News Column

QMED - Medtronic, Thermo Fisher Making Largest Medtech Buys

July 16, 2014

ENP Newswire - 16 July 2014

Release date- 14072014 - Whether it involves Medtronic buying Covidien for $43 billion or Thermo Fisher Scientific acquiring Life Technologies Corp. for $13.6 billion, the medical device industry has seen some major mergers and acquisitions deals in 2014.

The 10 largest deals Qmed has covered this year are worth about $83 billion. And the year is only a little over halfway done.

Reasons for the deals include the need for larger companies with more economies of scale needed to compete amid a trend toward reduced healtcare spending in the United States, Europe and other developed countries. For U.S.-based multinationals, the chance to move the headquarters overseas also has tax benefits.

Here are 10 of the largest medtech M&A deals so far this year:

1. Medtronic to Buy Covidien

Price: $43 Billion

Medtronic announced in June that it has agreed to acquire Irish medtech firm Covidien for $42.9 billion in cash and stock. The purchase is the largest acquisition of a foreign firm by a U.S. company, based on Standard & Poor's Capital IQ data.

The move stands to make Medtronic, which was already the fourth largest medical device firm, even more competitive. With total revenue of $14.3 billion, Covidien is a heavyweight in its own right, ranking as the eighth largest device company. In the same time period, Medtronic's total revenue was $16.7 billion. For the sake of comparison, diversified healthcare behemoth Johnson & Johnson had total revenue of $28.6 billion in that same time period.

The merger will give the firm 87,000 employees based throughout more than 150 countries. Executives at the company have indicated that strategic cost-cutting could follow, with approximately $850 million in potential cost savings earmarked over the course of the next two to three years.

The merged entity will be known as Medtronic plc. Medtronic's current CEO Omar Ishrak will be put at the helm of the combined company, who incidentally denied that the merger was motivated by a desire to lower its tax rate.

While the company will be officially headquartered in Ireland, it will still retain operational headquarters in Minneapolis.

The merger is expected to pass regulatory hurdles by the end of the year or by the early 2015.

Read Qmed's story about the deal.

2. Thermo Fisher's Personalized Medicine Play

Price: $13.6 Billion

Thermo Fisher Scientific in May completed its $13.6 billion acquisition of Life Technologies Corp. (Carlsbad, CA), a move that will provide lab products leader Thermo Fisher with access to the DNA sequencing market.

'Our combined offering provides cutting-edge technologies, such as genomics and proteomics, to accelerate life sciences research and improve human health,' Thermo Fisher Scientific CEO Marc N. Casper said in a news release.

The deal was first announced more than a year ago.

That is likely no idle boast. Genomic sequencing is poised to ultimately play an important role in healthcare, helping shift medicine away from a one-size-fits-all methodology to make it increasingly personalized. For now, however, genomic sequencing is a niche technology that has not been tested extensively in the real world. In addition, many of its benefits are often described in the context of an unspecified time in the future. In March, San Francisco Gate published a piece pointing out some of the current-gen technology's alleged shortcomings in a piece titled 'Whole-genome sequencing falls short, study says.'

3. Zimmer Holdings 'Shakes Warsaw' with Biomet Deal

Price: $13.4 Billion

The Wall Street Journal in April ran the headline, 'The Deal That Shook Warsaw, Ind.,' when Zimmer Holdings announced its plans for the $13.35 billion acquisition of Biomet, the other big ortho device company headquartered in the Indiana city.

The acquisition-expected to close early next year pending customary closing conditions-is expected to solidify Zimmer's position as the second-largest orthopedic company in the world.

Zimmer says it expects to realize cost synergies of $270 million annually by the third year after closing, but the operative word in the deal has been integration, not restructuring.

Read Qmed's story about the deal.

4. Abbott Labs Sharpens Device Focus with Pharma Sale

Price: $5.3 Billion

Abbott Park, IL-based Abbott Laboratories continues to divest itself of pharmaceutical holdings as it focuses more attention on medical devices and diagnostics, with the latest deal involving the multibillion-dollar sale of its developed markets branded generics pharmaceuticals business to Pittsburgh-based Mylan.

Abbott will receive 105 million shares in a 'New Mylan' entity that will include Mylan and the former Abbott assets, according to a July 14 news release. Based on Mylan's closing stock price on Friday, Abbott's equity stake would be worth $5.3 billion, and Abbott Labs CEO Miles White says the company does not plan to hold onto the shares long term.

The transaction is expected to close during the first quarter of 2015.

The generic pharmaceuticals business has had about $2 billion in annual sales generated in Europe, Canada, Japan, Australia, and New Zealand-about two-fifths of Abbott's remaining pharmaceuticals business. Based on 2013 sales, medical devices would make up 38% of Abbott revenue, versus a previous 35%. (Abbott also has a multibillion-dollar nutritional business.)

Read Qmed's story about the deal.

5. J&J Sells Blood Testing Equipment Business to Carlyle Group

Price: $4 Billion

Johnson & Johnson in late March announced that had accepted a binding $4 billion offer from The Carlyle Group to buy its Ortho-Clinical Diagnostics business, which provides blood-testing equipment and chemicals. J&J announced sale completion on June 30.

One would think a blood testing equipment business would be a gold mine. Getting one's blood drawn is pretty common, after all. But it has not been so for J&J.

The company's diagnostics business brought in $1.89 billion in revenue in 2013, a nearly 9 percent decline from 2012.

J&J is not alone in this situation. Even with a slight uptick related to the U.S. Affordable Care Act bringing in new patients, the $75 billion lab testing industry will continue to slow down through 2015, according to G2 Intelligence research recounted by American Public Media's Marketplace.

Read Qmed's story about the deal.

6. Smith and Nephew Buys ArthroCare

Price: $1.5 Billion

Smith & Nephew announced in February that it had executed an agreement to buy sports medicine company ArthroCare Corp. It announced on May 29 that the purchase was completed, at a price of about $1.5 billion.

The news came only weeks after ArthroCare agreed to pay $30 million to settle securities fraud-related charges with the U.S. Department of Justice.

Still, Smith & Nephew CEO Olivier Bohuon said: 'This is a compelling opportunity to add ArthroCare's technology and highly complementary products to further strengthen our sports medicine business. Together, we will be able to generate significant additional revenue from the more comprehensive portfolio, combined sales force and Smith & Nephew's global footprint.'

7. GE Acquires Thermo Fisher Life Sciences Technology

Price: $1.06 Billion

Cell culture and gene modulation technology, as well as magnetic beads used protein analysis and medical diagnostics, are included in GE's $1.06 billion acquisition of life science business lines from Thermo Fisher Scientific, which closed in March.

GE announced in January that the product offering additions would allow GE Healthcare to develop 'end-to-end' technologies for cell biology research, cell therapy, and the manufacture of innovative medicines and vaccines.

Buying Thermo Fisher's Sera-Mag magnetic beads product line enables GE to extend its existing technologies in protein analysis and medical diagnostics. The Sera-Mag beads have a high surface area per unit mass and slow settling rate with good lot-to-lot reproducibility.

8. Boston Scientific Buys Interventional Division of Bayer AG

Price: $415 Million

This roughly $415 million deal, announced in May, is expected to close in the second half of 2014, subject to customary closing conditions. Boston Scientific said buying Bayer AG's Interventional Division will help it meet its goal of providing a comprehensive portfolio of products and services to treat peripheral vascular disease-which affects more than 27 million people worldwide.

Bayer Interventional had about $120 million in sales in 2013, and purchasing it gives Boston Scientific more access to what it described as attractive segments in the peripheral space, including in the atherectomy and thrombectomy categories.

'These technologies help physicians save both limbs and lives,' Boston Scientific CEO Mike Mahoney said in a news release.

9. St. Jude Buys Heart Failure Tech

Price: $375 Million

St. Jude Medical in May announced that it was paying $375 million to acquire CardioMEMS and its device to help manage heart failure. The purchase came amid U.S. FDA approval of the CardioMEMS HF System.

The device is about the size of a dime and is implanted in the pulmonary artery during a minimally invasive procedure. It can transmit information about pulmonary artery pressure from a patient's home to a health provider. Increased pressure in the artery is an early warning of worsening heart failure.

Catching a rise in pulmonary artery pressure allows doctors to proactively manage medications and other treatment options, decreasing the likelihood of hospital admission. Odd are, that's an attractive value proposition for U.S. health systems, especially since Obamacare has Medicare increasingly reimbursing based on how overall patient populations are managed. Public relations for St. Jude noted that heart failure costs the United States$31 billion annually, an amount expected to more than double to $70 billion by 2030.

The CardioMEMS HF System is also touted as the first FDA-approved implanted device that is a pressure-reading silicon chip, hermetically sealed in glass using a laser.

St. Jude has continued big acquisition spending post-CardioMEMS. Just on July 14, it announced an agreement to acquire NeuroTherm, a manufacturer of pain management therapies. The $200-million acquisition will enable St. Jude to enter the market for spinal pain treatment using radiofrequency ablation (RFA) therapy.

10. Cardinal's AccessClosure Takeover

Price: $320 Million

Dublin, OH-based Cardinal Health Inc. announced in May that it has completed its acquisition of privately-held AccessClosure Inc. (Santa Clara, CA), giving it a foothold in the interventional cardiology space. The all-cash $320 million deal, originally announced on April 2, will add AccessClosure's extravascular closure devices and other products to Cardinal's portfolio of solutions.

AccessClosure's Mynx family of patient-friendly vascular closure devices helps physicians close the femoral artery using a unique, secure sealant, which dissolves within 30 days and leaves behind nothing but a healed artery. According to the company, Mynx allows patients to safely ambulate more quickly and enables them to return home sooner.

At the April announcement, Don Casey, CEO of Cardinal Health's Medical segment, said, 'We are excited about this opportunity because it provides a scalable platform - with an outstanding product, strong customer base, cost-effective service model, and seasoned management team. Our goal is to become the partner of choice for solutions that improve patient care while reducing the cost and complexity of procedures for hospital systems.'

For more stories covering the world of technology, please see HispanicBusiness' Tech Channel

Source: ENP Newswire

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