Topping 2005 in terms of healthcare deals is going to be tough.
The sector last year saw Orange County’s largest deal to date, Cypress-based PacifiCare Health Systems Inc.’s $9 billion sale to Minnesota’s UnitedHealth Group Inc.
Could more deals be on tap for this year?
“There’s always a possibility for a mega deal,” said Paul Kacik, a senior vice president and head of healthcare investment banking at Los Angeles-based Barrington Associates’ Newport Beach office. “2005 was a great year for M & A.; We expect it to continue well into 2006.”
The county is home to a handful of midsize and smaller healthcare companies that could catch the eye of larger players.
Not everyone’s looking for another blockbuster deal this year.
“My gut reaction is (a PacifiCare-sized deal) is fluky and that the large healthcare companies in Orange County are probably going to stay independent,” said Ethan Feffer, a partner in the Costa Mesa office of Pillsbury, Winthrop, Shaw, Pittman LLC.
For their part, several healthcare companies said they plan to stay the course.
“We don’t anticipate any such offers,” said Paul Whitlock, a spokesman for Beckman Coulter Inc., the Fullerton-based maker of medical testing gear. An acquisition isn’t part of our forward planning.”
A spokesman for Edwards Lifesciences Corp., the Irvine-based heart valve maker, said the company’s “management is positioning the company for long-term, sustainable growth as an independent entity.”
Still, like any public company, “Edwards would act in the best interests of its shareholders and evaluate any offer for purchase,” the spokesman said.
Allergan Inc., the Irvine drug maker, could make a niche addition to the medicine chest of a big drug maker. But the maker of Botox could prove too pricey, with a recent market value of $15 billion.
An Allergan spokeswoman declined to address “speculation.”
Barrington’s Kacik doesn’t rule out interest.
“Big Pharma is always looking to bolster their pipeline, and Big Pharma is acquisitive right now,” he said.
Most buying by big drug makers involves smaller, “emerging growth” biotechnology companies, Kacik said.
Allergan is wrapping up its own big buy: a $3.2 billion deal for Santa Barbara’s Inamed Corp., a maker of breast implants and skin products.
Apria Healthcare Group Inc., a Lake Forest-based home healthcare provider, isn’t seeking a buyer anymore.
The company last year hired Morgan Stanley to contact potential suitors. Apria dropped the effort in October.
“With the ending of the Morgan Stanley process, we have no active plan to continue evaluating opportunities,” said Lisa Getson, an Apria executive vice president.
Even so, Apria’s board gets letters from time to time expressing interest and would take “appropriate action,” she said.
Investment bankers had hoped for another big deal with Apria “but it didn’t seem to work out,” Kacik said.
A bigger company still could “want to, at some point, step in and take (Apria),” he said.
A pair of healthcare technology companies bolstered their performance last year and could prove attractive: Quality Systems Inc., an Irvine maker of software that helps doctors and dentists manage their practices, and Newport Beach-based TriZetto Group Inc., which works with health plans to manage data.
“In broad terms, both of them are (candidates),” said Gene Mannheimer, an analyst with the San Diego office of Caris & Co. “If I was putting bets down, I still think Quality Systems is the more likely one, although the surge in price makes it less attractive to a buyer, obviously.”
Shares of Quality Systems more than doubled last year. The company counted a market value of $1 billion last week.
Besides corporate buyers, smaller healthcare companies could catch the eye of private equity firms, which did major buying in 2005.
“Because valuations are high, you’re seeing a lot of middle-market business owners saying it’s the right time to sell my business,” Kacik said.
