Healthcare Banking Overview

I am interested in getting some information on the healthcare investment banking. I have read some of the other posts and found out names of some of the players, but have not found anything that could give me extensive info on industry background. Any books or online literature you can recommend? I am interested in finding out if this is best way for me to combine my Life Science/Medical background with an interest in banking. I have taken basic finance courses: intro, one on strategy etc. What is the job market like especially for those looking to just start out in the industry as intern/analysts.

Breaking Into Healthcare Investment Banking

HC investment banking is almost always a good branch of investment banking to be in considering the fact that there is constant innovation and start-ups in this space that will be acquired by the large cap health care companies. Additionally, it is a business in which scale matters in order to fund R&D so acquisitions to develop scale will frequently be in the best interest of businesses regardless of the M&A environment.

Cries - Asset Management Vice President:
Healthcare is, and will continue to be a great industry to cover. It makes up a gigantic portion of the GDP, and some sub-sector is always rolling-up. Tons of deals, especially because the government cant make up its mind on how it wants to do reimbursements, or what sorts of laws it wants to pass that will reform the entire industry.

There's a lot of downward pricing pressure, and there will continue to be as long as the government & MCOs run the show. It's gonna be a booming market for many years to come as providers attempt to cut costs by consolidating, and as med device companies try to invent more efficient/cheaper ways to deliver the same services.

Read some industry reports from Moody's or S&P. They're pretty all-encompassing. Many larger schools have access to these industry reports. Alternatively, read initiating reports from the big banks. Try to find an initiating report for one of the major players in each sub-sector of healthcare. I would definitely focus on big pharma, MCOs, Med devices, and clinical testing if you are just starting out.

User deal_mkr, an investment banking analyst, shared details about the different industries that fall within HC IB:

deal_mkr - Investment Banking Analyst:
Healthcare is generally broken down like this:
  • Medical technology / Equipment (J&J)
  • Pharmaceuticals, which is further broken down into more mature companies with a wide portfolio of marketed drugs (Pfizer) and smaller biotech companies which may be listed publicly and have 9-figure valuations based solely on a product in clinical trials, despite no revenue. These smaller companies generally look to get acquired or license their product to one of the big boys, and these licensing deals can run into the hundreds of millions of dollars, even before the product is approved. Therefore there is always lots of deal activity in this sector.
  • Medical Services (Hospitals)

Out of these Pharma/Life Sciences is the most niche-y -

Read an analyst report on a life-science company and it will be unlike an analyst report for a more conventional company - lots of detailed far out revenue projections broken down by product and detail on clinical trials, usually written by guys with PhD's.

Additionally, there is very little debt financing for many of these companies so the models will not include big debt schedules and you can forget about LBOs

Healthcare IBanking Recruitment

thatch:
I work at a pretty decently recognized HC bank on the street and in terms of analysts...we generally care more about general intelligence whether it be in finance specifically or in pharma. One of the analysts here has no finance background but has a science background from school and he's doing great. I'm the complete opposite, no science background at all and pure finance and i'm doing aight.
In terms of the degree, it's not impossible but we focus our recruiting efforts generally where the analysts graduated from. So this fall, i'll be going back to my alma mater for recruiting and likewise for the other analysts. Not to say we don't consider other schools outright but our initial outreach is limited by resources. If we consider a candidate from a diff school its usually through a referral or a client reaching out or just cold calling.

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Comments (88)

 
Aug 14, 2011 - 8:06pm

Healthcare is, and will continue to be a great industry to cover. It makes up a gigantic portion of the GDP, and some sub-sector is always rolling-up. Tons of deals, especially because the government cant make up its mind on how it wants to do reimbursements, or what sorts of laws it wants to pass that will reform the entire industry.

There's a lot of downward pricing pressure, and there will continue to be as long as the government & MCOs run the show. Its gonna be a booming market for many years to come as providers attempt to cut costs by consolidating, and as med device companies try to invent more efficient/cheaper ways to deliver the same services.

Read some industry reports from Moody's or S&P. They're pretty all-encompassing. Many larger schools have access to these industry reports. Alternatively, read initiating reports from the big banks. Try to find an initiating report for one of the major players in each sub-sector of healthcare. I would definitely focus on big pharma, MCOs, Med devices, and clinical testing if you are just starting out.

Array

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Aug 16, 2011 - 6:07pm

So far I have only managed to find tidbits of info and looked into the profiles of some of the key players and recent developments. One thing that has come over and over by at least reading the threads is that it seems that by choosing to pursue this field you risk getting pigeon holed and would have a hard time transferring to other areas of banking due to a narrow exposure. Do you think this is entirely true? Not that I think that is very likely to happen because my interest is certainly here, but would it make it impossible to switch in the future?

Also, what is the compensation in healthcare based on? I mean I am sure it is the usual base salary + performance based bonuses like other areas, but are they prone to frequent fluctuations like the industry itself? In general what could someone starting out expect in terms of pay and what potential is there for growth. Is it on par with other operations that banking focuses on? I am really interested in heathcare innovation, med devices and LIFE SCIENCES in general so I think I would really like this field, but I feel quite uncertain not knowing what I am going to get myself into.

If I have completed a Life Sciences degree and introductory finance courses, how far away am I from being prepared to apply for summer internships? Do I have to take more advanced courses? Do most College students apply only after Junior Year?

 
Aug 17, 2011 - 12:49am

palma:
So far I have only managed to find tidbits of info and looked into the profiles of some of the key players and recent developments. One thing that has come over and over by at least reading the threads is that it seems that by choosing to pursue this field you risk getting pigeon holed and would have a hard time transferring to other areas of banking due to a narrow exposure. Do you think this is entirely true? Not that I think that is very likely to happen because my interest is certainly here, but would it make it impossible to switch in the future?

Also, what is the compensation in healthcare based on? I mean I am sure it is the usual base salary + performance based bonuses like other areas, but are they prone to frequent fluctuations like the industry itself? In general what could someone starting out expect in terms of pay and what potential is there for growth. Is it on par with other operations that banking focuses on? I am really interested in heathcare innovation, med devices and LIFE SCIENCES in general so I think I would really like this field, but I feel quite uncertain not knowing what I am going to get myself into.

If I have completed a Life Sciences degree and introductory finance courses, how far away am I from being prepared to apply for summer internships? Do I have to take more advanced courses? Do most College students apply only after Junior Year?

Healthcare generally has a beta

 
Aug 17, 2011 - 2:02am

Healthcare is generally broken down like this:

Medical technology / Equipment (J&J)

Pharmaceuticals, which is further broken down into more mature companies with a wide portfolio of marketed drugs (Pfizer) and smaller biotech companies which may be listed publicly and have 9-figure valuations based solely on a product in clinical trials, despite no revenue. These smaller companies generally look to get acquired or license their product to one of the big boys, and these licensing deals can run into the hundreds of millions of dollars, even before the product is approved. Therefore there is always lots of deal activity in this sector.

Medical Services (Hospitals)

Out of these Pharma/Life Sciences is the most niche-y -

read an analyst report on a life-science company and it will be unlike an analyst report for a more conventional company - lots of detailed far out revenue projections broken down by product and detail on clinical trials, usually written by guys with PhD's.

Additionally, there is very little debt financing for many of these companies so the models will not include big debt schedules and you can forget about LBOs

I dont have much experience with the other two sectors

Def interested in hearing others' perspectives on the space

 
Aug 17, 2011 - 2:16am
  • Pigeonholing is subjective: obviously a REIB guy will know more about REITs than you do. but you'll likely know more about your chemical compounds than he does. Needless to say, Healthcare IB is like another language, which based on your LS background you seem equipped to understand how things come together.
  • Job market will always be there: healthcare affects everyone. I couldn't give 2 shits if I didn't shop for clothes in a year. But I'd be worried if I couldn't get my prescriptions filled out.
  • VCs are a good path if you're thinking 'exit opps' and really want to dig into these kinds of companies.
 
Aug 17, 2011 - 8:05pm

All that makes the sector seem very interesting to work in acutally. I just read my last post and realized that I just fired away with questions one after another...guess I should have asked them in pieces. In any case, I am thinking about the possibility of appyling for a summer position as an analyst because I guess right now there are probably no analyst positions out there? I looked at the career section of a couple of different HC focused firms and for starting analyst positions they don't require a lot of previous finance experience so it might be good for me since I have none. Do you think I would stand a chance of landing a position like this next summer if I have a 3.9 GPA in my UG Life Sci degree + fin courses. Also, just to throw a curveball...I am from the socialist-rye sipping-bacon perfecting-hockey worshipping-frozen landmass just above y'all. Does that make a difference when applying to the US? If it helps my degree is from a school targetted by most big IBs: Queen's University (still you may not have heard of it). For now, what do you think I should be looking into to help solidify my resume, do more fin courses or land a job on the business side of Pharma?

 
Aug 17, 2011 - 8:15pm

palma:
Does that make a difference when applying to the US? If it helps my degree is from a school targetted by most big IBs: Queen's University (still you may not have heard of it). For now, what do you think I should be looking into to help solidify my resume, do more fin courses or land a job on the business side of Pharma?

i work at a pretty decently recognized hc bank on the street and in terms of analysts...we generally care more about general intelligence whether it be in finance specifically or in pharma. one of the analysts here has no finance bkground but has a science bkground from school and he's doing great. im the complete opposite, no science bkground at all and pure finance and i'm doing aight.

in terms of the degree, it's not impossible but we focus our recruiting efforts generally where the analysts graduated from. so this fall, i'll be going back to my alma mater for recruiting and likewise for the other analysts. not to say we dont consider other schools outright but our initial outreach is limited by resources. if we consider a candidate from a diff school its usually through a referral or a client reaching out or just cold calling.

feel free to PM if you have any qs.

 
Aug 17, 2011 - 10:28pm

@ Palma:

  1. Your entire school is not a target. The Commerce program at your school is a target. And only the top 5 % of the program will end up in IB.

  2. It is not targeted by "most IBs". It is only targeted by GS in NY (which takes anywhere from 0 to 5, depending on the year). The rest of the IBs that target it are Canadian.

@ Everyone else:

How much of an advantage is it to have a science background for HC IB. Is it even an advantage?

 
Aug 17, 2011 - 11:02pm

seedy underbelly:
@ Palma:
  1. Your entire school is not a target. The Commerce program at your school is a target. And only the top 5 % of the program will end up in IB.

  2. It is not targeted by "most IBs". It is only targeted by GS in NY (which takes anywhere from 0 to 5, depending on the year). The rest of the IBs that target it are Canadian.

@ Everyone else:

How much of an advantage is it to have a science background for HC IB. Is it even an advantage?

Well, I guess it is as target as a Canadian school can be. I don't know which banks recruit from Commerce these days, but as early as 2008, I remember seeing recruiters on campus from the different banks as well as info sessions. Although, some of them were for Canadian offices of American Banks. I am guessing a LS/HC background is probably not the end all be all advantge, but it gives you a little bit more to talk about in the interview when they ask "Why healthcare?" and it is a smaller learning curve in getting to know the products (HC innovation vary so greatly and paradigm shifts take place all the time in the science). Finally, if you have a passion for the industry that might make ones work more interesting. Those are my guesses...

Though, I think it is just as important to shine in Fin courses as well...because I don't think I would consider banking in general if I did not do well in them despite my LS background.

 
Aug 18, 2011 - 10:00pm

Ah the long awaited one...yessir! I was also wondering, being clueless, if right now is the time to apply for analyst positions for the coming year or summer? It seems a couple of people have posted about interviews etc. at the firms I am interested in.

 
Aug 18, 2011 - 10:01pm

Breaking into Healthcare Investment Banking (Originally Posted: 08/02/2014)

Hello to all,

I am on a crossroad in my career and I need an advice. I have a PhD in cell biology from ETH Zurich and 2 years of work in biotech industry in Switzerland. I would like at this point to make a transition to IB although I am not sure how. I have been looking for master programs and I like the Master in Management at HEC Paris (2 years with a gap year for an internship + a specialization in finance in 2nd year; I am 28 years old now, a bit old for the program although I like the curriculum). The alternative is going to an MBA (I was thinking of INSEAD or LBS, but I don't know does working on a PhD count as a work experience..) Any advice would be appreciated.

All the best.

 
Aug 18, 2011 - 10:02pm

There are actually relatively few people in healthcare investment banking that have healthcare backgrounds, especially at the junior level. Healthcare experience is really only a secondary factor, if at all. The best way to break into healthcare investment banking is to have the right skills and aptitude for corporate finance and investment banking itself, not healthcare.

My advice would be to go to business school, as it is extremely difficult to lateral from outside the industry. Once you are in the recruiting process for internships and focused on IBD recruiting, THEN you can convey that healthcare is your "first choice" coverage group.

 
Aug 18, 2011 - 10:04pm

Thanks for the answers So what would you advise me to do with the education? Master in Management at HEC Paris, or maybe Master in Finance at University Saint Gallen? Or na MBA (although i don't know whether I am qualified for that with 2 years of work)

 
Aug 18, 2011 - 10:05pm

I am not too familiar with those other degrees, but think you would be at a severe disadvantage going into recruiting if your primary focus was investment banking. I'm sure it's possible but likely an uphill battle. Fact of the matter is that most banks simply focus their associate recruiting on MBA programs and do not have a process in place for other masters' degrees.

 
Aug 18, 2011 - 10:09pm

Healthcare Investment Banking - Healthcare/HC investment industry? (Originally Posted: 06/03/2010)

Hey guys, I was wondering if anybody knows of a site or readings about the healthcare/HC investment banking industry. I'll be starting in the HC group in a week, and just wanted to get myself acquainted with the terminologies and trends.

thanks in advance!

 
Aug 18, 2011 - 10:14pm

Healthcare IB - Interest has grown (Originally Posted: 05/08/2008)

Over the past couple months, my interest has grown in potentially working in a healthcare group within IBD. That said, I've also come to the conclusion that I don't know much about the industry or what is truly unique about it. So to make sure it is a group I want to pursue and to help prepare for FT interviews next fall, I was hoping some people on here that have experience in this realm could give me more specifics.

First, are there any aspects of deals in the healthcare sector that are unique in comparison to other sectors? Are the financial statements similar to firms in other industries, e.g. more/less debt, revenues, etc?

I don't come from anything close to a science background, so will this put me at a distinct disadvantage in interviews? Where are the best sources for info on healthcare related deals?

Finally, where do you see the industry going over the next 5-10 years? As an outsider, it seems like the industry could really take off in terms of deal activity because of technological advancements and baby boomers retiring, but I could be wrong.

Any info or opinions would be greatly appreciated.

 
Best Response
Aug 18, 2011 - 10:15pm

Health Care banking can be split simply into two categories: Services and Life Sciences (some may argue that Managed Care deserves it's own split, but I guess technically it's a service provided).

Services include hospitals, assisted living / skilled nursing facilities, HC IT, healthcare staffing, CROs/CMOs, labs, managed care, equipment suppliers, distribution, etc. These companies tend to have capital structures which allow them to take on sizable amounts of debt and on the whole the clients are much bigger companies. Their financial statements look very similar to every others (with the exception Managed Care, which look similar to FIG companies). However, for facility-based companies with heavy proprietary real-estate assets, you may use EBITDAR instead of EBITDA (and subsequent ratios such as Adj. Debt / EBITDAR, etc.).

Life Sciences companies include big pharma, biopharma, biotech, medical devices, diagnostics - basically anything requiring heavy R&D expenditures that don't provide a service. These companies can be big (GSK, Wyeth, Teva, Forest Labs, Abbott, Stryker) or tiny start-ups. The bigger companies typically need the same investment banking products as any other large, publicly traded corporation. The smaller companies tend to focus on equity products - namely, going public.

A hard science background is not needed for health care banking. Unlike a group like Consumer or Industrial, you won't see a ton of bankers jumping ship to be researchers or vice versa (although by nature of interest, more people with hard science backgrounds tend to be interested in health care, but not many). Bankers are purely there for financial expertise and execution, rarely do they provide any product advice to the clients. Usually the clients they are speaking to have hard science backgrounds and could run circles around the bankers. That doesn't mean the bankers don't do their best to understand the products and the science behind them, but they don't fool themselves into thinking they are going to provide value to specific company about the products themselves. It's more high level - i.e. "your company has a product that is going off patent soon, generics will be squeezing any margins you may have, why don't you acquire another smaller company that's currently in Phase III with a similar Hepatitus C drug" etc.

Maybe when I have more time and it's not nearing the end of a long and hungover Friday that I'll go into my 5-10 year view of the health care industry, but hopefully that helps. If you have an interest in health care, don't let the rumors about the hours scare you off. I think you should put personal interest and cultural fit first when choosing a group.

Aug 18, 2011 - 10:17pm

Great summary from GameTheory - a couple other things I'd point out on healthcare:

-As he alluded to, you will tend to gain more "finance" exposure in terms of modeling if you work in healthcare services but you will gain more "market" knowledge if you do life sciences because you work with a lot of tiny startups and big companies looking to acquire tiny startups.

Of course, with current market conditions there aren't too many debt deals/LBOs going on, so who knows how true this generalization is currently. Just my observation from some healthcare IB friends over the past few years and what they learned in different groups.

-A lot of people on this board have asked about "recession-resistant" groups, and I think healthcare is at or near the top of that list. Perhaps life sciences are more risky, but healthcare services are needed regardless of what the economy is like or how many writedowns banks report.

You're unlikely to see many mega-LBO deals like HCA over the next several years, but I'd say overall dealflow in healthcare will probably be stronger than in higher "recession-beta" sectors like consumer/retail.

-Although you don't need a hard science background to do it, I think having some kind of background or showing a strong interest definitely gives you an advantage. That was my experience when interviewing for various industry groups 2 years ago anyway.

If you had done business development at Genentech for a few years and then did a finance MBA, for example, that would be great positioning for healthcare IB.

But if you haven't, that's fine too - just make sure you have some compelling reasons for why you want to do it.

I do not work in healthcare IB so not sure what the best source of info. is on related deals, but I would imagine the same sources as for other industries (The Deal, WSJ etc.).

 
Aug 18, 2011 - 10:20pm

Thanks for all the info guys, I appreciate it. I definitely think Healthcare is a group I will push for during FT recruiting.

And GameTheory, add me to the group that would love to hear your thoughts on the sector over the next few years.

 
Aug 18, 2011 - 10:23pm

I doubt my response is anywhere near as earth shattering as you guys may be hoping for. Everyone is aware of the macro factors that are driving the proliferation of the health care industry these days - things like the aging population of the United States, rising health care costs, and up until recently, the reimbursement environment.

Obviously what happens with the much of the services industry is highly dependent on what happens come November. For those of you unfamiliar with the government reimbursement situation in the 90's, the Cost Plus system that the government had adopted to reimburse Medicare, Medicaid, etc. (that is, using a flat reimbursement rate program across the board), allowed many otherwise inefficiently run sectors (i.e. nursing homes, hospitals - anyone with large amounts of government reimbursement risk) to thrive relatively easily. Once the government switched to the PPO system of reimbursement, which changed the levels of reimbursement by level of acuity and complexity of care, there was a tough transition period while inefficiently run organizations either died off or evolved rapidly. It's easy to note that while this claimed the lives of many large, publicly traded health care companies and put many of the healthiest companies on life support, the administration at the time (Bill Clinton) did nothing to from a government standpoint to ease the transition period. It's ironic that organizations like the SEIU are deathly afraid of private equity buyers in the nursing home space (putting images of our nations' poor elderly being put out on the streets) but it was our own administration that did the most damage to the industry in the late 90's early 2000's, but I digress...

Looking into the future it's clear that reimbursement rates are getting cut and will continue to see a decline. It will be interesting to see how the Democrats deal with the funding of government reimbursement programs in the face of implementing universal health care. There is already an active shift of several at-risk facility based companies to pursue a better "payor mix" - that is, more private pay and gov't reimbursement per patient base - with an emphasis on private pay backed patients and an emphasis on adding higher acuity care to capture higher reimbursement. It's hard to see this sector as the crown jewel it once was for leveraged buy-outs, especially with most private equity firms (including mine) shunning all reimbursement risk (the days of playing the arb card of system inefficiencies are over). The big business of utilizing the real estate assets of facility-based companies by layering on CMBS is, for the time being worse-off than even the traditional credit markets. I don't think anyone wants to be touching any pre-packaged, ratings-traunched real-estate products for some time...

The managed care sector will obviously be the most affected come November and beyond. Assuming the proper implementation of a universal health care system that provides adequate care for all who choose to use it (at great cost to the average American taxpayer, no less) will, no doubt be earth-shattering to the larger managed care players. Personally, it's difficult for me to see an easy way to provide universal health care in a legal environment that comes just short of encouraging frivolous medical malpractice lawsuits by rewarding plaintiffs with outsized damages. From a banking perspective, it's difficult to get M&A work out of these companies as they do much of the smaller acquisitions in-house. Most of what you'll see from them is larger follow-on offerings and debt offerings. In the instance of the impending Wellcare acquisition by Humana or United, you'll find there is seldom any loyalty to any firm when you're that big - expect large bake-off processes.

One area which I think there's always upside for is PBMs and other drug distributors. Brand name or generic, there will always be a need for large distribution players. While there is much threat from overseas (namely China and India), until people can get comfortable with their quality control and regulatory environment I think you'll see a good amount of dominance in the U.S. Unfortunately it's hard to see much M&A in the sector as there are really only 3 or 4 major players - although I do think many are looking to move downstream and acquire large retailers and pharmacies.

As far as the life sciences go, it's interesting to see how much of a roller coaster ride it's been for biotech in the equity markets. They come in and out of favor - lately it seems that people have been looking for good biotech plays but none have been able to have enormous amounts of success (except of course, the U.S. listed or dual listed China IPOs). Of course, less access to public markets will make them cheaper targets for bigger corporations. As far as the macro environment goes, however, if you have a good product and the ability to find funding there's always some sort of liquidity event out there, whether it be public filing or acquisition by one of the hungrier, bigger pharma or biopharma companies that need to keep their pipelines alive and their stock prices up.

As it pertains to banking, I see quite a bit of growth in places like Brazil, where universal health care is simply not working and large managed care players are catching all of the fallout from those who can afford private health care plans. You'll see many IPOs coming from that market alone. China and India as global suppliers, manufacturers, and eventually research and development in the long term. Health care staffing is another interesting sector to watch that has been able to weather the economic storm thus far, anyways - there continues to be high demand for qualified health care professionals. Also, I'm somewhat bullish on specialty off-site treatment centers. Radiation therapy centers, kidney dialysis centers - anything that makes treating a debilitating condition without making the patient drive for hours. Low cap-ex (the equipment is usually leased) and most of the centers are privately run - consolidation is obviously a major factor here. I'm keeping an eye on the RTSX/Vestar buyout.

 
Aug 18, 2011 - 10:24pm

As a former Healthcare IB analysts, I agree with Game Theory's sentiment on HC.

I covered the HC Services sector with a heavy emphasis on hospitals, home nursing, hospice, respiratory therapy, durable medical equipment and HCIT.

Understanding the dynamics of the healthcare industry can give you a headache at times as there are many moving parts...CMS reimbursement rates, annual gov't regulations, various compliance measures, etc.

Although time will tell how HC will evolve after November, the industry will continue to grow as the aging population and life expectancy continues to increase. The services sector is highly fragmented. Although the M&A market may be slowing down somewhat, I believe there exist significant opportunities for consilidation in HC services.

 
Aug 18, 2011 - 10:26pm

Hmmm. Interesting perspective Game Theory... particularly interesting to read that you are bullish on specialty off-site treatment centers. I will disagree with you.

I've been working on an analysis of multi-facility dialysis treatment centers and most of them are simply NOT profitable. We're more often concluding on a fair value based on net fixed assets vs. cash flows. Sure, capex is low... what does equipment cost on average? Oh I'd say a typical dialysis machine is about $18K. Leased? Yes. But so what. In spite of the low overhead, simply put, cash flows are not there unless the facility is lucky enough to be run by a Medical Director or Medical Group who has a big following in the area or who is closely connected to a local hospital and thereby is a rainmaker with patients. The reality is that more often than not and dependent ofcourse on geography, most of these types of "off-site" facilities are cannibalized by competition, most have negative margins, most are operated below capacity and most have challenged patient mix profiles. I would not be bullish.

Just my 2 cents...

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Aug 18, 2011 - 10:27pm

Definitely agree with your analysis aadpepsi. I guess maybe since I added it in as a last minute thought I didn't expound on why I think it's a good play. When I said "most are privately owned" I didn't mean that as a good thing. I meant the industry is fractured and a consolidation play is key, there are doctors by profession who aren't businessmen by training running these centers inefficiently (and we all love inefficiency). Maybe they have the ability to drive traffic to their sites through their relationships with mid-sized regional hospitals and the like, but like you said, probably not. Where the upside comes is a regional or even national player snapping up selective sites in good locations and utilizing their existing relationship network to drive traffic and kill off any stragglers that are poorly run (not from a medical standpoint, but from a business standpoint). Many doctors who have partnerships and have small local chains of off-site treatment centers are heavily invested on a personal level and are always looking for the next liquidity event. And oftentimes the price they will exit for they measure in terms of absolute dollars and not necessarily IRR or however else we may look at it. Or, if it makes sense (or the leases are unfavorable), build de novo locations to compete with existing facilities.

From a concept standpoint, it makes perfect sense, however. A patient who needs dialysis will need it for the rest of his or her life, or until a kidney transplant is received. Radiation therapy obviously has less gaurunteed recurring cashflow (patients who need radiation therapy will either move to chemo or go into remission) but with the general trend of cancer rates and subsequent treatment increasing, it makes sense. The alternative being a mid-sized regional hospital, which can result in long waits and long drives, neither of which is desirable to the patient if it can be avoided.

 
Aug 18, 2011 - 10:28pm

Healthcare Investment Banking - Differences in terms of valuation and DCF? (Originally Posted: 03/20/2007)

Anyone know of any good websites to research and learn about the healthcare industry?

Also, what are the differences in terms of valuation and DCF for a healthcare company? Common multiples used?

 
Aug 18, 2011 - 10:30pm

Healthcare IBD FT Analyst Position (Originally Posted: 11/28/2014)

Hey guys,

Got an interview for a FT position at a mid market investment bank dealing in healthcare on Monday (December 1)

Does anyone have any recommendations on websites I could read that will help bring me up to speed on the healthcare sector?

Can anyone point me in the direction of any good threads revolving around healthcare investment banking?

Thanks

Array
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Aug 18, 2011 - 10:31pm

Healthcare has been huge this year - make sure you know all about the tax inversion large pharma deals that happened or were attempted earlier this year. Can't point you to any specific websites, sorry.

 
Jun 22, 2018 - 12:48pm

There's been a lot of deal making over the last year or so (Valeant recently buying Salix comes to mind). Some high profile deals have also fallen through e.g. Abbvie/Shire and Pfizer/Astrazeneca.

It's currently quite a "hot" industry as far as I'm aware.

 
Jun 22, 2018 - 12:49pm

It appears to be the most active sector along with to TMT right now. There have been 38 major M&A deals so far this year in Healthcare to go through and that doesn't count deals that never went through or smaller deals. But the deal volume in healthcare is expected to stay the same or even pickup during Q3 and Q4.

Google "healthcare m&a deals 2015" there are some good lists of all the M&A action related to Healthcare this year and in the past.

 
Jun 22, 2018 - 12:50pm

As everyone has said, HC is probably the most active sector in M&A, and has been for the past 2 years. I'll give you a quick overview of the sectors and the activity in them.

Pharma:
Very active, showing no signs of slowing down. Notable big pharma deals in the past year include Endo/Par, Valeant/Salix, Pfizer/Hospira, Actavis/Allergan. Not to mention the ongoing takeover situations with Teva/Mylan/Perrigo. Plus there are still a good number of mid-sized players in spec pharma that could get swallowed up.

Medical Devices/Tools:
Big players are consolidating, but there's not a lot of room left for big deals. Notable deals in the past year include Danaher/Pall, Becton Dickinson/Carefusion, Medtronic/Covidien, Zimmer/Biomet, Wright/Tornier. The space will probably stay hot between the midcap and smaller players, but the influx of big deals in the past year means that we probably won't see as many big deals in medtech space in the near future.

Biotech:
Less active in M&A, but very active in equity markets. But still a lot of notable deals, including: Alexion/Synageva, Abbvie/Pharmacyclics, Teva/Auspex. Biotech is richly valued right now, so we might not see as much M&A activity in the near future, since most of the big pharma guys won't want to shell out a ton of dough for a single marketed drug.

HC Services:
This is a broad space, but it has been hot for a while now too. Recently we saw CVS/Omnicare, United/Catamaran, Tenet/USPI, and a lot of activity by mid-sized players. Also continuing to see a good amount of equity raises. Yesterday we saw the rumor about Humana's potential sale, so it wouldn't be surprising to see another huge Services deal in the next few weeks.

Despite the inversion craze slowing down, it's still not over. The new rules released in the fall make it a little tougher to get some of the tax benefits of domiciling abroad, but the benefits are still very achievable. I wouldn't be surprised to see a few of the big pharma guys try to invert again (because they are at a huge disadvantage to their inverted competitors, who pay 5-17% tax, rather than the US statutory rate of 35%).

 
Jun 22, 2018 - 12:51pm

Last comment pretty much covers it. One thing I'd add is that lot of HC Services deals are

Array
 
Jun 22, 2018 - 12:52pm

Healthcare IB (Originally Posted: 07/18/2016)

I currently go to a top-20 university on the west coast, and have a strong interest in both health and finance. Through my research for careers I came across healthcare investment banking. Would it be better for my future job prospects to have a health major with a finance minor, or a Economics major with a health minor?

 
Jun 22, 2018 - 12:57pm

Readings for healthcare IB? (Originally Posted: 03/10/2018)

I will be joining a healthcare IB group this summer as an SA. The group mainly does life sciences/biotech deals. Anyone have good books, journals, industry report suggestions for this to learn the industry? Thanks.

 
Jun 22, 2018 - 12:58pm

Satan, sorry there are no responses yet. Maybe one of these topics can point you in the right direction:

  • Healthcare Banking Overview I am interested in getting some information on the healthcare investment banking. I have read some ... interested in finding out if this is best way for me to combine my Life Science/Medical background with an ... like especially for those looking to just start out in the industry as intern/analysts. Breaking Into ...
  • Citi Healthcare IBD-interviewing for a specific group with their group coming up soon. Any ideas on how to prep for it would be great too. I have read the ... I am interviewing for a specific group. Thanks. Investment Banking Citi healthcare ... Does anyone know anything about Citi 's Healthcare group? I have an interview specifically ...
  • MBB: which offices to look at for education and healthcare industries? but the descriptions are rather superficial.. Thanks for reading my post! consulting mbb ... education and healthcare industries; can somebody help? I did click though a few individual office websites ...
  • Healthcare Consulting firms, best for healthcare strategy- Best brand and exit opps? Who are the best consulting firms for healthcare strategy? Which firms have the best brand and ... exit opps? How does Evolent stack up? Bonus points for those who don't just say " MBB ". ...
  • Reading is fundamental…the ROI of reading. team, some I have not read, so they can learn different things and bring the best ideas up for ... table? Reading mostly for leisure or work-only? Any good recommendations? These Startup Founders Swear By ... Interesting read from FastCompany.com, many startup founders believe that making the time to read ...
  • What are you reading? What books are you guys reading, or have read/plan on reading? Fiction, non-fiction, biographies, ... that you absolutely recommend? Any great magazines or websites you guys turn to for quality, ... stimulating content? I feel like its essential to sanity always be reading something to Sunday, August 6, ...
  • United Airlines forces a peacock to give up seat on flight (yes, you read that right) Lmao, so some chick was denied a seat for her "emotional support" animal, a peacock. ... Finance Pros- Your Resume Mentor for Mock Interviews Job Salaries Data ...
  • Top Tip: Get any MD to read your resume (or anyone to read anything) So no one is returning your sad, sappy, suck up emails? People think you are cold calling for girl ... scout cookies? Well man the f*ck up and lets trick someone into reading your resume. Don't bother ... get your hands on. Insert your resume like, a metaphor for penis entering into a vagina. Figure out an ...
  • More suggestions...

No promises, but sometimes if we mention a user, they will share their wisdom: MonkeyMann @Yuri the International" matt5488

If those topics were completely useless, don't blame me, blame my programmers...

 
Jun 22, 2018 - 1:01pm

Investment Banking Healthcare (Originally Posted: 09/15/2010)

Hey Everyone, I would like to know what you think about Credit Suisse's IBD healthcare team. Should I accept it or insist (and perhaps cross the HR staff) on going into a more generalist team or possibly TMT? Thanks for your opinions.

 
Jun 22, 2018 - 1:04pm

Monty -- I was a HC analyst for a couple of years. I can't say I know that much about the HC space though, but more than your average monkey.

CompBanker

 
Jun 22, 2018 - 1:14pm

Healthcare Banking Weakening? (Originally Posted: 10/12/2011)

This is something that I've heard some banker acquaintances insinuating as of late. Obviously broader economic conditions have contributed to slower dealflow, except I've also been hearing speculation that this is fundamentally tied to the health/structure of the industry as well.

Since I don't know much about healthcare banking, could someone please elaborate? HC was a super-hot area to be in the past few years with strong PE exit opps, but maybe that's changing?

 
Jun 22, 2018 - 1:15pm

Uncertainty. Home health recently got destroyed by medicare changes. The "Competitive Bidding" initiative is impacting reimbursement for the largest segments in durable medical equipment. The Affordable Care Act (Obamacare) is also causing massive uncertainty as no one knows if it will get repealed/changed. Furthermore, it could result in ~15 million additional insured Americans that were not previously insured, causing a large spike in the patient base (this is a positive). This environment makes it very difficult to invest money in the sector.

That said -- deals are still getting done and the healthcare specific groups I interact with are still busy. Hard to say.

CompBanker

  • 1
 
Jun 22, 2018 - 1:16pm

Thanks for the response, all great points that make a lot of sense... recently it seems like, at least at GS, HC has been surprisingly quiet while Nat Res has been killing it, though with these kinds of things it is ultimately hard to say what direction dealflow is going to go.

 
Jun 22, 2018 - 1:17pm

another brilliant idea obama cooked up is an excise tax on medical device makers as part of healthcare reform. additionally he recently proposed shortening the exclusivity period for biologics from 12 to 7 years in order to pay for job creation (???). So i echo the govt uncertainty.

Additionally, the FDA is a total disaster and the increasingly lengthy and expensive approval process (for devices and drugs) is threatening to strangle early stage investing.

That said, if there are going to be deals getting done in this economy, healthcare is a pretty likely space for them. Pharmas still need to fill their pipelines and several of this years biggest deals have been in devices.

Not strictly healthcare but Hellman Friedman and Carlyle just announced $3.9bn for Pharmaceutical Product Development about a week ago

http://www.hf.com/news/100311.html

 
Jun 22, 2018 - 1:19pm

Health Care IB (Originally Posted: 10/18/2011)

I have a final round interview with a health care group on Friday. My contact in the group told me that I should know more about health care IB specifically for this interview than the previous interviews. I've been trying to find as much information as I can on the industry and have a very basic knowledge, but I'd like to see if the IB gurus here on WSO can help me out.

Any information you have on the health care industry would be greatly appreciated. Also, any places where I can find industry news, industry specific multiples, etc would be awesome.

Thanks

 
Jun 22, 2018 - 1:20pm

you're in business school?

Go use their resources. Read industry research on big pharma, med tech, med distribution, and HMOs. A good report will be 30-40 pages.

Read about those 4, and you will be set

Array

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