1. PRIVATE EQUITY AND THE GLOBAL HEALTHCARE SECTOR: IMPACTS AND
OPPORTUNITIES
A tale of private equity in healthcare…
Nick Ibery, Kunal Sinha, Rishabh Mehreia
Professor Eli Talmor
THE ANNUAL COLLER PRIZE IN PRIVATE EQUITY AWARDS EVENING AND
PANEL DISCUSSION 29 OCTOBER 2013

2. The diverse healthcare industry
Pharmaceuticals /Biotechnology
Medical device
Manufacturers/Suppliers
Biotechnology R&D
Medical device manufacturers
Drug Suppliers
Consumer medical products (e.g.
testing supplies, monitors, first aid)
Drug Manufacturers
Medical device suppliers
Healthcare Providers/Payors
Services
Hospitals/health systems
Healthcare IT (hardware & software)
Long-term care facilities
Hospital/practice management
Physician groups Managed care
Data analysis
Outpatient surgery centers
Electronic medical records (EMRs)
Ancillary providers (e.g. clinical
laboratory, radiology, pharmacy)
Telemedicine
Practice services (e.g. services of
physicians / mid-level practitioners)
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3. Positives of investments in healthcare
due to non-cyclical
nature of health-care
spending
From niches within a
very diverse sector
Value Adding
due to predictable
spending on and
consumption of
services and products
High
Growth
Recession
Proof
Macro Market
Favorable
Demographics
High
Margin
Positives
Stable Cash
Flow
Highly
Fragmented
Platform for
Buy & Build
creates opportunities
to generate returns
through efficiency
Industry
through well managed and well
operated companies in a
fragmented sector
Source: “Is Your Healthcare Company a Fit for Private Equity?”, by Richard Jackim, Midcap Advisors – Blog entry
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ageing population,
western lifestyles

4. Risks of investments in pharmaceuticals
long history of M&A
and strategic buyers
beating financial ones
significant
repercussions for
post-launch issues
Post-launch
Long
Product
Cycle
Power of
Strategic
Buyers
PostLaunch
Liability
Risk
significant reporting and
disclosure requirements once
products are in the market
~10 years for drug
discovery, development,
and commercialization
Regulatory
Hurdles
Possible
Risks
PostLaunch
Regulatory
Burden
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many filing and
approval stages with
very low success rates
Pre-launch
No Cash
Flow preLaunch
need to wait until
commercialization (10
years)

5. Drug development process – the view from Pharma companies
Source: “Drug Discovery and Development”, by the Pharmaceutical Research and Manufacturers of America published in 2007
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6. Nordic Capital Background

Founded in 1989 by Robert Andreen and Morgan Olsson in 1989

Raised first fund in 1990

By now (2013), Nordic Capital a leading PE firm in the world

Committed regional focus through a strong physical presence
– Offices and portfolio primarily across the Nordic and German speaking regions
– deep roots within the Nordic region
Office Locations as of 2012
Portfolio Company Locations as of 2012
United States
Jersey
Switzerland
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7. Nycomed Pharma before Takeda acquisition in 2010

Leading European and Emerging Markets co.

Prescription (87%) & OTC products (13%)

Present in more than 70 countries

€2.8bn revenue & €765mm EBITDA

Approx. 11,800 employees worldwide

Blockbuster products:
– Pantoprazole: 2006 sales of $2.6bn
– Daxas: newly launched but most effective
product for the $10-20bn COPD market
Note: Takeda did not acquire Nycomed’s US Dermatology Unit (Fougera) – the above figures exclude this entity
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8. 3 distinct phases of transformation for Nycomed
Nycomed expands
aggressively into EMs
Nycomed
acquires Altana
Nordic Capital
exits ex-US
Sale to Takeda
Expansion to a
pan-EU co.
An Emerging
Markets co.
• Global operations
• Substantial synergies
(~EUR 300 mn)
• R&D pipeline
• Emerging markets
focus
• Leverage key
products
• Daxas – approval
and partnering
with Forest (US)
and Merck (EU)
Nordic Capital
acquires Nycomed
A pan-nordic specialty pharma co.
• €9.6bn trade sale
• Largest in Europe
and 3rd largest in the
world
• Joint company jumps
to # 12 in the world
by revenue
• Excludes Fougera
Sale of Fougera to
Sandoz
• Pharma focus; sold off non-pharma activities
• Focus on In-licensing for product sourcing
• Streamlined operations
1999
2000
2001
Nordic Capital
2002
2003
2004
US exit
• $1.5bn trade sale
• Closing H2 2012
2005
2006
DLJ et. al.
2007
2008
2009
2010
Nordic Capital
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2011
2012

9. 1999-2002
1st deal: Nordic Capital acquires Nycomed Pharma

Nycomed’s profile:
– Strong market position in Norway and Denmark
– Well diversified product portfolio
– Orphan company being divested by parent (Nycomed Amersham)
– Auction to strategic investors already failed

Nordic Capital’s post-investment goals for Nycomed:
Targets during holding period
Transaction details – May 1999
Reduce operational costs
EV
$548mm
Divest non-core businesses
Nordic Capital stake
69%
Nycomed Amersham
stake
29%
Management stake
2%
Drive revenue and EBITDA growth
Nodic Capital Funds
III, IV
Replace management
Planned Exit
IPO, Trade Sale
Re-position as a
pan-Nordic co. by
acquiring companies
in-licensing products
Note: In September 2001, Nordic Capital purchased Nycomed Amersham’s 29% ownership interest using fund IV
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10. 1st deal exit to Credit Suisse, Blackstone et. al.
Transaction details – May 1999
EV
€1,114mm
Sales multiple
2.1x
EBITDA multiple
8.9x
EBITA multiple
11.5x
Buyer
Credit Suisse, Blackstone et. al.
Exit
Secondary sale
Return for Fund III
6.3x / ~65% IRR
Return for Fund IV
1.9x / ~70% IRR
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11. 2005-2012
2nd Deal: Nordic Capital reacquires Nycomed Pharma

Strong belief in management team’s ability to execute a well-defined growth strategy
Investment Thesis:

Strengthen product portfolio by in-licensing/acquiring late-stage products with clinical
proof of concept (CPoC):
– Enter rapidly growing therapeutic segments
– Strengthen current offerings

Become the “Preferred partner” in Europe of research based companies

Scale down internal and early-stage projects

Increasing operational, cost and capital efficiencies
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12. 2011
Takeda-Nycomed Deal Rationale

Geographic Synergies: Complementary geographical businesses / ease of integration:
Source: Takeda Investor Presentation from May 2011
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13. 2011
Takeda-Nycomed Deal Rationale

Transaction transforms Takeda’s commercial infrastructure
– Deepens presence in Europe
– Establishes Takeda in high growth Emerging Markets
Europe
Emerging Markets
Source: Takeda Investor Presentation from May 2011
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14. Nordic Capital: Value creation

Structural transformation

Operational improvement

Buy-and-build

Growth in emerging market

Strategic repositioning

Growth acceleration
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15. 15

16. Thank you!
Open floor Q&A session

17. Turning a disaster into an opportunity ... and a big success
• Coinciding with
Nycomed’s acquisition
• Russian business sizeable
– but unprofitable
• Nordic Capital
negotiates significant
discount for taking on
the risk
• Many Western MNCs
which had entered
Russia recently, exit the
market (e.g. Merck)
The Russian ruble
crisis hits in August
1998
Nycomed Russia
CEO spots an
opportunity
• Initial plans from Nordic
Capital call for closing down
Russia
• CEO of Russian business
makes a case for turning
around in 6 months – gets
board approval and backing
• New plans call for leveraging
presence in the region since
Soviet era, strong brand
recognition, and strong
relationships with customers
and suppliers
• Receivables are recovered
with minimal writeoffs
• Co. is restructured (~50%
layoffs)
• Exiting MNCs lower
competitiveness in the
Russian market
• Some (e.g. Merck) out-license
all their products to
Nycomed to sell in the
region
Russia drives growth
and provides the
appetite for Ems
The Russian business grew from $11mm in 1999 to more than $600mm in 2011
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18. Dec 2006
Altana acquisition numbers
Transaction details – Dec 2006
EV of Altana
€4,215mm
EV/EBITDA
6.3x
EV/EBITA
7.4x
Wt. EV/EBITDA
7.6x
Wt. EV/EBITA
10.3x
New Nordic Capital Equity
€350mm
New Debt for the group
€5,000mm
New Debt/EBITDA
4.9x 2006E pro forma
EBITDA
Note: In connection with closing Blackstone and other Credit Suisse co-investors
sold their remaining ownership in Nycomed to Nordic Capital and other investors
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19. Dec 2006
Altana acquisition – a big bet or a calculated risk?
Benefits
Risks
Favorable Cash
Flow profile
Pantoprazole LoE
Cost saving through
synergy and
restructuring
Target 3x size of
acquirer
Strategic geographic
fit
Sun/Teva Launch
“at-risk”
Few bidders
Significant leverage
to support the deal
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