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

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
1 Johnson & Johnson Company acquisition Synthes 19,700 Closed 14 June 2012
2 Hologic Company acquisition Gen-Probe 3,700 Closed 1 August 2012
3 Asahi Kasei Company acquisition ZOLL Medical 2,210 Closed 26 April 2012
4 Agilent Technologies Company acquisition Dako 2,200 Closed 21 June 2012
5 Boston Scientific Company acquisition Cameron Health 1,350 Closed 8 June 2012
6 FUJIFILM Holdings Company acquisition SonoSite 995 Closed 29 March 2012
7 Thermo Fisher Scientific Company acquisition One Lambda 925 Closed 13 September 2012
8 Medtronic Company acquisition Kanghui Holdings 816 Open 27 September 2012
9 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
1 Danaher Company acquisition Beckman Coulter 6,800 Closed 30 June 2011
2 Thermo Fisher Scientific Company acquisition Phadia 3,438 Closed 23 August 2011
3 Terumo Company acquisition CaridianBCT 2,625 Closed 14 April 2011
4 DENTSPLY International Business unit AstraTech 1,800 Closed 31 August 2011
5 Stryker Business unit Neurovascular Division of Boston Scientific 1,500 Closed 3 January 2011
6 Medtronic Company acquisition Ardian 800 Closed 13 January 2011
7 Quest Diagnostics Business unit Athena Diagnostics 740 Closed 4 April 2011
8 Bausch + Lomb Option Technolas Perfect Vision 645 Open 8 September 2011
9 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 Medical, Oridion, superDimension, Maya Medical, Newport 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 5
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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