Update 12 September 2023
I assume that everybody is now back from their (well deserved) summer holidays. We spent two weeks in Poland and had a great time. It is a beautiful country with some wonderful cities (Gdansk, Krakow, etc.) and a fascinating history. Travelling by train through Europe was very comfortable and I definitely see us doing something similar again.
It is a long time since the last update and even though many people have been on vacation, these is still news to report from the Dutch healthcare sector:
- Dutch healthcare sector facing fundamental financial challenges. Will the Government respond?
- Minister to start enquiry into role of private equity in the healthcare sector. What are possible consequences?
- Unilabs allowed to acquire Dutch laboratory company. Will consolidation in the diagnostics sector continue?
- Ceban and Brocacef trade activities. What is the reason for the deal?
- In a new snapshot we give an overview of Sirius Medical, a start-up focusing on cancer care
Dutch healthcare sector facing fundamental financial challenges
In our last update before the summer we wrote about how regional organizations had written a manifest explaining how they expected to become structurally loss-making. The extremely difficult financial situation for the sector was last week further underlined by reports from EY and BDO. The EY report is based on analyzing 785 annual reports from healthcare organizations for the year 2022. Key conclusions are that overall profitability has declined by 50% from the previous year, that the number of companies reporting losses has doubled and the number of healthcare companies in “special management” at banks (due to not meeting agreed financial targets for loans) has increased dramatically. EY expects that a consequences of the difficult financial situation will be that banks will reduce their exposure to the sector and require higher interest rates for any financing that they choose to provide.
A report from BDO focuses on companies operating in the Dutch elderly care sector and ls based on the annual reports of 789 companies for the year 2022. BDO reports that overall profits in the sector were halved from €533 million in 2021 to €262 million in 2022 and that the number of organizations reporting losses increase by 40% from 2021 to 2022. BDO concludes that the ongoing changes such as the announced lower tariffs are unsustainable, and that the government needs to intervene in order to avoid bankruptcies.
The pressure is increasing on the government to intervene. A risk factor is that there will be a new election in November and the Government is limited in what it can do in its interim role. Even after the elections time will be needed to agree a coalition. Last time (2021) this process took 300 days and the process this time will be complicated by new political parties that are expected to do well.
Government to start enquiry into role of private equity in healthcare sector
We have often written about the growing importance of private equity in the Dutch healthcare sector (healthcare related IT, veterinary sector, etc.). We have also written about how the NZa (Dutch Healthcare Authorities) have a positive view on the effects of private equity on the overall Dutch healthcare sector. However, in the last few months there has been a much negative reporting on private-equity financed investments in commercial primary care chains.
Based on questions from Parliament related to quality issues in primary care locations owned by Co-Med the Minister of Health has decided to start an enquiry into the positive and negative effects of private equity on the healthcare sector. The enquiry is part of a larger process where the government is looking into the role played by commercial healthcare organizations.
As in most countries the Netherlands also has an ongoing discussion related to profits and healthcare. It would be surprising if the recently announced study developed other conclusions that those already made by the NZa study. Commercial healthcare might be an issue in the upcoming elections, but the discussions will most probably focus on how to deal with structural issues such the growing number of elderly patients, how to deal with staff shortages and how to finance the growing costs of healthcare.
Unilabs allowed to acquire Dutch diagnostics company
At the end of May Unilabs announced that they were acquiring Atalmedial. Last week the ACM (Dutch Competition Authority) gave a green light for the acquisition saying that there is still sufficient competition in the market. Atalmedial has approximately €70 million revenues and 525 employees. As confirmed by the ACM the Dutch diagnostics market is still very fragmented. Additional acquisitions by international companies such as Unilabs, Cerba Healthcare, Eurofins, etc. can therefore be expected.
Brocacef and Ceban trade activities
Brocacef is a major player in the Dutch healthcare market as a pharmaceutical wholesaler and owner of one the largest chains of pharmacies (BENU) with 321 own pharmacies and fifteen franchise pharmacies. Brocacef is also active in the compounding market with a focus on in-house compounding for hospitals. Ceban Pharmaceuticals is owned by Bencis, a Dutch private-equity company. The core activities of Ceban are in the area of compounding and specialty pharmaceuticals. However, Ceban also owns Medsen Apotheken a medium-sized Dutch chains of pharmacies.
Recently, it has been announced that Brocacef and Ceban qre in the process of trading key activities. Brocacef will acquire nineteen of the forty-four pharmacies owned by Medsen and Ceban will acquire Brocacef’s activities related to in-house compounding for hospitals. The deal will strengthen the core activities of both companies.
Snapshot of a Dutch commercial healthcare company: Sirius Medical activities
Sirius Medical was started in 2017 as a spin-off from the Netherlands Cancer Institute. The company is focused on improving care for cancer patients. Its main product, Pintuition, is a navigation system allowing tumors to be located easily and accurately. This is done by placing a magnetic pin in the tumor that can be used for a considerable time in conjunction with a system that accurately shows the distance to the tumor.
The company recently closed a Series B financing for €12 million and is rapidly expanding its geographical scope throughout Europe and the US. Key shareholders are Holland Capital and Norgine Ventures.