Kinetic Concepts tries to arrest market share atrophy with $500m Systagenix buy

After a woeful showing in the first half, the medtech M&A scene has shown a welcome sign of life. At $485m, Kinetic Concepts’ purchase of Systagenix’s woundcare business could turn out to be the fourth-largest deal to close in 2013.

The deal is Kinetic Concepts’ second buy in a year and, like the first – that of MoMelan Technologies in December for an undisclosed amount – is aimed at bolstering the company’s standing in the wound healing sector. This is something it needs to do: before this deal was announced, EvaluateMedTech’s consensus forecasts saw Kinetic Concepts’ share of the wound management market shrinking from 12.4% in 2012 to 11.3% in 2018, dropping from second place to third.

Growth rates

Spun out of Johnson & Johnson’s Ethicon surgical products unit in 2008, UK-based Systagenix is now owned by private equity firm One Equity Partners. The amount One Equity paid for the business five years ago is unknown.

When the deal closes in the fourth quarter of this year, Kinetic Concepts will own Systagenix’s woundcare portfolio, including a collagen gel-based dressing, Promogran, and a non-adherent antimicrobial dressing, Silvercel, both of which are designed to aid the healing of ulcers and traumatic and surgical wounds.

The UK group also manufactures a diagnostic, Woundchek, which determines whether a wound is subject to elevated protease activity, in which case they are less likely to heal; a protease modulating therapy can then be administered to speed healing. Systagenix’s diagnostics operations are to form a separate company which One Equity will continue to own, and Kinetic Concepts will help distribute Woundchek.

One Equity may have got the better end of the deal. The wound management sector is predicted to have an annual growth rate of 4.4% out to 2018, whereas the in vitro diagnostics sector is growing at a rate of 5.0% a year, EvaluateMedTech data show. Presumably Kinetic Concepts’ management feels that a manoeuvre permitting them a more dominant position in a slower growing segment is worthwhile.

The overall medtech market is forecast to grow 4.6% a year to be worth $453bn by 2018, according to EvaluateMedTech.

Fourth place

So flat has the M&A landscape been this year that a deal worth less than half a billion dollars could end up being one of the top five buys of 2013 (Medtech M&A on course for the worst year in a decade, July 25, 2013).

However, of the 21 medtech acquisitions announced in 2012 or 2013 that remain open, three are larger – much larger – than the Systagenix buy (see table). While Thermo Fisher’s purchase of Life Technologies is not expected to close until 2014, either of the other deals could complete this year. If both do, Kinetic Concepts/Systagenix will be knocked out of the top five.

Top four open medtech deals announced in 2012 and 2013
Deal announcement date Acquiring company Target company Deal value ($m) Expected deal close date
15 April 2013 Thermo Fisher Scientific Life Technologies                 13,600 H1 2014
27 May 2013 Valeant Pharmaceuticals International Bausch + Lomb                   8,700 Unknown
4 December 2012 Baxter International Gambro                   4,000 Unknown
30 July 2013 Kinetic Concepts Systagenix                      485 Q4 2013

All data sourced to EvaluateMedTech

To contact the writer of this story email Elizabeth Cairns in London at [email protected] or follow @LizEPVantage on Twitter

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