Oct 20, 2020 (Financial News Media via COMTEX) -- Palm Beach, FL - October 20, 2020 - Because the COVID-19 pandemic has resulted in significant financial challenges for the healthcare industry, smaller independent health systems will need to pursue partnerships to survive. Much of the financial hardship that hospitals and health systems face has come from reductions in elective procedures, and most hospital systems had used more than 50% of their reserves, and another 41.1% of hospital systems had expended between 21% and 50% of their reserves, according to a recent report. As the year progresses, the financial future doesn’t look bright, with estimates for hospital performance in Q3 and Q4 2020 indicating declines in operating margins by as much as 11%, according to the report. The analysts predict that the pent-up M&A activity from the pandemic will “very likely” cause a surge of hospital M&As moving into 2021. A report from analysts at Waller and Kaufman Hall said that: "”We foresee an increase in the number of independent hospitals and smaller systems that will need to explore partnerships in order to ensure the continued delivery of quality healthcare to the organizations’ communities,” the report said. Active companies in the markets this week include: Teladoc Health (NYS:TDOC) , CB2 Insights, Inc. (otcqb:CBIIF), CloudMD Software & Services Inc. (TSX:CA:DOC) (otcqb:DOCRF), Community Health Systems, Inc. (NYS:CYH) , Tivity Health, Inc. (NAS:TVTY) .
The article stated that: "The COVID-19 pandemic has created significant challenges for smaller hospitals and health systems. It has presented significant challenges to smaller, less capitalized and otherwise distressed healthcare providers. In terms of operating performance, half of our country's hospitals reported negative margins as Q1 of 2020.Reductions in commercially covered elective procedures and COVID-19 preparation and response, including the purchase of personal protective equipment (PPE) with the concomitant price increases, have created intense operating challenges for providers." It continued: "The COVID-19 pandemic has reduced M&A transaction volume as the focus of many hospital systems shifts from strategic growth to managing the financial and operational challenges of the pandemic... (but) as we emerge from this period and move into 2021, a surge of hospital M&A activity is likely."
CB2 Insights, Inc. (otcqb:CBIIF) BREAKING NEWS:CB2 Insights announces debt conversion of $3M USD held by Merida Capital and extinguishes all long-term debt liabilities – CB2 Insights ("CB2" or the "Company"), one of the largest integrative healthcare systems in the United States, is pleased to announce that it has completed an early conversion of its promissory note ("Note") held by Merida Capital Partners II LP ("Merida"), a US based private equity fund, dated June 17, 2020. The principal amount of $3M USD will be converted in full. Merida will be granted 10,412,250 common shares of CB2 based on the 8-day VWAP of $0.38 CAD. With the shares received from this debt conversion, Merida continues to strengthen its position in CB2 as a reporting insider for with total holding of 25,603,945 common shares.
Under the terms of the Note, the principal amount of $3M USD will become payable on December 24, 2022 and carries an annual interest rate of 8%. Additionally, if at any time prior to the maturity date, the closing price of the Company's common shares on the CSE is equal to or greater than $0.30 CAD for 20 consecutive trading days, then the outstanding amounts owed under the Note will be converted into that number of common shares based on the 20-day VWAP, less a discount of 10%. Based on early conversion, the Note has been converted at the 8-day VWAP with no discount.
Conversion of the Note will save the company approximately $0.5M USD in interest payments over the remainder of the Term. Additionally, the Company has strengthened its balance sheet by reducing 100% of its long-term debt. The Company also announced a full quarter of profitability in Q2 2020 and expects this to continue for Q3 2020. The Company also recently completed an oversubscribed private placement of $5.13M CAD bringing the total cash position to $5.5M CAD. The Company forecasts strong growth organically as it continues to expand its primary care services in the US through its physical clinics and telemedicine offerings.
As part of its stated strategy of perusing an M&A pipeline of medical clinics and services in the US, the Company recently completed the acquisition of Maverick County Medical in Texas with revenues of $1.6M CAD and EBITDA of $0.3M CAD for a total purchase price of $0.98M CAD. The Company is now well positioned to continue working through its deal pipeline and expects strong deal flow in the future. With a strong cash position, no long-term debt and a profitable business operation, the Company is well positioned to execute against its strategy.
"We continue to focus the Company to be on the offensive and establish the foundation for rapid growth in the US healthcare market, "said Prad Sekar, CEO, CB2 Insights. "The early conversion of our promissory note from Merida continues to validate our strength in the US with a strong financial partner that is committed to supporting our growth. The US healthcare market has never been as attractive and in demand for innovative solutions. With over 40 years collectively in practice management and healthcare operations, coupled with excess cash on hand and a strong infrastructure, we are well positioned to deliver our innovative multi-disciplinary health solutions to benefit millions of Americans."
"Merida has always sought to partner with companies that develop valuable assets in data and technology that can be extrapolated to succeed in traditional industries. Our firm’s voluntary note conversion further supports Merida’s belief that CB2 stands on the precipice of disrupting traditional healthcare channels while continuing to deliver innovative healthcare solutions both in clinic and virtually.” said Mitch Baruchowitz, Managing Partner of Merida. Read more news for CB2 Insights at: https://www.cb2insights.com/news
Other recent developments in the healthcare industry include:
Community Health Systems, Inc. (NYS:CYH) recently announced that an affiliate of the Company has completed the sale of 480-bed Bayfront Health St. Petersburg in St. Petersburg, Florida, and its associated assets to a subsidiary of Orlando Health which has assumed responsibility for the long-term lease and operations of the hospital. The effective date of the transaction is October 1, 2020. With the divestiture completed, Community Health Systems affiliates continue to operate 11 hospitals in Florida. The hospital in this transaction is among the planned divestitures discussed on the Company's second quarter 2020 earnings call.
Community Health Systems, Inc. is one of the largest publicly traded hospital companies in the United States and a leading operator of general acute care hospitals in communities across the country. The Company, through its subsidiaries, owns, leases or operates 92 affiliated hospitals in 16 states with an aggregate of approximately 15,000 licensed beds. The Company's headquarters are located in Franklin, Tennessee, a suburb south of Nashville.
CloudMD Software & Services Inc. (TSX:CA:DOC) (otcqb:DOCRF), a telemedicine company revolutionizing the delivery of healthcare to patients, recently announced that it has appointed Mena Beshay, the Company's current Chief Financial Officer ("CFO"), to a newly created, more focused role of Global Head, Corporate Development, where he will be responsible for leading the Company's corporate development activities which includes global mergers and acquisitions ("M&A") and its organic growth strategy. Mena's financial and operational experience will be valuable in leading the execution of the Company's growth strategy, while putting an even greater emphasis on M&A.
CloudMD has appointed Daniel Lee, an experienced capital markets and technology financial executive as its new CFO. Daniel's expertise and financial operations experience are important for CloudMD's strategic priorities to scale and grow the business globally with the proper financial frameworks in place. The appointment adds strength and depth to CloudMD's executive team which is imperative to support the rapid growth and integration of the business.
Teladoc Health (NYS:TDOC) , the global leader in virtual care, recently announced it is providing free, 24/7 general medical telehealth visits to residents, first responders and others directly impacted by Hurricane Sally and the devastating floods that have affected the area as a result. Individuals from the hardest hit areas in Alabama and Florida, as well as those located in Georgia and the Carolinas who are now being displaced can seek treatment from a board-certified, state licensed physician for any non-emergency illness by calling Teladoc directly at 855-225-5032.
"Especially during this hurricane season, as communities are already navigating an active pandemic, we want to make sure that those who are faced with the devastation of natural disasters are keeping their health front and center and know how to get care," said Dr. Lewis Levy, FACP, chief medical officer, Teladoc Health. "Virtual care is a proven solution that supports community health during these times, as residents from evacuated areas seek to stay healthy when healthcare facilities and providers may also possibly be affected and unable to meet all care needs."
Tivity Health, Inc. (NAS:TVTY) recently announced that it has entered into a definitive agreement with Kainos Capital, a leading food and consumer-focused private equity firm, under which Kainos Capital will acquire Tivity Health’s Nutrition Business, which includes Nutrisystem [(R)] and South Beach Diet [(R)] , for a purchase price of $575 million in cash.
“Following a comprehensive review of the Company’s strategy and core capabilities, our Board of Directors and management team concluded that divesting the Nutrition Business through this transaction will best enable Tivity Health to focus its management team, resources and investment on its core healthcare business, to drive long-term, sustainable growth and increase shareholder value,” said Anthony Sanfilippo, Chairman of the Board of Directors of Tivity Health.
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