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Life Sciences References Valuation Snapshot

10 Jun 2020

European healthcare indices and the COVID-19 impact

The COVID-19 pandemic has dramatically impacted many aspects of life. The extent of the effects still needs to be fully understood. But some impacts to the Life Sciences M&A market are already visible. Across all industries many transactions have been put on hold, as parties are concentrating on the continuity of their businesses. While some of those deals will be closed later this year, many will be stalled. The shortage of debt financing, the investment controlling regulation by the German government and purchase price disputes might reduce the number of transactions even more. In this worldwide downturn of the economy, Life Sciences companies will not be immune, but they show more resilience than other sectors.

The trend of Life Sciences companies focusing on their core businesses is now more visible than ever, as we see increased spin-offs and divestitures. We also expect increasing institutional investments in the Life Sciences sector. With less targets on the market, those opportunities will become more competitive.

As the pandemic is forcing us to go online, the trend towards digitalisation will see an immense acceleration. Changes that for long have seemed impossible due to strict regulations and cultural aversions, are now happening, including telehealth and sick leave notes via phone. Patients and providers have learned to manage the distance and use digital tools. The enormous costs burdening the providers as a consequence of the shutdowns will further drive digitalisation to dramatically increase productivity.

COVID -19 will eventually lead to a re-thinking of supply chains. China holds a central role as manufacturer, producing 90% of active pharmaceutical ingredients, thus leading to fear of shortages and dependencies. Some countries have limited their export of medical products. Businesses in the future will be required to have detailed planning on how to overcome short term supply issues. This aspect will also have a strong impact on the pricing in M&A transactions.

Most Medtech and pharma companies remained stable throughout the pandemic, while healthcare provider businesses are having difficulties. With many specialty doctor’s offices being closed, and hospitals concentrating on COVID-19 patients and emergencies rather than performing revenue-driving surgeries, the healthcare provider segment sees decreasing revenues and increasing losses. The full extent of the SARS CoV-2 virus on the Life Sciences industry will have to be evaluated at the end of the pandemic, but with the exception of provider businesses M&A activities will remain on high levels at comparably high prices.

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Life Sciences References Valuation Snapshot