Although the volume of med-tech deals and mergers and acquisitions in 2020 rival each of the last two years, the level of disclosed values has fallen far short of 2019 in both instances, with $3.67 billion in deals through the end of the third quarter representing a 55% decline from this point last year, and $8.5 billion in M&As are down by 79%.
The huge drop is due mainly to the lack of disclosed terms. By the end of the third quarter of 2020, there were 1,043 completed deals, including licensings, collaborations and joint ventures, compared with 655 in 2019. As for M&As, the first nine months of this year had 272 completed vs. 210 last year.
Yet out of the 1,043 completed deals, only 46 – about 4% – included financial terms. Of the 272 M&As, only about a quarter of them, or 72, disclosed terms.
Of the ones that did report financials during the third quarter, the highest deal and M&A were for digital and virtual care technologies, which have become increasingly in-demand during the COVID-19 pandemic.
Digital deal tops Q3
Three of the top five deals for 2020 occurred in the third quarter. The fifth highest deal was one completed in July and worth $280 million in which Medigen Biotechnology Corp. agreed to distribute Alercell’s rapid antibody serology tests against COVID-19. The second and the fourth highest deals were both completed in September. Boehringer Ingelheim International GmbH signed a $500 million deal with Click Therapeutics Inc. to develop CT-155, a prescription-based digital therapeutic, to help in treating schizophrenia. And Corza Health Inc. agreed, for $409.8 million, to acquire Takeda Pharmaceutical Co. Ltd.’s Tachosil fibrin sealant patch.
The Boehringer/Click deal is the seventh highest in the past three years. Only one deal this year beats it: the April partnership between Scworx LLC and Rethink My Healthcare worth $830 million, the fourth highest in three years, to supply IgM/IgG rapid detection kits for COVID-19, which is caused by the SARS-CoV-2 infection.
Broken out by quarter, the third quarter of 2020 had the fewest number of deals this year at 308 vs. 421 in the second quarter and 314 in the first quarter. The value of deals was $1.6 billion in the third quarter vs. $1.77 billion in the second quarter and $275.8 million in the first quarter.
Also, there were fewer deals focused on diagnostics and other solutions for COVID-19 in the third quarter, with only 77 valued at $339.28 million vs. 185 valued at $840.99 million in the second quarter. The first quarter included 40 COVID-19-focused deals, all with undisclosed terms. In total, deals focused on the pandemic represent 29% of all deals this year and 25% of those during the third quarter.
Virtual care M&A leads Q3
The highest M&As during the third quarter include four that are in the top seven for 2020, and all were completed in July. The third and fourth highest for the year are Teladoc Health Inc.’s acquisition of Intouch Health for $600 million, creating a leader in virtual care delivery, and DXC Technology Co.’s sale of its health care software provider business to Dedalus Group for $525 million. The sixth and seventh highest M&As for the year include Montagu Private Equity’s acquisition of Rti Surgical Inc.'s OEM business for $490 million, and Adapthealth LLC’s acquisition of Solara Medical Supplies for $425 million.
Two mergers that beat out Teladoc/Intouch this year include Dedalus Holding SpA’s purchase of Agfa-Gevaert Group NV for $1.1 billion in June, and Baring Private Equity Asia’s buyout of Lumenis Ltd. for $1 billion in February. None of the top M&As completed in 2020 come close to the industry’s top 10 highest M&As on record, but some pending ones do.
Teladoc recently signed an agreement to acquire Livongo Health Inc. for $18.5 billion, which could become the largest M&A of the year if it closes in the fourth quarter as expected. Another large pending M&A announced in the third quarter is Siemens Healthineers AG’s buyout of Varian Medical Systems Inc. for $16.4 billion, although that deal is not expected to close until the first quarter of 2021. Assuming both of those deals close, they would become the sixth and seventh largest M&As for the med-tech industry within the BioWorld database.
Another large pending M&A announced in September is Illumina Inc.’s purchase of liquid biopsy startup Grail Inc. for $8 billion, which the former company had spun out in 2016. It is not expected to close until the second half of 2021, however.
There were 77 completed M&As worth $3.04 billion in the third quarter, compared with 99 valued at $2.8 billion in the second quarter and 96 worth $2.67 billion in the first quarter.