Top healthcare bankers from Morgan Stanley and BoA see a slowdown ahead after a record year for deals and IPOs

Forbes reporter Michela Tindera with Wells Fargo's Omid Ahdieh and Morgan Stanley's Cheri Mowrey.

  • For healthcare companies, it’s going to be hard to top 2018 when it comes to raising capital and going public. 
  • At the 2018 Forbes Healthcare Summit in New York, bankers from Wells Fargo, Bank of America Merrill Lynch and Morgan Stanley predicted what’s ahead for healthcare dealmaking in 2019.
  • In 2019, there likely won’t be as many IPOs, and funding rounds might be down for private companies without the expectation of a speedy public offering. 

It’s been a busy year for healthcare bankers.

Biotech IPOs are on track to surpass the last several years. Mergers and acquisitions are at a record. And venture funding has hit a ten year high.

But prepare for a slowdown next year, some top bankers say.

„It is a bit hard to see it staying at that same level“ Thomas Sheehan, head of global healthcare investment banking at Bank of America Merrill Lynch said at the 2018 Forbes Healthcare Summit in New York, speaking to the number of IPOs that have taken place in 2018.

Sheehan spoke on a panel with Omid Ahdieh, head of healthcare services investment banking at Wells Fargo Securities and Cheri Mowrey, head of healthcare services investment banking at Morgan Stanley

All three said they expect the number of healthcare IPOs to decline next year. There were 47 biotech IPOs, raising $4.6 billion, in the first nine months of this year, according to Renaissance Capital.

However, Sheehan said he does expect to see some larger public offerings.

Moderna, expected to be the largest biotech IPO in history, filed to go public in November.

Read more: When Moderna goes public in what might be the biggest IPO in biotech history, it should be very good for these 7 people and investors

When it comes to venture funding, Sheehan and Ahdieh said they think the amount that companies raise will be down compared to 2018. In the first 10 months of this year, companies raised $26 billion, a 10-year high according to Forbes. 

There was less agreement about M&A activity next year. As of November 23 , healthcare dealmaking hit an all-time high of almost $400 billion. The biggest takeover of the year was Takeda Pharmaceutical’s $76.9 billion bid for Shire and No. 2 was health insurer Cigna’s $68.5 billion acquisition of pharmacy-benefits manager Express Scripts.

Ahdieh and Mowrey said they think that 2019’s deals won’t surpass 2018’s record levels, while Sheehan said he thought they would. 

Here are some of their other big predictions:

  • Sheehan said he expects pharmaceutical companies to divest parts of their businesses no longer seen as core over the next 24 months — a strategy that’s worked well for companies like Eli Lilly, which spun out its animal health business into Elanco, and German pharmaceutical company Merck KGaA, which sold its consumer health business to Proctor and Gamble.
  • Mowrey said that while there’s been a lack of healthcare IT companies going public as strategic investors swoop in to acquire them, she anticipates seeing some emerge in 2019. While the deals might not be as large as seen in 2018, the number of deals may go up. 
  • Ahdieh and Mowrey said they expect to see more companies that provide services to health insurers, in areas like payments and technology, to go public in 2019 as well. 

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Source: Business insider

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