A new report from market intelligence company Kalorama Information suggests that medical device companies faced with a challenging sales landscape are acquiring each other to boost revenues and take advantage of distribution synergies.
Healthcare market research publisher Kalorama says the $300-billion plus global market for medical devices will grow only in the 3 to 4% range for the next five years, and this has forced companies to be creative. The finding was made in the firm’s recent report, The Global Market for Medical Devices, 5th Edition, a link to which can be found here.
Mention Zimmer and Biomet ($13.5 Bn), Smith & Nephew and ArthroCare ($1.7 Bn), everyone else and Smith & Nephew (rumoured), and you can sense that acquisition activity amongst the big boys has been pretty much unbridled over the past twelve months, culminating in the news that Covidien was to be snapped up by Medtronic for a massive $42.9 billion.
The Kalorama report covers as many of these as possible, including Stryker’s purchase of Patient Safety Technologies, Inc., whose proprietary Safety-Sponge® System and SurgiCount 360™ compliance software help prevent Retained Foreign Objects (RFOs) in the operating room, as well as the acquisition of German surgical room equipment maker Berchtold Holding AG, a 90-year-old healthcare equipment company that makes surgical tables, equipment booms and surgical lighting system. Indeed Stryker also acquired robot assisted orthopedic surgery company MAKO Surgical Corporation.
Why is there so much M&A activity? The Kalorama report describes an industry adjusting to challenges of reimbursement reductions and new taxes, namely as the U.S. device sales tax levy as presenting headwinds to revenue expansion and that’s probably totally fair. Ongoing challenges in the financing of healthcare provision have to play their part too, on a global basis. One factor we’d point to however is the impending raising of regulatory standards, particularly in Europe. Innovations in train right now are likely to be faced with a brave new world of heightened requirements, making the idea of buying ready-made devices and product ranges more attractive.
Kalorama says device manufacturers have responded by boosting innovation and technology, finding new markets, and buying each other. It’ll be interesting to see their evidence for the former, but there’s no doubting the latter.
“Combining is the rule as government spending is being curtailed in the US and Europe, and the emerging nations can’t replace the revenue fast enough,” said Bruce Carlson, Publisher of Kalorama Information. “The way to growth is to acquire, partner and merge.”
Source: Kalorama Information, PR Newswire