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2012 sees largest pure medtech buy for seven years, but value of deals slump 27%

Date October 29, 2012

This year has seen fewer mergers and acquisitions in the medtech space so far than the equivalent period in 2011, and the total value of the deals has also fallen. In the first three quarters of 2012 $47bn was spent on acquiring medtech companies, compared with $65bn a year earlier. The fall of 27% is particularly concerning as nearly half of the 2012 total spend was from a single $20bn deal.

Analysis of data from EvaluateMedTech shows that the first three quarters of 2012 saw 38 M&A deals within medtech, compared with 60 in the same period in 2011. This 37% drop is partly due to the macroeconomic climate, and no doubt some of the blame can also be apportioned to the forthcoming US medtech sales tax, which is forcing companies into cost-cutting and limiting their takeover opportunities (see tables).

Largest pure medtech deal for seven years

By far the largest medtech acquisition of 2012 was that of the trauma specialist Synthes by  Johnson & Johnson. The $19.7bn deal was worth more than five times as much as the next largest transaction, Hologic’s buyout of Gen-Probe for $3.7bn. It is a huge outlier, unlike anything in the first three quarters of 2011, where the top deal was worth less than twice the price of the second. 

Top 20 medtech M&A deals in first nine months of 2012 
Rank  Acquiring company  Deal type  Target  Deal value ($m)  Status  Date 
Johnson & Johnson  Company acquisition  Synthes  19,700  Closed  14 June 2012 
Hologic  Company acquisition  Gen-Probe  3,700  Closed  1 August 2012 
Asahi Kasei  Company acquisition  ZOLL Medical  2,210  Closed  26 April 2012 
Agilent Technologies  Company acquisition  Dako  2,200  Closed  21 June 2012 
Boston Scientific  Company acquisition  Cameron Health  1,350  Closed  8 June 2012 
FUJIFILM Holdings  Company acquisition  SonoSite  995  Closed  29 March 2012 
Thermo Fisher Scientific  Company acquisition  One Lambda  925  Closed  13 September 2012 
Medtronic  Company acquisition  Kanghui Holdings  816  Open  27 September 2012 
Haemonetics  Business unit  Blood collection, filtration and processing product lines of Pall  535  Closed  2 August 2012 
10  Hill-Rom  Company acquisition  Aspen Surgical Products  400  Closed  26 June 2012 
11  AngioDynamics  Company acquisition  Navilyst Medical  372  Closed  22 May 2012 
12  Danaher  Company acquisition  IRIS International  338  Open  17 September 2012 
13  Covidien  Company acquisition  BÂRRX Medical  325  Closed  05 January 2012 
14  Baxter International  Company acquisition  Synovis Life Technologies  325  Closed  14 February 2012 
15  Covidien  Company acquisition  Oridion  310  Closed  26 June 2012 
16  Covidien  Company acquisition  superDimension  300  Closed  15 May 2012 
17  Biomet  Business unit  Trauma business of DePuy Orthopaedics  280  Closed  15 June 2012 
18  Teleflex  Company acquisition  LMA International  276  Open  14 August 2012 
19  Getinge  Business unit  Therapeutic Support System business of Kinetic Concepts  275  Open  15 August 2012 
20  STERIS  Company acquisition  U.S. Endoscopy Group  270  Closed  15 August 2012 

The deal was, in its way, also a response to economic pressures. J&J’s DePuy subsidiary already had a significant presence in the  orthopaedic market, but much less in trauma, with a market share of around 6% before the acquisition, compared with 58% for  Synthes. Because trauma care is a necessity, it is under less pricing pressure than procedures such as joint replacement (J&J needs to practice dealmaking arts in Synthes talks, April 18, 2011).

The Synthes deal was the largest acquisition of a pure-play medtech company since Boston Scientific’s 2005 acquisition of  Guidant for $27bn. Boston has had significant difficulties digesting pacemaker developer  Guidant and may only now be getting back on track (EP Vantage Interview – Boston Scientific remakes itself to face the future, October 22, 2012). J&J, being the biggest medtech company in addition to its pharmaceutical operations, ought to be able to absorb Synthes more easily.

The most expensive transaction to date in 2012 has had a knock-on effect in that it necessitated the 17th most expensive: Biomet bought the trauma segment of  DePuy, which included fixation products used in the treatment of bone fractures, for $280m in June, in order to allay EU antitrust concerns resulting from the Synthes buy.

Top 20 medtech M&A deals in first nine months of 2011  
Rank  Acquiring company  Deal type  Target  Deal value ($m)  Status  Date 
Danaher  Company acquisition  Beckman Coulter  6,800  Closed  30 June 2011 
Thermo Fisher Scientific  Company acquisition  Phadia  3,438  Closed  23 August 2011 
Terumo  Company acquisition  CaridianBCT  2,625  Closed  14 April 2011 
DENTSPLY International  Business unit  AstraTech  1,800  Closed  31 August 2011 
Stryker  Business unit  Neurovascular Division of Boston Scientific  1,500  Closed  3 January 2011 
Medtronic  Company acquisition  Ardian  800  Closed  13 January 2011 
Quest Diagnostics  Business unit  Athena Diagnostics  740  Closed  4 April 2011 
Bausch + Lomb  Option  Technolas Perfect Vision  645  Open  8 September 2011 
Elekta  Company acquisition  Nucletron  526  Closed  15 September 2011 
10  Medtronic  Company acquisition  Salient Surgical Technologies  525  Closed  31 August 2011 
11  Novartis  Company acquisition  Genoptix  525  Closed  31 August 2011 
12  Boston Scientific  Company acquisition  Sadra Medical  470  Closed  7 March 2011 
13  Boston Scientific  Company acquisition  Atritech  386  Closed  4 January 2011 
14  QIAGEN  Company acquisition  Cellestis  375  Closed  3 March 2011 
15  Hologic  Company acquisition  Interlace Medical  374  Closed  29 August 2011 
16  Hitachi Medical  Company acquisition  Aloka  350  Closed  7 January 2011 
17  Accuray  Company acquisition  Tomo Therapy  292  Closed  4 March 2011 
18  Toshiba  Company acquisition  Vital Images  277  Closed  13 June 2011 
19  Roche  Company acquisition  mtm laboratories  273  Closed  15 June 2011 
20  Sekisui Chemical  Business unit  Genzyme’s Diagnostic Business  265  Closed  1 February 2011 

Covidien

The most acquisitive firm in terms of deals is Dublin-based Covidien, which purchased no fewer than seven companies: BÂRRX MedicalOridionsuperDimensionMaya MedicalNewport Medical Instruments, CNS Therapeutics and MindFrame, for a total of $1.4bn.

BÂRRX is a developer of radiofrequency ablation catheters used to remove precancerous tissue from the gastrointestinal tract to treat conditions including Barrett's oesophagus. Maya Medical’s lead technology, the OneShot renal denervation system, also employs radiofrequency energy, but uses it to ablate nerves to control blood pressure.

Three further companies are active in the pulmonary area. Oridion develops devices that detect the proportion of  carbon dioxide in a patient’s breath as a monitoring tool for use during anaesthesia and intensive care. The Israeli company  superDimension has a product called the i·Logic system, which can extend the reach of conventional bronchoscopes to provide minimally invasive access to lesions deep in the lungs, to improve evaluation of lesions and enable safer tissue biopsies.  Newport Medical Instruments develops ventilators. These companies are logical purchases given  Covidien’s portfolio of pulse oximeters and other monitoring products.

MindFrame manufactures devices to aid rapid perfusion and clot removal to treat patients with  ischaemic stroke. Lastly, CNS Therapeutics is a pharma company, bought by  Covidien’s drugs subsidiary Mallinckrodt.

The most acquisitive company in the first three quarters of 2011 was Medtronic, which bought renal denervation specialist Ardian, surgery companies Salient Surgical Technologies and PEAK Surgical and  Jolife, a Swedish firm that had developed a tool that administers non-stop chest compressions, spending a total of $1.5bn.

The medtech sector is growing faster than pharma. Though there have been fewer acquisitions so far in 2012 than in 2011, this trend is a recent one – 2011 saw more buyouts than 2009 – and there is no reason why it might not be reversed in 2013. 

Medtech mergers & acquisitions  
Deal announcement date   Total deal value ($m)   Deal count 
1st quarter 2011  5,778  16 
2nd quarter 2011  48,334  22 
3rd quarter 2011  10,839  22 
1st quarter 2012  3,430 
2nd quarter 2012  31,173  14 
3rd quarter 2012  12,499  19 

To contact the writer of this story email Elizabeth Cairns in London at  elizabethc@epvantage.com

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