While larger acquisitions were announced at the end of the year including J&J’s $16.6B purchase of Abiomed, the number of deals declined from 2021.
Medical device mergers and acquisitions were slower in 2022 than previous years.
Johnson & Johnson’s planned $16.6 billion acquisition of heart pump maker Abiomed capped off an otherwise slower year for mergers and acquisitions. It was one of 11 deals valued above $1 billion in the year, compared with 21 “megadeals” in 2021, according to data from consulting and accounting firm EY.
The recession was one reason for the slowdown in dealmaking as many companies’ shares declined in value. In October, before J&J had reached an agreement with Abiomed, CFO Joe Wolk had said the volatility “doesn’t help for a conducive M&A market.” Potential sellers, he said, are reluctant to sell below recent all-time high share prices.
J&J’s offer price for Abiomed valued the company at close to its 52-week high of $381.99 per share. Boston Scientific’s planned acquisition of Apollo Endosurgery for $615 million was also valued near its 52-week high of $10 per share, which analysts noted since the deals were announced within weeks of each other.
“I don’t think we’re ready to say we’re off to the races of 2021 again,” EY Life Sciences Partner John Babitt said in an interview, noting that a lot of the top mid-size companies are still trading 20% to 30% below recent highs for their shares. Still, the reality may be setting in that their shares may not bounce back as quickly as they did after the start of the COVID-19 pandemic, he added.
Looking at private, venture-backed deals, 2022 still had the fewest deals since 2016, said Jon Norris, managing director of Silicon Valley Bank’s healthcare practice.
“I think the small- to mid-cap folks who were so excited, [and] provided a nice boost to the industry with their acquisitions in 2021 became a lot more focused on cash preservation, EPS, their own products, and were less likely to acquire new companies,” Norris said.
Many of the deals that did happen were for products that had 510(k) clearance, which larger companies could easily tuck into their revenue stream.
“My very broad perspective is less activity in device, more focus on the bigger acquirers,” Norris said.
Here’s a closer look at the top 10 medical device deals of 2022.
J&J’s acquisition of Abiomed leads the top deals for 2022
1. Johnson & Johnson buys Abiomed
Amount: $16.6 billion
Date announced: Nov. 1
After a slow period for medtech mergers, Johnson & Johnson closed out the year by purchasing Abiomed for $16.6 billion.
The deal was priced at $380 per share, 51% more than Abiomed’s closing stock price the day before the announcement. The Danvers, Mass.-based company’s shareholders could receive as much as an additional $35 per share if the companies reach certain commercial and clinical milestones.
At the beginning of the year, J&J CEO Joaquin Duato said the company would take a more aggressive approach to medtech M&A, as the company spins out its consumer health business to focus more on pharmaceuticals and medical devices.
Abiomed is expected to complement J&J’s Biosense Webster electrophysiology business and will operate as a standalone business under J&J’s medical devices unit.
2. Stryker buys Vocera Communications
Amount: $3.09 billion
Date closed: Feb. 23
Stryker’s purchase of Vocera is an example of medical-device companies looking to acquire software assets. San Jose, Calif.-based Vocera makes communication and workflow optimization software for hospitals.
Some analysts said they were puzzled over the acquisition after it was announced in January given that it’s outside of Stryker’s traditional medical and surgical equipment focus and that it values Vocera 11.5 times higher than its 2022 revenue estimates.
In Stryker’s most recent quarterly earnings call, Jason Beach, vice president of investor relations, said the company is “pleased” with the integration process even as some installations had been delayed as the company shifts Vocera’s salesforce to the Stryker model and plans to move more customers to the cloud.
3. Thermo Fisher buys The Binding Site
Amount: $2.6 billion
Date announced: Oct. 31
Thermo Fisher reached an agreement to acquire U.K.-based diagnostics firm the Binding Site Group for 2.25 billion pounds, about $2.6 billion at the time of the announcement. The company makes two blood tests for multiple myeloma, intended to diagnose the cancer and monitor patients after they’ve been diagnosed.
The company would become part of Thermo Fisher’s specialty diagnostics portfolio, which currently includes COVID-19 testing and tests to monitor levels of immunosuppressant drugs in transplant patients.
The deal is expected to close in the first half of 2023.
4. Becton Dickinson buys Parata Systems
Amount: $1.53 billion
Date closed: July 18
BD’s purchase of Parata is another example of a software-focused acquisition.
Durham, North Carolina-based Parata makes software to automate vial filling, packaging and central fill for pharmacies. J.P. Morgan analysts wrote that it could pair with BD’s Pyxis line of automated medication dispensers.
BD said Parata could help BD reach its goal of a 25% operating margin by the end of 2025. The two companies reached an agreement in June and closed the acquisition a month later.
The purchase has already boosted BD’s revenue. In the company’s fiscal fourth quarter, BD’s medical segment revenue, which includes medication management and pharmaceutical systems, increased 5.8% compared to the year-earlier quarter. Still, the company’s overall revenue decreased because of foreign-exchange rates and declining sales of COVID-19 tests.
5. ArchiMed buys Natus Medical Incorporated
Amount: $1.2 billion
Date closed: July 21
An affiliate of French investment firm ArchiMed acquired Middleton, Wisc.-based Natus Medical, which makes devices to screen, diagnose and treat neurological conditions. ArchiMed’s MED Platform II fund paid $33.50 per share, about 29% higher than Natus’s share price the day before the deal was announced.
Natus makes electroencephalography systems, monitors for intracranial pressure, electromyography devices and hearing assessments. The company was founded in 1987 and has sales in over 100 countries.
6. Masimo buys Sound United
Amount: $1.03 billion
Date closed: April 11
Irvine-based medical device company Masimo acquired Viper Holdings, the parent company of consumer electronics company Sound United. The acquisition is being used to support consumer product launches for Masimo, which makes devices for pulse oximetry and patient monitoring in the operating room, as well as a consumer-facing version of its pulse oximetry device, a bio-sensor smartwatch and a sleep monitor. Sound United operates consumer-facing audio brands, including Denon, a maker of home entertainment systems, Bowers & Wilkins, which makes speakers and headphones, and Boston Acoustics, which manufactures home speakers.
In early December, Masimo said customers could now connect its passive health monitoring technology to Denon’s HEOS entertainment system and use that to share personal health information with clinicians over Masimo’s servers.
Stifel analysts wrote in a Feb. 15 research note that Masimo could use Sound United’s manufacturing capacity and its commercial channels, including Best Buy, to sell more of its personal monitoring devices, while bringing Sound United’s devices to a hospital setting.
While the acquisition closed in April, the combined company has since weathered some leadership changes. Sound United CEO Kevin Duffy, promoted to president of Masimo’s consumer division, was terminated without cause in July. Two months later, Masimo promoted former Sound United Chief Commercial Officer Blair Tripodi to chief operating officer of its consumer business.
Masimo’s shares have declined by about 49% in the past 12 months. The stock fell 37% between Feb. 15 and Feb. 16, the day after the acquisition was announced.
7. ResMed buys MediFox
Amount: $976 million
Date closed: Nov. 22
ResMed struck an agreement to buy German software company MediFox Dan for 950 million euros, or about $976 million on the day the deal closed. MediFox makes software for groups that provide healthcare outside of the hospital, including care documentation, administration and billing.
ResMed’s main business are its sleep and respiratory devices, but it also owns two software-as-a-service (SaaS) brands: MatrixCare and Brightree. The acquisition was intended to complement the latter and help ResMed extend its software business outside of the U.S.
In a November update, ResMed said it would keep MediFox’s employees, locations and business processes, with the company reporting to ResMed’s SaaS President Bobby Ghoshal. MediFox has more than 700 employees.
8. Medtronic buys Affera
Amount: $925 million
Date closed: Aug. 30
Medtronic announced plans last year to buy Affera, a Newton, Mass.-based company that makes cardiac ablation and cardiac mapping devices. The $925 million offer included $250 million that will be paid out after certain unspecified “contingent considerations” have been met.
When the purchase was announced in January, Medtronic CEO Geoff Martha said it would give Medtronic a “much more complete” electrophysiology ablation portfolio and help it to better compete in a high-growth market.
Cardiac ablation involves creating small scars in the heart to block irregular electrical signals, intended to treat arrhythmias. Affera’s technology, which is not yet FDA-approved, would give Medtronic its first mapping and navigation system and is intended to treat atrial fibrillation.
9. CooperCompanies buys Cook Medical’s reproductive health business
Amount: $875 million
Date announced: Feb. 7
CooperCompanies, a Pleasanton, Calif.-based company focused on women’s health and fertility solutions, struck an agreement to buy Cook Medical’s reproductive health business, which includes products for obstetrics, gynecology, and in-vitro fertilization (IVF).
Bloomington, Ind.-based Cook Medical, founded in 1963, developed the first needle for IVF treatments. CooperCompanies’ agreed to pay $675 million at closing and pay an additional $200 million over the next four years.
In April, both firms received a request for additional information from the Federal Trade Commission related to the acquisition, and the deal has yet to close, a Cook spokesperson said.
10. Boston Scientific buys Apollo Endosurgery
Amount: $615M
Date announced: Nov. 29
Boston Scientific set out plans to acquire Apollo Endosurgery, an Austin, Tex.-based maker of endoluminal surgery devices. The minimally invasive procedures are performed using an endoscope through the gastrointestinal tract.
The purchase is expected to complement Boston Scientific’s endoscopy business, giving it an entry into the endobariatric market.
The deal values Apollo at $10 per share. The medtech firm expects 2022 revenue of $76 million, about an eighth of the $615 million acquisition price.