British Prime Minister David Cameron resigned, politicians in other EU countries called for their own referendums and stocks worldwide quivered, according to U.S. News & World Report.
But what does the decision mean for American healthcare companies?
Here, Dimitri Drone, global deals leader for pharmaceuticals and life sciences at PricewaterhouseCoopers, provides four thoughts on how Brexit will play out in the U.S.
1. American healthcare could be a good place to invest. Regardless of international politics, people are still going to need healthcare, according to Mr. Drone, but Britain’s exit provides a stronger value proposition in the U.S. as the value of the pound plummets. In the short-term, the deterioration of the British pound could increase the relative value of U.S. dollar revenues, according to Mr. Drone.
Looking at the long-term, people will always need healthcare, so regardless, companies looking to invest should consider managed healthcare and healthcare facilities. “If you know people are going to be sick and need treatment, it’s a good place [for institutional investors] to think about from a long-term investment standpoint,” he says.
2. American healthcare companies with global operations in Europe will face challenges. Mr. Drone says American healthcare companies with global operations in Europe — those that have at least $50 billion in market capitalization — may not necessarily see their values go down as a result of Brexit. However, they will experience challenges obtaining fundraising and regulatory approval. “A process that was previously seamless and was able to be conducted in regular course of business now will be harder,” he says.
3. Life sciences companies could have a harder time raising capital. Quite a few life sciences companies are in need of constant capital replenishment. In challening financial markets, these companies may raise capital at more expensive terms then they did prior to Brexit, says Mr. Drone. “Biotech for instance, as a sector, they’ll need years and years worth of capital to go from their idea to something that’s a commercially viable product. That’s hundreds of millions of dollars and up, so those that…don’t have the most sought after technology and assets have a harder time getting financing than they did before,” he added.
4. M&A could be impacted. There’s always a lot of money that could be made during a period of uncertainty, meaning share prices are going to come down temporarily. However, if an American healthcare company looking to merge with or acquire another company feels bullish on the sector in the medium or long-term, the prices will rebound. “Will CEOs be more incentivized to buy something when it’s on sale, when the market’s down, or will they kind of look at the overall uncertainty and say, ‘Even though I might be able to make some profits in the meantime, I’m going to pass,'” Mr. Drone says. “Which view will win out probably falls on a company-by-company level. Some will decide not to proceed with M&A and others will decide to go after it in a more aggressive way.”
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