2018 health care & life sciences investment outlook

Our teams surveyed 265 finance professionals involved in the health care & life sciences sector.

KPMG & Leavitt Partners (LP) are pleased to present the 2018 Health Care & Life Sciences Annual Investment Summary. As 2017 came to a close, a flurry of multibillion dollar mergers was announced that could certainly impact the health care marketplace for years to come, reinforcing the notion that the health care & life sciences sector is in the middle of a significant transition.

The promise of U.S. tax reform could also open the door to repatriation of cash from overseas, providing an additional catalyst for global companies to put their cash to work. Building on last year’s KPMG/LP partnership, this year’s report captures finance professionals’ reactions to disruptors and their perceptions of specific health care sectors. This survey looked at technological, economic and regulatory disruptors affecting the industry, many of which continue to reshape the health care landscape.

Our teams surveyed 265 finance professionals involved in the health care & life sciences sector about trends and expectations for the industry, including an analysis of twelve separate subsectors selected by the teams based on relevance and activity.1 Respondents were asked about investment activity, valuation, and key expectations regarding capital formation over the next year.

Key Findings – Outlook

  • There is still significant appeal for M&A and investment in health care & life sciences. After survey results were tabulated, proposed deals announced late in 2017 – CVS and Aetna, Ascension and Providence St. Joseph Health, Dignity Health and Catholic Health Initiatives and most recently Humana and Kindred – further indicate a rapidly evolving marketplace in health care.
  • While several sectors are expected to show significant growth, there is a growing sense that the market generally is over-valuated, creating potential risk should some market shock hit the space.i (Chart 1 on opposite page)
  • Key drivers for M&A activity include looking for accretive acquisitions, cost consolidation, and changing payment models.ii (Table 1)
  • The top factors that investors said keep them up at night are changing reimbursement models, regulatory risk, health care reform, and political instability.iii

Generally, health information technology and outpatient services are expected to grow, as the market adapts to reimbursement challenges and the desire to move to a more efficient delivery.