by S&P Global
Medical-device companies will persist in their pursuit of strategic acquisitions in 2019 amid increasing deal interest from investors and private equity firms, according to a report by Fitch Solutions Macro Research.
That continues a trend in 2018, when strategic investors and private equity firms snapped up assets and took stakes in companies like Resonetics LLC, which received an investment from a portfolio company of GTCR LLC.
"Smaller and more frequent deals are able to support a more comprehensive growth strategy for companies and can often deliver substantially higher returns," Fitch Solutions said. "By undertaking regular, small, low-value acquisitions, companies can further solidify their position in markets they are already participating in."
An aging population, longer life spans and a growing middle class in developing countries, especially in Asia, has positioned the medical-device market for continued growth, increasing the attraction of the sector, Fitch Solutions reported.
Companies including Stryker Corp., Johnson & Johnson, Boston Scientific Corp., Smith & Nephew PLC, Abbott Laboratories and Edwards Lifesciences Corp. have undertaken small-scale deals in 2019 to gain novel technology that complements their current portfolios.
Companies such as Edwards, Boston Scientific, Abbott and Medtronic PLC, which have been traditionally focused on developing therapies in interventional cardiology — catheter-based treatment of structural heart diseases — have undertaken bolt-on deals that complement their current portfolios.
While Medtronic is acquiring privately held EPIX Therapeutics Inc., which develops devices for treating irregular heartbeats, Abbott is acquiring Cephea Valve Technologies Inc., a developer of heart valve replacement products.
Boston Scientific is in the middle of a £3.3 billion takeover of BTG PLC, a U.K. developer of products for treating cancer and vascular diseases. The company had also acquired Millipede Inc. to strengthen its heart devices segment.
Earlier in April, Edwards completed its acquisition of CAS Medical Systems Inc., which makes devices for monitoring blood oxygen in the brain during surgeries.
Fitch Solutions added that Stryker and Smith & Nephew are aiming to diversify their product portfolios through small-scale acquisitions. Stryker bolstered its ear, nose and throat portfolio with the acquisition of Arrinex Inc. in February and Entellus Medical Inc. in 2018, while the $110 million acquisition of OrthoSpace Ltd. has helped strengthen its sports therapy segment. Stryker's Chairman and CEO Kevin Lobo had also noted in its first-quarter earnings call that the company will be on the hunt for new acquisitions.
The report noted that surgical robotics is another key area where companies are eyeing acquisition opportunities. J&J has acquired surgical-robot maker Auris Health Inc. in a $3.4 billion deal. Smith & Nephew is going to acquire Munich-based Brainlab AG's orthopedic joint reconstruction business which will be integrated with the London-based company's robotics commercial organization. Earlier in April, Smith & Nephew also acquired stem cell research company Osiris Therapeutics Inc. in a $660.5 million transaction.
In December 2018, Dublin-based Medtronic closed a deal to buy Israel-based Mazor Robotics Ltd. to strengthen its position as a provider of spine surgery technologies.
Fitch Solutions Group Ltd. is an affiliate of Fitch Ratings Inc. Fitch Ratings did not have any input on the Fitch Solutions report.