WEST PALM BEACH, Fla., Feb. 27, 2014 /PRNewswire/ -- FTI Consulting, Inc. (NYSE: FCN), the global business advisory firm dedicated to helping organizations protect and enhance their enterprise value, today announced the results of the firm's fourth annual Life Sciences Investor Survey of European and U.S. institutional investors on a number of key industry-related topics. Conducted by the firm's Strategic Communications segment, the study's findings underscore investors' overall optimism toward the outlook for healthcare stock performance and the anticipated continued strength of the transaction environment in the sector. The research also revealed a number of key trends in shareholder engagement for healthcare and life sciences companies to consider.
The study found 67 percent of investors expect healthcare to outperform or generate equal returns to the broader market in 2014. Seventy-seven percent of investors believe current healthcare valuations are being supported by a foundation of fresh innovation, science, restructuring and a favorable growth outlook — and do not reflect a sector investment bubble.
According to FTI Consulting's research, the industry's transaction environment is expected to remain relatively robust in 2014. After a total of 43 venture capital-backed U.S. healthcare initial public offerings (IPOs) raised $2.7 billion in 2013, compared to only 14 U.S. healthcare IPOs in 2012 that raised $714 million, an overwhelming 84 percent of investors surveyed expect the IPO window to remain open for life sciences companies for at least six more months.
Moreover, 65 percent of investors believe this healthy appetite for healthcare IPOs is fueling a more expensive deal and merger and acquisition (M&A) environment. This was certainly the case in 2013, when 60 transactions with a combined value of $77 billion were completed compared to 2012 when 51 transactions with a combined value of $44 billion were completed. The average size of each transaction in 2013 was 49 percent higher than in the prior year."With 59 percent of investors anticipating a significant or moderate increase in M&A among healthcare and life sciences companies, 2014 could be another record year for the sector in terms of both the number and value of deals," said Elizabeth Saunders, Senior Managing Director and Americas Chairman in the Strategic Communications segment at FTI Consulting. "The IPO and M&A-related data derived from this study indicate strong optionality potential for development-stage companies," said Barbara Ryan, Managing Director in the Strategic Communications segment's Healthcare & Life Sciences industry team at FTI Consulting. "To maximize this optionality, these companies must build a corporate narrative that clearly defines the investment case, and then communicate that investment case 'early and often' via presentations at healthcare investment conferences and one-on-one meetings with institutional investors." The FTI Consulting research also found the majority of investors view direct interaction with companies as their most preferred information source — with industry conferences, investor day events, non-deal roadshows and investment conferences identified as the most important communication activities. Of significance, the study showed a meaningful geographical split in the number of investor interactions preferred prior to an investment decision. U.S. investors prefer three to four direct interactions with a management team prior to making an investment decision, while European investors generally arrive at an investment decision following one to two interactions.