Paul MacDonald, CIO on M&A Activities in Healthcare.

April 10, 2018

First quarter M&A deals in Healthcare are at a 10 year high in according to Bloomberg as companies generating abundant free cash flow and overseas cash repatriation look for targets. The trend has continued through early April with a large acquisition announced by Novartis coupled with several pending mergers in the insurance & managed care sectors while speculation of bio-pharma mega-mergers is also percolating.

S&P 500 valuation multiples have compressed and so has the broader Healthcare sector – trading at a 1.2x multiple discount to the market while the Pharmaceutical sub-sector discount has remained abnormally wide (chart below).

We think M&A is one of the key catalysts for multiples to normalize – in addition to a solid earnings season & significant near-term results expected in biotech & pharma. See the latest Healthcare Leaders Summary (HHL Update).

Source: Bloomberg, April 9, 2018. Based on 12 month forward consensus P/E.

You may also like…

Disclaimer

For Information Purposes Only. Commissions, management fees and expenses all may be associated with investing in HARVEST Exchange Traded Funds (managed by Harvest Portfolios Group Inc.) Please read the relevant prospectus before investing. The funds are not guaranteed, their values change frequently and past performance may not be repeated. This communication should not be considered as advice and/or a recommendation to purchase or sell the mentioned securities or used to engage in personal investment strategies. Tax, investment and all other decisions should be made with guidance from a qualified professional.

Certain statements in the Harvest Blog are forward looking Forward-looking statements (“FLS”) are statements that are predictive in nature, depend upon or refer to future events or conditions, or that include words such as “may,” “will,” “should,” “could,” “expect,” “anticipate,” “intend,” “plan,” “believe,” or  “estimate,” or other similar expressions. Statements that look forward in time or include anything other than historical information are subject to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the FLS.

FLS are not guarantees of future performance and are by their nature based on numerous assumptions, which include, amongst other things, that (i) the Fund can attract and maintain investors and have sufficient capital under management to effect their investment strategies, (ii) the investment strategies will produce the results intended by the portfolio managers, and (iii) the markets will react and perform in a manner consistent with the investment strategies. Although the FLS contained herein are based upon what the portfolio manager believe to be reasonable assumptions, the portfolio manager cannot assure that actual results will be consistent with these FLS.

Unless required by applicable law, Harvest Portfolios Group Inc. does not undertake, and specifically disclaim, any intention or obligation to update or revise any FLS, whether as a result of new information, future events or otherwise.

Sign up to receive our monthly updates

SUBSCRIBE