The Cardiology Lifeline is a tech-free zone (high-tech that is).


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By Stephen Cervieri, Managing Director 
 
Mergers & Acquisitions
 
The Cardiology Lifeline is a tech-free zone (high-tech that is).  But I can’t resist republishing the best description of the MicroHoo blow up.  Simply because if I ask for a show of hands in our sector, I am sure we all have experienced the same buyer behavior in our deals.  Not that Yahoo gets anything above a D- for its behavior:
 
“Nobody wants a big teetering giant stumbling through their market threatening to topple over and wipe out entire neighborhoods by accident. But that's what Microsoft has become -- the big stupid retarded giant lurching into the Valley, like King Kong with a lobotomy and a shotgun and a bottle of tequila, stomping around and beating its chest and then stumbling away, having wiped out most of the city.”
 
You can email confidentially your war stories with drunk cardiology gorillas.  If appropriate, we’ll publish next week.
 
Mergers & Acquisitions (II)
 
We’re not being self serving in banging the table on healthcare’s resiliency in times of trouble.  This week’s data point is courtesy of BMS.  As applicable to Cardiology as it is to and for wound care.
 
Bristol-Myers Squibb on Friday agreed to sell its ConvaTec unit for $4.1 billion to Avista Capital Partners and Nordic Capital, with fully-committed leveraged financing led by JPMorgan.
 
In plain English Corporate Finance-speak: this is a multi-billion dollar leveraged buyout that includes a: (1) U.S. target; (2) U.S. financial sponsor; (3) Loan commitment from Wall Street with no atypical material conditions.
 
It’s also the largest leveraged buyout announced since Carlyle Group agreed on Manor Care last July, another Healthcare deal.
 
ConvaTec is a particularly attractive loan candidate because it has high cash-flows and low cyclicality. The unit makes therapeutic products for wound care and ostomy care.   It also had a motivated seller in Bristol-Myers Squibb, which has been trying to divest itself of most non-pharma assets. For example, it sold its medical imaging unit to Avista earlier this year for $525 million.
 
Let’s hear what the investors say: “I think the banks saw a very stable company,” says Kristoffer Melinder, a partner with Nordic Capital.
 
Tom Dean of Avista adds: “Both our firm and Nordic have a history of doing leveraged healthcare deals, and I think that helped make [lenders] more comfortable.”
 
Regulatory
 
Should insurers be allowed to reward docs who switch patients to generics?
 
That debate is going public in Colorado, where legislators have proposed a bill that would prohibit the practice. On the "pro" side: Sen. Paula Sandoval, who sponsored the bill; she says docs should be thinking about patients, not money. Also on the pro side: Pfizer.
 
The AARP, Kaiser Permanente, and the Colorado Association of Health Plans are on the "con" side in this debate. Interestingly, Kaiser's opposition doesn't stem from support of the payments. The insurer is decrying a lack of reciprocal bans on Pfizer and other drugmakers, which leaves pharma free to incentivize docs--with gifts, lunches, and so on--to buy more expensive meds.
 
You'll recall that last year, a Blue Cross HMO offered to pay $100 each time a doctor switched a patient off an expensive brand-name cholesterol med, e.g. Pfizer's Lipitor, to a cheaper generic. The 90-day program saved Blue Care Network $5 million, a company spokeswoman said.
 
But the plan drew sharp criticism; some charged it put money before patients' interests.
 
I’d like to know more about those “interests”.