerland NVS

In BrIef: Novartis is paying $12.9 billion to acquire the remaining 23% interest in eye-care giant Alcon that it does not already own. This follow-up deal completes a transaction begun in 2008, and makes Novartis the largest eye-care company in the world.

Xoft, Inc. Private iCAD, Inc. NASDAQ: 12/16/2010 $13,100,000 Sunnyvale, California Nashua, New Hampshire ICAD

In BrIef: iCad is paying $13.1 million in a combination of stock and cash to acquire Xoft, a company that develops electronic brachytherapy systems. The price to revenue multiple for this transaction is approximately 2.4x.

deal suMMarIes—teChnology pharMaCeutICals

TargET LISTINg acQUIrEr LISTINg DaTE PrIcEU.S. OTC product portfolio NYSE: Meda AB STO: 12/14/2010 $34,600,000 Middlesex, England GSK Solna, Sweden MEDAA

In BrIef: GlaxoSmithKline plc is selling a portfolio of three over-the-counter products in the United States to Meda AB for approximately $34.6 million, or 2.4x revenue.

Nanjing MeiRui Pharma Private GlaxoSmithKline plc NYSE: 12/7/2010 $70,000,000 Nanjing City, China Middlesex, England GSK

In BrIef: Pagoda Pharmaceuticals Ltd and Allergon AB are selling Nanjing MeiRui Pharma, a pharmaceutical company that specializes in urol-ogy and allergy treatments, to GlaxoSmithKline for $70.0 million in cash.

Spencer Pharmaceutical, Inc. PK: Al-Dorra Holding Private 12/10/2010 $245,000,000 Boston, Massachusetts SPPH Kuwait City, Kuwait

In BrIef: Al-Dorra Holding is paying $245.0 million to acquire and privatize Spencer Pharmaceutical, a company that is focused on developing new drug release and absorption systems for treating metabolic diseases such as diabetes.

Paras Pharmaceuticals Private Reckitt Benckiser PLC LSE: 12/13/2010 $726,000,000 Ahmedabad, India Slough, England RB

In BrIef: Reckitt Benckiser is paying $726.0 million to acquire Paras Pharmaceuticals, a company that is engaged in over-the-counter pharma-ceuticals and personal care products. The sellers include a set of private equity groups.

Q-Med AB SS: Galderma, S.A. Private 12/13/2010 $1,080,000,000 Uppsala, Sweden QMED Lausanne, Switzerland

In BrIef: Galderma is paying $1.08 billion, or 5.5x revenue, to buy Q-Med, a company that manufactures products based on hyaluronic acid which, when injected, can smooth wrinkles or enhance breast size.

Matrixx Initiatives, Inc. NASDAQ: H.I.G. Capital, LLC Private 12/14/2010 $72,500,000 Scottsdale, Arizona MTXX Miami, Florida

In BrIef: H.I.G. Capital is acquiring and privatizing Matrixx Initiatives for $72.5 million, or 1.2x revenue. Matrixx manufactures over-the-counter health care products, including cold remedy products.

Dramamine business NYSE: Prestige Brands Holdings, Inc. NYSE: 12/16/2010 $76,000,000 New Brunswick, New Jersey JNJ Irvington, New York PBH

In BrIef: Johnson and Johnson is selling its Dramamine business to Prestige Brands for $76.0 million in cash. Dramamine is an over-the-coun-ter drug used to treat nausea, vomiting and dizziness associated with notion sickness.



addItIonal transaCtIons—teChnology

Sector target acquirer DateBIOTECHNOLOGY Diabetes drug collaboration (Evotec) AstraZeneca, MedImmume 12/16/2010 Rights to Parkinson’s compound GlaxoSmithKline 12/16/2010 Ophthalmology collaboration (Lpath) Pfizer 12/20/2010 Peptide-based vaccine collaboration Pfizer 12/20/2010E-HEALTH Prematics Navinet, Inc. 12/6/2010 Peminic, Inc. Verge Solutions, LLC 12/7/2010 iCare, LLC Wolters Kluwer, NV 12/9/2010 Digital District Publicis Groupe, S.A. 12/13/2010 InfoLogix, Inc. Stanley Black & Decker 12/15/2010MEDICAL DEVICES Clinical Innovations, Inc. The Pritzker Group 12/14/2010 Sodem Diffusion Zimmer Holdings, Inc. 12/23/2010PHARMACEUTICALS Roxro Pharma Daiichi Sankyo Co. 12/13/2010 Covalent oncology drug deal Sanofi-Aventis 12/20/2010

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MedImmue, the global biologics unit of AstraZen-eca (NYSE: AZN), has entered into a €259.0 million ($366.9 million) license and collaboration agreement with Evotec (FSE: EVT) to develop and commercialize a set of treatments in the diabetes therapeutic area. The collaboration focuses in particular on the regeneration of insulin-producing beta cells. Under terms of the agree-ment, MedImmune will make a €5.0 million upfront payment and up to €254.0 million in various clinical, regulatory and commercial milestone payments.

Oncolys BioPharma, a biotech based in Tokyo, Japan, is selling the worldwide rights for festinavir to Bristol-Myers Squibb (NYSE: BMY) in a transaction valued at approximately $286.0 million. Festinavir, a next-generation nucleotide reverse transcriptase inhibitor, is a potential HIV treatment that is currently in mid-stage testing. It is engineered to be used once daily. Under terms of the deal, BMY will make an upfront payment, followed by development, regulatory and sales milestone payments. Royalties on product sales are also covered in the agree-ment. This acquisition gives BMY access to a novel drug




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addItIonal transaCtIons—teChnology

Sector target acquirer announceD upDateBIOTECH Cypress Bioscience, Inc. Ramius, LLC 7/19/2010 12/15/2010 San Diego, California New York, New York

reCent developMents: Ramius raised the price of its offer for Cypress Bioscience to $6.50 a share, or a total of $255.0 million, from the initial price of $4.00 a share which it originally made in July 2010. Cypress has agreed to the revised offer.

candidate to treat HIV. Festinavir was originally licensed to Oncolys in 2006 from Yale University.

In an outright acquisition of an entire company, Gilead Sciences (NASDAQ: GILD) is paying $225.0 mil-lion to acquire Arresto Biosciences. Based in Palo Alto, California, Arresto develops medicines to treat fibrotic diseases and cancer by targeting enzymes involved in the synthesis of the extracellular matrix. This acquisition gives the buyer an additional platform for developing drugs to treat fibrotic diseases and tumors. The target’s lead product candidate, AB0024, is currently in early-stage testing as a treatment for idiopathic pulmonary fibrosis, a condition that scars the lungs. In addition to the initial $225.0 million, the agreement also provides for potential future payments related to sales levels. The target’s ven-ture investors include Kleiner Perkins Caufield & Byers, HealthCare Ventures, Northgate Capital, DAG Ventures and Abbott Biotech Ventures.

Gen-Probe (NASDAQ: GPRO) is acquiring GTI Di-agnostics from The Riverside Company, a PEG, for $53.0 million in cash. Based in Wisconsin, GTI is a specialty di-agnostics company focused on the transplantation, blood bank and specialty coagulation markets. This acquisition broadens the buyer’s transplant diagnostics business. It also gives the company access to growing coagulation and transfusion-related blood bank products that may be marketed to its customer base. GTI manufactures certain products sold by GPRO under its Lifecodes brand.

GlaxoSmithKline (NYSE: GSK) is entering into a $186.5 million agreement with Impax Laboratories to develop and commercialize IPX066, an investigational product for the treatment of Parkinson’s disease. A novel extended-release, carbidopa-levopoda product, the can-didate is currently in phase 3 clinical trials. Under terms of the deal, GSK will make an $11.5 million upfront payment, and commit to making up to $175.0 million in



development and commercial milestones. Impax is also to receive tiered, double-digit royalties on GSK’s sales of IPX066-derived products.

e-health

In December’s largest e-Health deal, insurer Aetna (NYSE: AET) is acquiring Medicity for $500.0 million. Based in Salt Lake City, Medicity is a health information exchange company which offers products that enable providers, such as hospitals and physician practices, to se-curely access and exchange health care information. This deal, which closed January 3, increases AET’s connec-tivity solutions. Medicity’s health information exchange currently reaches over 760 hospitals, 125,000 physicians and 250,000 end users.

Power tool manufacturer Stanley Black & Decker (NYSE: SWK) is growing its e-Health business with the $61.2 million acquisition of Infologix (OTCBB: IFLG), a provider of enterprise mobility solutions for the health care industry headquartered in Hatboro, Pennsylvania. IFLG will add to SWK’s portfolio an established provider of mobile workstations and asset tracking solutions. SWK is offering $4.75 per share in cash and assuming approxi-mately $22.1 million in debt, raising the price to $61.2 million. The price to revenue multiple is 0.97x; since EBITDA is negative, we don’t have a multiple for that.

MedICal devICes

After two years in the making, the largest acquisi-tion in Swiss corporate history finally closed. Novartis AG paid $12.9 billion to acquire the 23% stake in Alcon (NYSE: ACL) that it did not already own. Our long-time readers will recall that NVS first announced a deal in 2008 to acquire a 77% majority interest in ACL for ap-proximately $39.0 billion, which was completed in early 2010. In a nutshell, the minority shareholders are getting the same price that majority shareholder Nestle received in the earlier deal. Acquisition of this final minority inter-est raises the total purchase price to approximately $52.0 billion. This deal now makes Novartis the largest eye care company in the world. The price to revenue multiple for a 100% interest is 7.3x; price to EBITDA, 18.6x.

In a deal worth $2.1 billion, Thermo Fisher Scientific (NYSE: TMO) is acquiring Dionex (NASDAQ: DNEX), a California-based company that designs, manufactures, markets and services analytical instrumentation and re-lated accessories and chemicals. TMO is offering to pay

$118.50 per share, a bid that offers DNEX shareholders a 21% premium over the stock’s prior-day price. This acquisition, along with a smaller one announced at the end of November, expands the buyer’s presence in the Asia-Pacific life sciences markets. DNEX is the world’s third-biggest player in chromatography systems, which is used in analysis for drug compounds. The deal is valued at 4.9x revenue and 20.4x EBITDA.

Samsung Electronics (KSE: 005930) is expanding into the ultrasound manufacturing market with its $262.0 million acquisition of a 43.5% stake in Medison, a Ko-rean manufacturer of ultrasound equipment which has a 6.2% share of the global ultrasound devices market. This purchase diversifies Samsung’s portfolio of products away from electronic components into the health care equip-ment industry. The transition may be facilitated by the fact that there are many areas in the medical device sector to which Samsung can apply its chip and panel technologies. The price for a 100% interest would be $602.3 million; the price to revenue multiple, 3.3x. Samsung prevailed over tobacco company KT&G Corp. and SK Holdings in an auction held by the private equity fund Census Asset Management.

Among deals of a more modest size, iCAD (NAS-DAQ: ICAD) is acquiring Xoft, Inc. for approximately $13.1 million. Based in Sunnyvale, California, Xoft develops electronic brachytherapy systems, using its pro-prietary treatment platform to deliver a therapeutic dose of radiation with minimal risk of exposure to surrounding tissue. Under terms of the deal, iCAD is issuing 8.47 mil-lion shares of common stock and paying $1.0 million in cash. The shares being offered represent 15.6% of iCAD’s outstanding common shares. Valued at 2.4x revenue, this acquisition transforms iCAD from a company focused on image analysis to a broader player in the oncology market.

Diagnostic instruments maker Beckman Coulter (NYSE: BEC) is putting itself up for sale, and has hired the indefatigable Goldman Sachs to run the sale. Some analysts believe that the company could fetch over $5.0 billion. And it would have to since, pre-announcement, the company had a market cap of $3.67 billion and total debt of $1.34 billion, i.e., just over $5.0 billion.

pharMaCeutICals

In December’s largest Pharmaceutical deal, Galder-ma, SA is acquiring Sweden’s Q-Med AB (SS: QMED)




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Year Deals Value Rank (In $ billions)2010† 913 206.5 52009 945 232.2 22008 1,001 226.9 42007 1,077 231.9 32006 1,010 268.4 12005 970 162.3 72004 875 164.3 62003 932 94.2 92002 947 97.9 82001 818 74.6 10

†Preliminary figures.

The Health Care M&A Market2001 Through 2010

for $1.08 billion. Q-Med manufactures products based on hyaluronic acid which when injected, can smooth wrinkles or enhance breast size. Its products therefore compete with such drugs as Botox in the esthetics and dermatology markets. This bid, valued at 5.5x revenue, offers Q-Med shareholders a 13% premium to the stock’s prior-day price. Nordea Corpo-rate Finance provided Q-Med with financial advice on this deal while Credit Suisse Group AG and Swedbank Corporate Fi-nance provided Galderma with similar advice. A joint venture between Nestle and cosmet-ics giant L’Oreal, Galderma is involved in therapeutic, correc-tive and esthetic solutions for dermatology patients.

Reckitt Benckiser (LSE: RB) is acquiring India’s Paras Pharmaceuticals in a deal worth approximately $726.0 million. Based in Admedabad, Gujarat, Paras Pharma manufac-tures OTC pharmaceuticals and personal care products. The deal is valued at 8.2x revenue, which is fairly steep for a consumer products company, but three factors fig-ure in the pricing. First, the sellers include private equity groups intent on making a good return on investment. The private equity firm Actis is selling its 63% stake in Paras; other shareholders, including Sequoia Capital and founder Giresh Patel, are also selling their stakes. Second, there was stiff competition for the deal: GlaxoSmithKline, Johnson & Johnson (NYSE: JNJ) and Novartis all had apparently taken a close look at Paras. Third, Paras serves the rapidly expanding Indian market, where rising forward earnings will ultimately help to lower the multiple.

Avila Therapeutics has entered into a global alli-ance with Sanofi-Aventis (NYSE: SNY) worth $194.0 million to discover covalent drugs for the treatment of various cancers. Under terms of this alliance, SNY gets a license to develop and commercialize the compounds that result from the discovery collaboration. Avila, based in Waltham, Massachusetts, is to receive $40.0 million in an upfront payment, and is eligible to receive up to $154.0 million in preclinical, clinical and regulatory milestone payments. The agreement also contemplates staged royal-ties and commercial milestones on product sales.

Boston-based Spencer Pharmaceuticals (PK: SPPH), a company focused on developing new drug-release and absorption systems for treating metabolic diseases such as diabetes, is being acquired by Al-Dorra Holding for approximately $245.0 million. SPPH was formed from a reverse merger with Emergensys in 2009, but has languished in the Pink Sheets ever since. This deal al-

lows shareholders to cash out on what had become a very low valued stock. Al Dorra Holdings, the private investment arm of Kuwait-based Al-Dorra Group, is offering $0.95 per share.

Prestige Brands Holdings (NYSE: PBH) is acquiring the Dramamine business from John-son & Johnson’s beleaguered McNeil-PPC unit for $76.0 mil-lion in cash. Dramamine is a de-cades-old OTC drug used to treat nausea, vomiting and dizziness associated with motion sickness. This acquisition enlarges PBH’s OTC drug portfolio; Dramamine currently has 32% of the U.S.

market. The deal is expected to generate tax attributes with a present value of about $14.0 million, which would imply an effective purchase price of approximately $62.0 mil-lion. Sawaya Segalas & Co. acted as exclusive financial advisor to PBH on the deal.

Boston Scientific Corporation (NYSE: BSX) has terminated the auction to sell off its pain management business; the lack of buyer interest was cited as the proxi-mate reason. Johnson & Johnson had considered a bid of about $1.0 billion while other bidders had contemplated prices as high as $1.5 billion. Not high enough for BSX’s liking, it appears.

The drug delivery technology company SurModics (NASDAQ: SDRX) has retained Piper Jaffray & Co. to pursue strategic options for its pharmaceutical unit so it can concentrate its energy on its medical device business. This change in direction responds to two factors. First, it was heavily criticized when it paid $150.0 million in 2007 for the pharma business. Second, its newly appointed CEO, Gary Maharaj, recently served as CEO of the medi-cal device maker Arizant, which was acquired by The 3M Company (NYSE: MMM) in September 2010 for $810.0 million.


volume 16, issue 1 the january 2011 health care m&a · volume 16, issue 1 january 2011 inside...

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