Health Care. Mergers & Acquisitions CENTURY. in the

Transcription

1 Health Care Mergers & Acquisitions 21 st CENTURY Target this industry's top M&A decision makers. This premier publication will be distributed at more than 25 health care investment conferences in 215 & 216!

2 Health Care M&A 21st Century Contents ABSTRACT EDITION 1 Introduction...2 Services Behavioral Health Care... Home Health & Hospice...4 Hospitals...6 Laboratories, MRI & Dialysis...8 Long-Term Care...1 Managed Care... Physician Medical Groups Rehabilitation... Technology Biotechnology...12 ehealth... Medical Devices... Pharmaceuticals... Introduction We are proud to introduce the premier edition of Health Care Mergers & Acquisitions 21st Century. This annual publication will track the merger and acquisition market health care sector from the beginning of the century. Join us as we look back at some of the most important transactions and trends that took place health care M&A market during the last 15 years. Reach the health care industry's top decision makers! This commemorative issue will be distributed at more than 25 health care investment conferences in 215 and 216 (see conference schedule and ad sizes and prices on pages 14 & 15). For the price of one ad, your message will be circulated all year! Distribution dates May 1, 215 April 3, 216. Spaces are limited and available on a first come, first served basis. Ad space may be reserved by contacting Jeanne Aloi at [email protected] or ext. 27. Health Care M&A 21 st Century ISSN#: Published by: Irving Levin Associates, Inc /2 Main Avenue Norwalk, CT 6851 (23) Fax (23) [email protected] Publisher: Senior Editor: Editor: Research Analyst: Eleanor B. Meredith Stephen M. Monroe Lisa E. Phillips Jon Espeland 215 Irving Levin Associates, Inc. All rights reserved. Reproduction or quotation in whole or part without permission is forbidden Glaxo Wellcome plc acquires Smith Kline Beecham for $74 billion Medicare and Medicaid made up 32% of all healthcare expenditures U.S. Pfizer acquires Pharmacia for $56 billion Medicare Prescription Drug, Improvement, & Modernization Act is signed into law 2

3 Health Care 21 st M&A CENTURY Despite the recent slowdown growth rate of health care expenditures, the reasons for which are still under debate, the health care economy continues to grow, and the health care merger and acquisition market is as active as ever. The graph below tracks the number of transactions over the past 15 years and highlights the fairly narrow band of 9 to 1, transactions announced per year. There have been three straight years of 1, or more announced transactions health care market, which demonstrates continued strength in this industry. This first edition also contains a snapshot of various health care sectors referenced table of contents. For recent M&A announcements, our online database, DealSearchOnline.com, is available and updated daily. Updated deal information is available to subscribers through our online database and various newsletters and reports. We hope that you find this overview a valuable tool for your business. As the timeline illustrates, there were some significant events that did impact the market over this period. Steve Monroe Lisa Phillips Number Number of Transactions of Jan , - Jan. 1, Sanofi-Synthelabo acquires Aventis for $65.5 billion Health care spending reaches $2 trillion (16% of GDP) Hospital giant HCA is privatized for $33 billion Census Bureau estimates 45.6 million uninsured HealthCareMandA 3

4 Health Care M&A 21 st Century Edition Home Health & Hospice Investor interest Home Health & Hospice sector was even with the prior year. Most of the transactions are small and many never get publicly announced, but the latest year proved the exception to that conventional wisdom, as there were three acquisitions of more than $2 million each. This sector recorded 35 mergers and acquisitions HOME HEALTH & HOSPICE Investor interest Home Health & Hospice sector was even with the prior year. in Most 213, of the transactions equal are small to the and many number never get publicly reported announced, but the latest year year proved the exception to that conventional wisdom, as there were three acquisitions of more than $2 million each. before. This sector recorded 35 mergers and acquisitions in 213, equal to the number reported the year before. 6 4 HOME HEALTH & HOSPICE Investor interest Home Health & Hospice sector was even with Deals the prior year. Most of the transactions are small and many never get publicly announced, but the latest year proved the exception to 2that conventional wisdom, as there were three acquisitions of more than $2 million each This sector recorded 35 mergers and acquisitions in 213, equal to the number reported the year before Although 4 dollar volume did not surpass the 212 HOME HEALTH & HOSPICE TRANSACTIONS total of $5.8 billion, the nearly $3.2 billion committed 2 to acquisitions 42 in this sector 44 was the second-highest past five 29 years. 21 Four of the 211 deals announced in Source: 213 Health made Care M&A the News, list March of 2141 largest transactions, indicating a growing interest in post-acute care and services. Deals Announced Home Health Care Mergers & Acquisitions, Announced Home Health Care Mergers & Acquisitions, Although dollar volume did not surpass the 212 total of $5.8 billion, the nearly $3.2 billion committed to acquisitions in 6 this sector was the second-highest past five years. Four of the deals announced in 213 made the list of 1 largest transactions, indicating a growing interest in post-acute care and services. Total Deals Announced Deals with Announced Prices Combined Purchase Price ($ millions) $141. $1,43. $29. $5,82.9 $3,187.1 Although dollar volume did not surpass the 212 total of $5.8 billion, the nearly $3.2 billion committed to acquisitions in Twenty-six this sector buyers was announced the second-highest a total of 35 in deals the past during five 213. years. Ten Four publicly of the traded deals announced corporations in announced 213 made 2 the deals, list of with 1 largest Kindred transactions, Healthcare indicating announcing growing five and interest The Ensign in post-acute Group announcing care and services. three. Buyers with two deals apiece included Addus HomeCare Corporation, Almost Family, LHC Group and Sinfonia HealthCare Corporation. Ten privately held companies announced one deal each. The targets included a division of one publicly traded company, 33 privately held HOME HEALTH & HOSPICE TRANSACTIONS companies and one not-for-profit organization. The largest deal of 213 ranks second among the 1 largest of the past five years. With a disclosed price of $2.1 billion, it also comprised Total Deals the lion s Announced share of the year s combined 42 total spending 44 in this sector. 29 CVS Caremark, 35 the 35 retail pharmacy giant, acquired Coram LLC, a home infusion business, from Apria Healthcare Group, itself a portfolio company of The Blackstone Deals Group. with Coram Announced was one Prices of the nation s largest 19 providers of 24 comprehensive 11 infusion 9 services. Besides 14 its home infusion business, it also operates a national network of more than 85 locations, including more than 65 ambulatory Combined Purchase Price ($ millions) $141. $1,43. $29. $5,82.9 $3,187.1 infusion sites. Depending on the site of care, costs of infusing specialty medications may be covered through medical or Health Care M&A 21 Twenty-six buyers announced a total of 35 deals during st Century, First Edition, Ten publicly traded corporations announced 2 deals, with 5 Kindred Healthcare announcing five and The Ensign Group announcing three. Buyers with two deals apiece included Addus HomeCare Corporation, Almost Family, LHC Group and Sinfonia HealthCare Corporation. Ten privately held companies announced one deal each. The targets included a division of one publicly traded company, 33 privately held companies and one not-for-profit organization. Twenty-six buyers announced a total of 35 deals during 213. Ten publicly traded corporations announced 2 deals, with Kindred Healthcare announcing five and The Ensign Group announcing three. Buyers with two deals apiece included Addus HomeCare Corporation, Almost Family, LHC Group and Sinfonia HealthCare Corporation. Ten privately held companies announced one deal each. The targets included a division of one publicly traded company, 33 privately held companies and one not-for-profit organization. The largest deal of 213 ranks second among the 1 largest of the past five years. With a disclosed price of $2.1 billion, it also comprised the lion s share of the year s combined total spending in this sector. CVS Caremark, the retail pharmacy giant, acquired Coram LLC, a home infusion business, from Apria Healthcare Group, itself a portfolio company of The Blackstone Group. Coram was one of the nation s largest providers of comprehensive infusion services. Besides its home infusion business, it also operates a national network of more than 85 locations, including more than 65 ambulatory infusion sites. Depending on the site of care, costs of infusing specialty The largest deal of 213 ranks second among the 1 largest of the past five years. With a disclosed price of $2.1 billion, it also comprised the lion s share of the year s combined total spending in this sector. CVS Caremark, the retail pharmacy giant, acquired Coram LLC, a home infusion business, from Apria Healthcare Group, itself a portfolio company of The Blackstone Group. Coram was one of the nation s largest providers of comprehensive infusion services. Besides its home infusion business, it also operates a national network of more than 85 locations, including more than 65 ambulatory infusion sites. Depending on the site of care, costs of infusing specialty medications may be covered through medical or President-elect Obama proposes a universal health care coverage system Health Care M&A 21 st Century, First Edition, Roche Holdings acquires Genetech for $46.8 billion (largest biotech deal ever) 21 Congress passes the PPACA 211 Health care expenditures nearly double since 2, growing from $1.2 trillion to $2.3 trillion 4

5 Health Care 21 st M&A CENTURY medications may be covered through medical or preferred provider for Harden s 49 skilled nursing pharmacy benefit plans, and that is where CVS and assisted living facilities in Texas. pharmacy Caremark benefit saw plans, the strategic and that is advantage. where CVS This Caremark saw the strategic advantage. This acquisition closed in January 214. acquisition closed in January 214. The home infusion industry underwent some consolidation in 212, as BioScrip, Inc. acquired Gentiva Health Services, which provides a comprehensive list of skilled nursing, physical therapy, hospice and other inhome services, made the top-1 list for the second time in five years with its $48.8 million acquisition of Harden Gentiva Health Services, which provides a CarePoint Partners Holdings LLC for $223 million. comprehensive list of skilled nursing, physical CarePoint Partners is a leading national provider Healthcare Holdings, based in Austin, Texas. Harden has a similar range of home care services with operations in 13 therapy, hospice and other in-home services, of home and alternate-site infusion therapy for states. Gentiva became a preferred provider for Harden s 49 skilled nursing and assisted living facilities in Texas. made the top-1 list for the second time in five patients with complex, acute and chronic illnesses, The years home with infusion its $48.8 industry million acquisition underwent of some Harden consolidation and in its 212, acquisition as BioScrip, in August Inc. 213 acquired boosted CarePoint Partners Holdings Healthcare LLC Holdings, for $223 million. based in CarePoint Austin, Texas. Partners is a leading BioScrip s national home provider infusion business of home and to 1, alternate-site infusion therapy Harden for has patients a similar with range complex, of home acute care services and chronic illnesses, patients. and its acquisition in August 213 boosted BioScrip s home with infusion operations business 13 to states. 1, Gentiva patients. became a 1 LARGEST HOME HEALTH & HOSPICE TRANSACTIONS, Acquirer Target Price Year The Linde Group Lincare Holdings Inc. $4,6,, 212 CVS Caremark Coram LLC $2,1,, 213 Gentiva Health Services, Inc. Odyssey HealthCare, Inc. $984,, 21 The Linde Group Home care business in continental Europe $75,, 212 Gentiva Health Services, Inc. Harden Healthcare Holdings, Inc. $48,8, 213 Highland Capital Management, LP American HomePatient, Inc. $235,24, 21 BioScrip, Inc. CarePoint Partners Holdings LLC $223,, 213 Centene Corporation U.S. Medical Management, LLC $2,, 213 MITIE Group PLC Enara Group Limited $178,8, 212 Amedisys, Inc. Beacon Hospice, Inc. $126,, The Supreme Court upholds the individual mandate of the PPACA by a 5-4 vote Consolidation of 4 major for-profit hospital chains (Tenet/Vanguard & CHS/HMA) Pharmaceutical M&A reaches $ billion HealthCareMandA 5

6 Health Care M&A 21 st Century Edition Hospitals The apparent slowdown in hospital merger and acquisition activity belies a market undergoing and reacting to major changes. In-patient volumes dropped for the fourth year in a row, and as hospitals were pressured to curtail the length of in-patient stays and readmissions, investors turned their attention to the post-acute markets, such as home health services, long-term care facilities and even behavioral health care programs and facilities The data chart below illustrates what an unusual year 213 was hospital market. Deal volume dropped for the first time since 29, to just 83 deals. Conversely, the number of hospitals involved in those deals climbed to a recent high of 283, continuing the upward trajectory of the past five years. That level will not likely be repeated in 214, because it is the result of some very unusual activity. Two of the largest publicly traded health systems announced the acquisition of two deals involved 99 hospitals and more than 17, hospital beds. HOSPITALS The apparent slowdown in hospital merger and acquisition activity belies a market undergoing and reacting to major changes. In-patient volumes dropped for the fourth year in a row, and as hospitals were pressured to curtail the length of in-patient stays and readmissions, investors turned their attention to the post-acute markets, such as home health services, long-term care facilities and even behavioral health care programs and facilities The following table represents a five-year compilation of statistics for all announced hospital transactions. The data chart below illustrates what an unusual year 213 was hospital market. Deal volume dropped for the first time since 29, to just 83 deals. Conversely, the number of hospitals involved in those deals climbed to a recent high of 283, continuing the upward trajectory of the past five years. That level will not likely be repeated in 214, because it is the result of some very unusual activity. Two of the largest publicly traded health systems announced the acquisition of two deals involved 99 hospitals and more than 17, hospital beds. may be a factor of the smaller sample sizes for both years, compared with 29 through 211. Over the past five years, the figures for average and median price per bed have increased steadily. The average price per bed has risen from $363,777 in 29 to $511,81 in 211, for a spread of $148,33. In 213, the average price per bed was $54,416. The median price per bed, however, has ranged between $364,543 in 21 and $416,667 in 213, for a much narrower spread of $52,124. Announced Hospital Transactions Deals Hospitals The following table represents a five-year compilation of statistics for all announced hospital transactions. Based on the 15 deals with the requisite figures, the average price/revenue multiple for all hospitals in 213 was.56x; the corresponding median was also.56x. (The relevant revenue figure used in these calculations is net patient revenue.) The average figure represents a slight but not significant decrease compared with the figure in 212, which Based on the 15 deals with the requisite figures, the average price/revenue multiple for all hospitals in 213 was.56x; the corresponding median was also.56x. (The relevant revenue figure used se calculations is net patient revenue.) The average figure represents a slight but not significant decrease compared with the figure in 212, which may be a factor of the smaller sample sizes for both years, compared with 29 through 211. Over the past five years, the figures for average and median price per bed have increased steadily. The average price per bed has risen from $363,777 in 29 to $511,81 in 211, for a spread of $148,33. In 213, the average price per bed was $54,416. The median price per bed, however, has ranged between $364,543 in 21 and $416,667 in 213, for a much narrower spread of $52,124. Health Care M&A 21 st Century, First Edition,

7 Health Care 21 st M&A CENTURY SUMMARY OF ACQUISITIONS Number of Deals Number of Beds 1,64 15,864 24,291 18,177 45,256 Number of Hospitals Total Acquired Revenues Average Revenue/Deal Median Revenue/Deal $6,236,55, $14,29,811, $16,163,489, $13,767,258,47 $2,937,87,12 $148,489,286 $29,4,164 $199,549,247 $178,795,565 $387,737,168 $16,15, $94,7, $91,, $122,194,772 $131,945,54 Deal Count Total Purchase Price $2,88,6, $1,515,632,477 $8,35,6, $2,5,517, $14,13,32, Average Price/Deal $87,25, $228,6,76 $173,22,83 $78,866,38 $672,872,381 Median Price/Deal $47,65, $68,5, $73,55, $38,55, $54,3, Deal Count Price/Revenue Average Price/Revenue Median.68x.76x.75x.54x.56x.73x.6x.68x.6x.56x Deal Count Price/EBITDA Average 11.1x 12.7x 14.1x 12.x 9.6x Price/EBITDA Median 9.9x 8.3x 1.1x 7.9x 9.2x Deal Count Price/Bed Average $363,777 $431,755 $511,81 $426,74 $54,416 Price/Bed Median $396,822 $364,543 $4,879 $312,48 $416,667 Deal Count HealthCareMandA 7

8 Health Care M&A 21 st Century Edition LABORATORIES, MRI & DIALYSIS This sector faces reimbursement headwinds from commercial insurance payers on one side, and lab companies are losing share to local hospitals, as they acquire physician Laboratories, MRI & Dialysis practices that generate substantial patient referrals. This Deal sector volume faces reimbursement Laboratories, headwinds MRI & Dialysis from commercial sector dipped insurance 23.4% in payers 213, to on 36 one transactions. side, and lab Deal companies value fared are losing slightly share better, to staying local hospitals, above the as billion-dollar they acquire mark physician for the year s practices total. that generate substantial patient referrals. 6 Announced Laboratory, MRI & Dialysis Mergers & Acquisitions, Transactions The Deal combined volume total in committed the Laboratories, to finance transactions MRI & in this sector apiece: also experience Diaverum a slight and dip, LifeLabs down 16.1%, Medical to LABORATORIES, MRI & DIALYSIS This sector faces reimbursement headwinds from commercial approximately insurance payers on $1.86 one side, billion. and lab companies One are simple losing share factor to local hospitals, at work as they is acquire that physician fewer deals that came with disclosed prices in 213 about practices Dialysis sector dipped 23.4% in 213, to 36 Laboratory Services. Six of the targets were 28%--compared that generate substantial with patient referrals. the situation in 212, when 43% of the transactions announced reported prices. transactions. Deal value fared slightly better, publicly traded corporations, and the rest were Deal volume Laboratories, MRI & Dialysis sector dipped 23.4% in 213, to 36 transactions. Deal value fared slightly better, staying above above the billion-dollar the mark billion-dollar for the year s total. mark for the all privately held. LABORATORIES, MRI & DIALYSIS TRANSACTIONS year s total. Announced Laboratory, MRI & Dialysis Mergers & Acquisitions, The largest deal in this sector was consummated Total The Deals combined Announced total committed to finance 3 42 between 29 two Canadian 47 companies, 36 6 as LifeLabs Deals transactions with in this sector also experience a Medical Laboratory Services agreed to pay 4 Announced Prices slight dip, down 16.1%, to approximately $1.22 billion for CML HealthCare Inc., a leading Combined 2 Purchase Price ($ millions) $9.5 $2,272.5 $6,2. $2,213.8 $1,855.6 $1.86 billion. One simple factor at work 47 is that diagnostic imaging provider, processing more Source: fewer Health deals Care that M&A came News, with disclosed March 214 prices than 4 million tests annually. The price in 213 about 28%--compared with the included $1.75 per share for all issued and A total Source: of Health 3 Care buyers M&A News, announced March deals. Twelve publicly traded companies announced 16 deals. Of those, DaVita and Quest situation Diagnostics in 212, had when three 43% deals of each. the transactions Among the 17 privately held outstanding companies that shares made acquisitions, of CML, which two companies was a The combined total committed to finance transactions in this sector also experience a slight dip, down 16.1%, to approximately made announced $1.86 billion. One simple two deals apiece: reported factor at work Diaverum prices. is that fewer deals that came with disclosed prices in 213 about and LifeLabs Medical Laboratory publicly Services. traded Six of the company, targets were as publicly well as traded the 28%--compared with the situation in 212, when 43% of the transactions announced reported prices. corporations, and the rest were all privately held. assumption of $255 million in outstanding debt. LABORATORIES, MRI & DIALYSIS TRANSACTIONS This deal now ranks as the second-largest The largest deal in this sector was consummated between two Canadian announced companies, as last LifeLabs five years. Medical Laboratory Total Deals Announced Services agreed to pay $1.22 billion for CML HealthCare Inc., a leading diagnostic imaging provider, processing more Deals with Announced Prices Combined than Purchase 4 million Price ($ millions) tests annually. $9.5 The $2,272.5 price $6,2. included $2,213.8 $1.75 $1,855.6 per share for all 1 issued LARGEST and LABS, outstanding MRI & DIALYSIS shares TRANSACTIONS, of CML, which Source: was Health a publicly Care M&A News, traded March 214 company, as well as the assumption of $255 million in outstanding debt. This deal now ranks as the A total second-largest of 3 buyers announced announced 36 deals. Twelve in publicly the traded last companies five years. announced 16 deals. Of those, DaVita and Quest Diagnostics had three deals each. Among the 17 privately held companies that made acquisitions, two companies made two deals A apiece: total Diaverum of 3 and buyers LifeLabs Medical announced Laboratory Services. 36 Six deals. of the targets were publicly traded corporations, and the rest were all privately held. Twelve publicly traded companies announced The largest deal in this sector was consummated between two Canadian companies, as LifeLabs Medical Laboratory Services agreed 16 to pay deals. $1.22 billion Of for CML those, HealthCare DaVita Inc., a leading and diagnostic Quest imaging provider, processing more than 4 million tests annually. The price included $1.75 per share for all issued and outstanding shares of CML, which was a publicly Diagnostics traded company, as well had as the three assumption deals of $255 each. million in Among outstanding debt. the This deal now ranks as the second-largest announced last five years. 17 privately held companies that made Health Care M&A 21 st Century, First Edition, 215 acquisitions, two companies made two deals 9 Transactions Acquirer Target Price Year Fresenius Medical Care Liberty Dialysis Holdings $2,1,, 211 LifeLabs Medical Laboratory Services CML HealthCare Inc. $1,22,, 213 Laboratory Corp. of America Holdings Genetic testing business $925,, 21 Thermo Fisher Scientific Inc. One Lambda $925,, 212 Quest Diagnostics, Inc. Athena Diagnostics $74,, 211 DaVita, Inc. DSI Renal, Inc. $73,, 211 Miraca Holdings, Inc. Caris Diagnostics, Inc. $725,, 211 Novartis AG Genoptix, Inc. $47,, 211 Fresenius Medical Care American Access Care Holdings $385,, 211 Illumina, Inc. Verinata Health, Inc. $35,, Health Care M&A 21 st Century, First Edition, 215 9

9 Health Care M&A 21 st CENTURY HealthCareMandA 9

10 Health Care M&A 21 st Century Edition Long-Term Care Activity seniors housing and care M&A market continues to grow. In the private pay seniors housing side (independent and assisted living), the market has been positively impacted by the improving economy and the housing market in general, as well as the rising wealth of the seniors population as the stock market hit record highs. Occupancy across the sector has also improved over the past two years, with the only headwind being the recent increase in new development of assisted living and memory care communities. In the skilled nursing side of the business, the Affordable Care Act has had some impact on acquisition activity, as buyers are making more strategic acquisitions than past that position them for greater market concentration and local relationships rather than just for the sake of growth. Pressure will continue on Medicare reimbursement, but there may be more sources of Medicare revenue (meaning different types of skilled nursing patients) that could offset lower Medicare rates. LONG-TERM CARE Activity seniors housing and care M&A market continues to grow. In the private pay seniors housing side (independent and assisted living), the market has been positively impacted by As can be seen below, there have been four straight the improving economy and the housing market in general, as well as the rising wealth of the seniors population as the stock years market of hit record senior highs. care M&A activity that has exceeded $9 Occupancy billion across the in sector each has also year. improved Whether over past the two years, market with the will only ever headwind hit being the recent increase in new development of assisted living and memory care communities. In the skilled nursing side of the business, levels the Affordable of 26 Care Act and has had 27 some impact again on acquisition unknown, activity, as buyers but are with making the more strategic acquisitions than past that position them for greater market concentration and local relationships rather than decreasing just for the sake of number growth. Pressure of will large continue publicly on Medicare reimbursement, traded operating but there may be more sources of Medicare revenue (meaning different types of skilled nursing patients) that could offset lower Medicare companies rates. (and only one with a market cap above $1. As can be billion), seen below, there any have surge been four straight in dollar years of senior value care M&A would activity that have has exceeded to come $9 billion in each year. Whether the market will ever hit the levels of 26 and 27 again is unknown, but with the decreasing number of large publicly from traded the operating REIT companies side (and of only the one with business. a market cap above $1. billion), any surge in dollar value would have to come from the REIT side of the business. In the senior care market, however, 213 was the fourth straight year of an increase in announced transactions, setting a record for the third year in a row. There were 225 publicly announced acquisitions in 213, an approximately 2% increase over 212, which itself had a 9% increase over 211. This is an acquisition market with In the senior care market, however, 213 was the fourth straight year of an increase in announced transactions, setting a record for the third year in a row. There were 225 publicly announced acquisitions in 213, an approximately 2% increase over 212, which itself had a 9% increase over 211. This is an acquisition market with depth, since there are usually six to a dozen buyers bidding on each marketed property or portfolio, and sometimes more. One of the problems for seniors housing and care operators is that they have been crowded out of the acquisition market by the growth in depth, since there are usually six to a dozen buyers bidding on each marketed property or portfolio, and sometimes more. One of the problems for seniors housing and financial buyers. care operators is that they have been crowded out of the acquisition market by the growth in financial buyers. In 213, about one-third of the announced transactions were by public or non-traded REITs. Some of these were traditional sale/leaseback financings that we view as non-arm s length for the pricing multiples later on in this report, but very often these REITs, especially the non-traded REITs, are teaming up with some of those enormous returns. providers who have not been able to compete market. There are a record number of publicly traded health care REITs, and also a record number of the non-traded health care REITs that, in many cases, are trying to grow as fast as possible in order to go public, Health Care M&A 21 st Century, First Edition, or will look to the larger REITs for an exit strategy. Even though the Big Three have been less active than past, at least for the sub-$5 million transactions, any void created has been filled by the smaller public REITs, which have now started doing transactions hundreds of millions, which is somewhat new for them. In addition to the REITs, private equity firms continue to be attracted to the senior care space, especially since as a separate real estate class it has shown not only stability, but also above market returns as some private equity groups have already flipped their previous acquisitions for enormous returns. In 213, about one-third of the announced transactions were by public or non-traded REITs. Some of these were traditional sale/leaseback financings that we view as non-arm s length for the pricing multiples later on in this report, but very often these REITs, especially the non-traded REITs, are teaming up with some of those providers who have not been able to compete market. There are a record number of publicly traded health care REITs, and also a record number of the non-traded health care REITs that, in many cases, are trying to grow as fast as possible in order to go public, or will look to the larger REITs for an exit strategy. Even though the Big Three have been less active than past, at least for the sub-$5 million transactions, any void created has been filled by the smaller public REITs, which have now started doing transactions hundreds of millions, which is somewhat new for them. In addition to the REITs, private equity firms continue to be attracted to the senior care space, especially since as a separate real estate class it has shown not only stability, but also above market returns as some private equity groups have already flipped their previous acquisitions for 1 Health Care M&A 21 st Century, First Edition,

11 Deal volume continued to decrease Physician Medical Group sector in 213, although not at the rate seen between 211 and 212. There were 65 transactions made public in 213, compared with PHYSICIAN MEDICAL GROUP TRANSACTIONS 7 the year before. M&A activity is dominated by specialty physician practice management groups (PPMs) in fields such as cardiology, hospitalist services, radiology, neonatology, oncology and pathology. In 213, only six hospitals and three integrated health systems announced an acquisition of a physician practice, compared with 49 deals announced by PPMs. Of all the health care sectors, physician medical group deals are Announced the most Physician difficult Medical to find Group Health Care M&A 21 st Century, First Edition, prices 215 for; Mergers & Acquisitions therefore, we believe the figures table underreport the combined purchase prices. That is certainly 12 9 one factor 6 behind the enormous difference between 212 s reported 3 $4.4 billion in 18 combined spending versus the $583 million reported in 213. In 212, DaVita Inc. paid $4.2 billion to acquire HealthCare Partners, which operated medical groups with 7 physicians and physician networks comprised of 1,8 physicians. Without that deal, this sector s combined total would have been $191 million in 212, and would have put the $583 million reported in 213 in a much more positive light. Health Care 21 st M&A CENTURY Physician Medical Groups PHYSICIAN MEDICAL GROUPS Hospitals and integrated delivery systems slowed their acquisition binge considerably Hospitals beginning and in integrated 212. delivery systems slowed their acquisition binge considerably beginning in 212. Deal volume continued to decrease Physician Medical Group sector in 213, although not at the rate seen between 211 and 212. There were 65 transactions made public in 213, compared with 7 the year before. M&A activity is dominated by specialty physician practice management groups (PPMs) in fields such as cardiology, hospitalist services, radiology, neonatology, oncology and pathology. In 213, only six hospitals and three integrated health systems announced an acquisition of a physician practice, compared with 49 deals announced by PPMs. Transactions Health Care M&A 21 st Century, First Edition, A total of 34 acquirers announced 65 deals in 213. Seven publicly traded corporations had a combined total of 35 deals. MEDNAX announced 11, IPC The Hospitalist Company had 1, TeamHealth had 1, and the remaining four companies did one deal each. Twelve not-for-profit organizations announced one deal each. Fourteen privately held companies announced 17 deals; Prospira Pain- Care, Inc. made three deals and DermOne Dermatology Centers made two. None of the targets were publicly traded corporations or subsidiaries, and all were privately owned except for two not-for-profits organizations. Combined Purchase Price ($ millions) $99.1 $425.4 $465. $4,411.5 $583.2 Source: Health PHYSICIAN Care M&A MEDICAL News, March 214 GROUPS Hospitals and integrated delivery systems slowed their acquisition 1 LARGEST PHYSICIAN MEDICAL GROUP TRANSACTIONS, binge considerably beginning in 212. A total of 34 acquirers announced 65 deals in 213. Seven publicly traded corporations had a combined total of 35 Acquirer deals. Target Price Year MEDNAX Deal announced volume continued 11, IPC to The decrease Hospitalist Physician Company Medical had 1, Group TeamHealth sector in 213, had although 1, and not the at remaining the rate seen four between companies DaVita, Inc. HealthCare Partners, LLC $4,22,, 212 did one deal 211 each. and 212. Twelve There not-for-profit were 65 transactions organizations made public announced in 213, compared one deal with each. 7 the Fourteen year before. privately M&A held activity companies is dominated by specialty physician practice management groups (PPMs) in fields such as cardiology, hospitalist services, Metropolitan Health Networks, Inc. Continucare, Inc. $416,, 211 announced 17 deals; Prospira PainCare, Inc. made three deals and DermOne Dermatology Centers made two. None of the radiology, neonatology, oncology and pathology. In 213, only six hospitals and three integrated health systems Northwestern Memorial Northwestern Medical Faculty targets were publicly traded corporations or subsidiaries, and all were privately owned except for two not-for-profits announced an acquisition of a physician practice, compared with 49 deals announced by PPMs. HealthCare Foundation $388,88, 213 organizations. Transactions Announced Physician Medical Group Mergers & Acquisitions Of all the health care sectors, physician medical group deals are the most difficult to find prices for; therefore, we believe the figures table underreport the combined purchase prices. That is certainly one factor behind the enormous difference between 212 s reported $4.4 billion in combined spending versus the $583 million reported in 213. In 212, DaVita Inc. paid $4.2 billion to acquire HealthCare Partners, which operated medical groups with 7 physicians and physician networks comprised of 1,8 physicians. Without that deal, this sector s combined total would have been $191 million in 212, and would have put the $583 million reported in 213 in a much more positive light. PHYSICIAN MEDICAL GROUP TRANSACTIONS Total Deals Announced Deals with Announced Prices Combined Purchase Price ($ millions) $99.1 $425.4 $465. $4,411.5 $ Of all the health care sectors, physician medical group deals are the most difficult to find prices for; therefore, we believe the figures table underreport the combined purchase prices. That is certainly one factor behind the enormous difference between 212 s reported $4.4 billion in combined spending versus the $583 million reported in 213. In 212, DaVita Inc. paid $4.2 billion to acquire HealthCare Partners, which operated medical groups with 7 physicians and physician networks comprised of 1,8 physicians. Without that deal, this sector s combined total would have been $191 million in 212, and would have put the $583 million reported in 213 in a much more positive light. Total Deals Announced Deals with Announced Prices The largest deal announced in 213 in this sector that made the list of top 1 transactions dating back to 29 was the $389 million acquisition of the Northwestern Medical Faculty Foundation, a 9-physician entity, by Northwestern Memorial Healthcare, an integrated health system that includes the 868-bed Northwestern Memorial Hospital, Northwestern Memorial Foundation and Northwestern Lake Forest Hospital. The deal closed on September 1, 213. Carle Foundation Hospital Carle Clinic Association $25,, 21 Radiation Therapy Services, Inc. OnCure Holdings, Inc. $125,, 213 Cadence Health OAD Orthopaedics $75,4, 212 Community Health Systems, Inc. Diagnostic Clinic of Longview, PA $64,3, 212 TeamHealth Morningstar Emergency Physicians $57,9, 21 Community Health Systems, Inc. Rockwood Clinic, P.S. $54,2, 29 Mednax, Inc. Greensboro Anesthesia Physicians, PC $5,, 21 The largest deal announced in 213 in this sector that made the list of top 1 transactions dating back to 29 was the $389 million acquisition of the Northwestern Medical Faculty Foundation, a 9-physician entity, by Northwestern Memorial Healthcare, an integrated health system that includes the 868-bed Northwestern Memorial Hospital, Northwestern Memorial Foundation and Northwestern Lake Forest Hospital. The deal closed on September 1, 213. A total of 34 acquirers announced 65 deals in 213. Seven publicly traded corporations had a combined total of 35 deals. MEDNAX announced 11, IPC The Hospitalist Company had 1, TeamHealth had 1, and the remaining four companies did one deal each. Twelve not-for-profit organizations announced one deal each. Fourteen privately held companies announced 17 deals; Prospira PainCare, Inc. made three deals and DermOne Dermatology Centers made two. None of the targets were publicly traded corporations or subsidiaries, and all were privately owned except for two not-for-profits organizations. Health Care M&A 21 st Century, First Edition, HealthCareMandA 11

12 Health Care M&A 21 st Century Edition Biotechnology Thirty-four transactions were announced Biotechnology sector during the second quarter, representing 3% of the 115 deals made last 12 months. Eight transactions were conducted by privately held acquirers and 26 by publicly traded companies. Twenty-four of the targets were privately held, and 1 were held by publicly traded companies Five of the targets were based outside the United States, in China, India, Israel and The Netherlands. Only two of the acquirers were foreign-based, in Canada and Mexico. Nine transactions involved acquiring the license to compounds or therapies, and two of the licensees were American universities. Just one deal made the list of the five largest transactions recorded past year. Glaxo- SmithKline paid $5.25 billion to Novartis for its global vaccine business. The Novartis vaccine portfolio and pipeline includes Bexcero, a new vaccine for the prevention of meningitis B, but excludes its influenza vaccines. The acquisition will significantly enhance the breadth of Glaxo- SmithKline's vaccines portfolio and pipeline, specifically in meningitis. It will also strengthen GSK's manufacturing network and reduce supply costs. The transaction is expected to close first half of

13 Health Care 21 st M&A CENTURY Three companies made two acquisitions apiece second quarter. Cancer Genetics paid a combined $6.55 million for Gentris Corporation, based in New Jersey, and BioServe Biotechnologies in India. Janssen acquired the licenses to two therapies. One was for a prostate cancer treatment ($365 million) and the other was for the global license to Vertex influenza treatment ($3 million). Techne Corporation acquired two companies: ProteinSimple was purchased for $3 million, and the Shanghai PrimeGene Bio-Tech Co. in China was purchased for an undisclosed price. 52% 52% 12% 12% 7% 15% 14% 14% 7% 15% Biotechnology ehealth Medical Devices Pharmaceuticals Services Biotechnology ehealth Medical Devices Pharmaceuticals Services WELLS FARGO capital FinAncE Offering financing for: Working capital capital expenditures Organic growth M&A and management buyouts Refinancing existing debt Stock repurchase or dividends We need a lender that speaks our language. Change is a constant for healthcare companies. You need a lender who understands the industry and can adapt quickly. The Healthcare team at Wells Fargo Capital Finance understands your business complexities and speaks your language. As part of a financial institution known for its strength and stability, let us help promote your business financial well-being while you preserve the well-being of others. To learn more, call or visit wellsfargocapitalfinance.com/healthcare. 213 Wells Fargo Capital Finance. All rights reserved. Products and services require credit approval. Wells Fargo Capital Finance is the trade name for certain senior secured lending services of Wells Fargo & Company and its subsidiaries. MC-6189 (6/13) HealthCareMandA 13

14 Irving Levin Associates, Inc. Target Health Care s Top M&A Players Health Care M&A 21 st Century Conference Distribution List Month Conference* Location 215 May BioTrinity 215 London, UK MedTech Investing Conference Minneapolis, MN National Healthcare CFO & CXO Palm Beach, FL June Venture Capital Investing Conference San Francisco, CA Private Equity Investment in Provider Healthcare New York, NY ACG Healthcare M&A Conference Chicago, IL July Oncology Partnering & Dealmaking Boston, MA California Healthcare Transactions California Anti-Infectives Partnering & Dealmaking Boston, MA mhealth + Telehealth World Boston, MA AM&AA Summer Conference Chicago, IL September Consumer Health & Wellness Innovation Summit San Francisco, CA Healthcare Deal Making Summit Nashville, TN Healthcare Forum Boston, MA CNS Partnering & Dealmaking Boston, MA BioPharm America San Diego, CA October HealthTech Conference San Mateo, CA Investment and M&A Opportunities in Healthcare Chicago, IL National Healthcare CFO & CXO Las Vegas, NV Healthcare Provider Technology M&A Forum New York, NY November BioPharm Insight Healthcare Forum New York, NY Digital Health Care Innovation Summit Boston, MA December mhealth Summit and Venture+ Forum Washington, DC RealShare Healthcare Real Estate Scottsdale, AZ 216 January Biotech Showcase San Francisco, CA February Super Investor US San Francisco, CA Corporate Venturing & Innovation Partnering Conference Newport Beach, CA Investment and M&A Opportunities Nashville, TN March Healthcare Europa Conference London, UK Financing Innovation & Tech. in Healthcare Conference Chicago, IL April World Healthcare Congress National Harbor, MD MidAmerica Healthcare Venture Forum Chicago, IL Diabetes Partnering & Dealmaking Boston, MA Stem Cell Commercialization & Partnering Boston, MA * Based on 214 agreements. Distribution schedule subject to change.

15 Irving Levin Associates, Inc. Health Care M&A 21 st Century Advertising Rate Sheet Half Page Vertical 3.5" x 9.19" Quarter Page 3.5" x 4.375" Full Page 7.32" x 9.19" Half Page Horizontal 7.32" x 4.375" ADVERTISING RATES Size Price (4 color) Full Page 7.32" x 9.19" $4,987 Half Page Horizontal 7.32" x 4.375" $3,587 Half Page Vertical 3.5" x 9.19" $3,587 Quarter Page 3.5" x 4.375" $1,937 Please send press-optimized PDFs. Max file size 5MB. No Bleed. Call or today to reserve your space! Bookings must be made by April 15, 215. Spaces are limited and available on a first come, first served basis. Contact Jeanne Aloi at [email protected] or ext. 27. This commemorative issue will be distributed at more than 25 health care investment conferences in 215 and 216.