DX Deals: Large Healthcare Bankruptcies Rebound from Pandemic Lull
A recent report offers new insight into bankruptcy trends within the sector starting before the COVID-19 pandemic.
Restructuring has become the order of the day for not only laboratory companies but also the entire healthcare industry. The trend began in earnest late last year when major healthcare bankruptcy filings increased by 84 percent compared with the same period in 2021, according to a recent report. The report, released by healthcare restructuring consulting firm Gibbins Advisors in January 2023, offers new insight into bankruptcy trends within the sector starting before the COVID-19 pandemic.1
Chapter 11 Filings Creep Back to Pre-Pandemic Levels
When the pandemic began in early 2020, the expectation was that bankruptcies would increase to catastrophic levels. However, major healthcare and medical sector Chapter 11 bankruptcies, which Gibbins defines as those involving debtor companies with liabilities of $10 million or more, actually fell early in the pandemic. Between 2019 and 2020, bankruptcies declined from 51 to 45. The decrease became even more pronounced in 2021 when major healthcare bankruptcies dropped 44 percent to 25.
In part, these lower-than-expected bankruptcy numbers were attributable to temporary federal and state government relief programs and funding measures, which enabled providers to stay open, Gibbins Advisors explains. Lenders also helped keep providers afloat so they could continue to care for patients by offering loan extensions and waivers.
“Providers that may have been cash poor before the pandemic now had strong cash balances, which helped to weather the storm of higher costs related to infection control measures, and staffing and volume challenges,” notes Clare Moylan, principal at Gibbins Advisors, in a release on an earlier version of the report.2
However, government relief and lender forbearance dried up as the pandemic dragged on, leaving providers to face 40-year high inflation and rising interest rates. Other financial headwinds cited by Gibbins Advisors:2
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- Chronic nursing shortages, which forced some providers to suspend or limit care, particularly in rural areas
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- Significantly higher labor costs resulting from the shortage of nurses and other skilled healthcare personnel
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- Supply chain and sourcing challenges, including those due to COVID-19 lockdowns in China
- Limited ability to pass cost increases to payers and patients
These pressures have led to a restructuring renaissance. According to Gibbins Advisors’ latest report (which updates analysis from August 2022), large healthcare bankruptcies jumped 84 percent in 2022, to 46, bringing them close to pre-pandemic levels.1 Activity was greatest during the final months of 2022, during which the yearly total filings number tripled.
Chapter 11 Healthcare Bankruptcies of Healthcare Companies with at Least $10 Million in Debt, 2019 to 2022
| 2019 | 2020 | 2021 | 2022 | |
|---|---|---|---|---|
| Bankruptcies | 51 | 45 | 25 | 46 |
Large Healthcare Bankruptcy* Filings (2019 to 2022)
greater than $10M in liabilities. Source: Recreated from Gibbins Advisors, “Healthcare restructuring through the COVID years…and beyond: Analysis of Chapter 11 Healthcare Bankruptcies 2019-2022.” Accessed May 2023. Credit: G2 Intelligence
By provider type, pharmaceutical companies had the most bankruptcy filings in 2022, with 14, followed by senior care facilities with 12. Only two hospitals went Chapter 11 during the year, as opposed to 10 hospital filings in the pre-pandemic year of 2019.
Takeaway
The Gibbins Advisors’ report expects the distress and market consolidation leading to bankruptcies among senior care and pharma/biotech companies to continue. As the storm clouds break, hospitals will find it harder to dodge the raindrops, with the firm forecasting more hospital Chapter 11 filings in 2023 and beyond.
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Here’s a summary of key strategic diagnostic deals announced from late April through May 2023:
Strategic Alliances, Partnerships, & Collaborations
| Partner 1 | Partner(s) 2+ | Deal Summary |
|---|---|---|
| Thermo Fisher Scientific | Pfizer | · Objective: Increase access to next-generation sequencing (NGS)-based testing for lung and breast cancer in over 30 countries across Latin America, Africa, Asia, and the Middle East · Dynamic: Thermo Fisher to identify local labs that have the necessary infrastructure, trained staff, and quality control measures to meet industry standards to use the firm’s NGS testing technology · Pfizer to explore ways to enable affordable patient access to NGS testing for these types of cancer, and work to raise healthcare provider awareness of the benefits of advanced testing · Companies to also consider expanding the collaboration geographically and for other types of cancer testing |
| Form Bio | · Objective: Provide access to Form Bio’s computational life sciences platform via Google Cloud’s multiomics software · Dynamic: Enable customers to incorporate Form Bio’s platform when adopting the new AI-powered multiomics suite |
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| FIND | VIA Global Health | · Objective: Expand access to diagnostic tests in low- and middle-income countries · Dynamic: Provide new routes to market for diagnostic test manufacturers by expanding the reach of FIND’s DxConnect Marketplace, which directly connects test buyers with approved suppliers to serve market segments that can’t access quality products via other procurement methods |
| Personalis | Ono Pharmaceutical + Japan’s National Cancer Center | · Objective: Assess Personalis’ minimal residual disease (MRD) platform in a study of Opdivo (nivolumab) in resectable rectal cancer with mismatch repair deficiency · Dynamic: Personalis to analyze samples from both tumor tissue and plasma circulating tumor DNA using its ImmunoID NeXT® assay and NeXT Personal® MRD platform · Investigators to then compare MRD test results with standard of care imaging and drug response data to assess whether an MRD-negative result could be a surrogate marker of clinical complete response |
| Personalis | Academic Breast Cancer Consortium (ABRCC) + Criterium | · Objective: Perform clinical trial evaluating performance of Personalis’ NeXT Personal® test in patients with early-stage triple-negative breast cancer · Dynamic: Personalis to test samples from approximately 900 patients with investigators to compare the MRD test results to clinical assessments of patients’ pathological complete response (pCR) to treatment |
| Getlabs | Sana MD | · Objective: Give Sana patients access to Getlabs’ phlebotomist network · Dynamic: Enable patients that receive a lab order from a Sana MD primary care provider to have a Getlabs visit scheduled to collect blood or other specimens at home for lab testing |
| Getlabs | Nice Healthcare | · Objective: Expand Nice Healthcare patients’ access to in-home healthcare and lab testing services · Dynamic: Enable Nice Healthcare clinicians to book at-home Getlabs appointments for collection of lab specimens and biometrics for their patients, with results to be provided by Nice Healthcare |
| Mainz Biomed | Microba Life Sciences | · Objective: Develop a first-in-class screening test for pancreatic cancer · Dynamic: Conduct pilot research project utilizing Microba’s proprietary Community Profiler metagenomic sequencing technology and bioinformatic tools for profiling human gastrointestinal samples |
| HiloProbe | Biocartis | · Objective: Commercialize HiloProbe’s ColoNode® test for nodal metastasis in colorectal cancer patients · Dynamic: Biocartis to distribute ColoNode as a manual kit to labs in certain European countries · Companies to also consider developing a fully automated version for use with Biocartis’ Idylla™ platform |
| Cellenion | Evosep | · Objective: Comarket respective companies’ products for single-cell proteomics applications · Dynamic: Jointly promote Cellenion’s single-cell isolation and sample preparation platform alongside Evosep’s liquid chromatography technology for peptide separation |
| Cofactor Genomics | Culmination Bio | · Objective: Develop Cofactor’s OncoPrism™ test to predict immunotherapy responses across 11 cancer types · Dynamic: Culmination Bio to offer Cofactor access to 4.5 million biological samples with decades of clinical outcome data to further develop the assay for predicting response to immune checkpoint inhibitors, including Merck’s Keytruda (pembrolizumab) |
| OmicsEdge | Almaden Genomics | · Objective: Provide service to analyze patient genomic data in clinical trials · Dynamic: OmicsEdge to incorporate Almaden’s g.nome™ platform into its drug discovery service |
| Ginkgo Bioworks | Boehringer Ingelheim | · Objective: Mine Ginkgo’s metagenomic sequence database to identify lead molecules for drug discovery · Dynamic: Ginkgo to receive upfront research fees along with up to $406 million in success-based R&D, regulatory, and commercial milestone payments · Ginkgo also gets royalties on sales of future products |
| BostonGene | Mater Research | · Objective: Discover novel diagnostic biomarkers of follicular lymphoma, a slow-growing form of non-Hodgkin lymphoma · Dynamic: BostonGene to support Mater Research’s efforts to develop biomarkers of advanced follicular lymphoma by performing transcriptome sequencing, spatial proteomics, and advanced analytics to develop RNA and protein-based biomarkers for use in clinical practice |
Distribution, Sales, & Marketing Agreements
| Product Owner | Distributor | Deal Summary |
|---|---|---|
| Parse Biosciences | Ornat Biochemicals and Laboratory Equipment | · Products: Parse’s full single-cell sequencing portfolio and cell and nuclei fixation kits · Territories: Israel |
| Euformatics | Zahrawi Group | · Products: Euformatics’ Genomics Hub service, including NGS assay validation, sample quality control, variant interpretation, and results reporting · Territories: Bahrain, Oman, United Arab Emirates |
| Applied BioCode | Medline Industries | · Products: BioCode MDx-3000 automated molecular diagnostics system and other products · Territories: US |
| Thermo Fisher Scientific | Werfen | · Products: Thermo Fisher Scientific’s TCAutomation™ laboratory automation system · Territory: Worldwide |
| Tecan | DYNEX Technologies | · Products: Tecan’s immunoassay products · Territory: US |
| ChromaCode | MedGenome | · Products: ChromaCode’s High Definition PCR (HDPCR™) platform · Territories: India and Middle East |
Licenses
| Licensor | Licensee | Deal Summary |
|---|---|---|
| Dana-Farber Cancer Institute | Aspira Women’s Health | Aspira gets exclusive rights to develop a microRNA-based ovarian cancer test based on Dana-Farber’s blood-based miRNA signature technique |
| Proteomics International Laboratories | Sonic Healthcare USA | Sonic Healthcare USA exclusively licenses Proteomics’ PromarkerD diabetic kidney disease blood test for commercialization in US |
Government Contracts
| Contractor | Govt. Agency | Contract Summary |
|---|---|---|
| Owlstone Medical | U.S. Defense Innovation Unit (DIU), a division of U.S. Department of Defense | Contract to adapt Owlstone’s portable handheld breathalyzer device for detecting pre-symptomatic respiratory infectious disease; device to work off battery power for use by warfighters in remote environments with limited access to medical personnel under initiative called the EXHALE project |
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