Axios Pro: Health Tech Deals
May 06, 2022
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Situational awareness: All eyes are on Bausch + Lomb, the first major IPO to price this year after TPG. Bausch + Lomb is considered a bellwether. If it goes well, others may follow. If not...

1 big thing: Newly led Centene disposes of assets

Pill breaking open spilling $100 bills.
Illustration: Eniola Odetunde/Axios

Centene unloaded PANTHERx and Magellan Rx on Thursday, as part of a portfolio rationalization the government-sponsored managed care giant is executing under new leadership.

Driving the news: Three months after Axios first reported the divestiture processes had launched for both assets, Centene is selling the pair for a combined $2.8 billion.

  • The Vistria Group, General Atlantic and Nautic Partners are jointly acquiring PANTHERx, a specialty pharmacy business specializing in orphan drugs and rare disease treatment. (The three firms will hold equal stakes upon closure.)
  • Prime Therapeutics agreed to buy Magellan Rx, the pharmacy benefit manager that Centene gained via its $2.2 billion deal for Magellan completed in January.

By the numbers: Prime disclosed an approximate $1.35 billion price tag for Magellan Rx, and sources tell Sarah the consortium's deal for PANTHERx falls between $1.4 billion and $1.45 billion.

  • Estimated 2022 EBITDA for PANTHERx is $70 million, Axios wrote previously, which implies an EBITDA multiple of ~20x.

Flashback: Axios wrote last week that other parties expected to submit final bids for PANTHERx included KKR, GI Partners and Orsini Specialty Pharmacy.

State of play: On the specialty pharmacy side, the dominant players (like CVS Specialty, Cigna's Accredo and Optum Specialty Pharmacy) are good at serving broad swaths of the market, but it's not in their nature to focus on smaller patient populations.

  • That presents an opportunity for players like PANTHERx, and this investment is a recognition of that.
  • Another data point is Carlyle's recent acquisition of a stake in Consonance Capital’s Orsini Specialty Pharmacy. In a similar vein, TPG Growth took a minority stake in Memphis-based AnovaRx.

Yes, and: Pharmaceutical companies are incentivized to continue to deliver rare disease therapies to niche populations, with advancements in genomics and technology helping fuel new drug development.

  • Backing them up? Specialty pharmacies.

Our thought bubble: The consortium investing in PANTHERx looks like somewhat of a specialty pharmacy "dream team."

  • General Atlantic and Vistria already are jointly invested in this thesis through a different lens. The duo own CareMetx, a high-touch, tech-enabled hub services model for specialty drugs. (Plus, Vistria owns specialty drug distribution business BioCare.)
  • Nautic, meanwhile, is arguably one of the deepest PE investors around the pharmacy with strong relationships with payors and PBMs. (Its investment umbrella includes the likes of CarepathRx, EmpiRx Health, ExactCare Pharmacy, SPS Health, for example.)

Catch up quick: For Centene, the strategic moves follow a major reshuffling of its board and C-suite, including the recent promotion of Sarah London from vice chairman to CEO.

  • London succeeds Michael Neirdorff, who commandeered a strategy at Centene for 25, years. Neirdorff took a medical leave in February and died in April.
  • London's appointment marks the start of a new era at Centene, having joined the company in 2020 from Optum Ventures, where she was a partner at UnitedHealth Group's venture arm.
  • Five new directors joined Centene in December after settling with activist investor Politan Capital Management.

The three PE firms investing in PANTHERx and Centene did not comment on the transaction.

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