The chief executives at Boston Scientific (NYSE:BSX) and C.R. Bard (NYSE:BCR) said this week that they’re cool on the consolidation trend sweeping the medical device sector.
Discussing their respective results for the 3rd quarter, the CEOs – Boston’s Mike Mahoney and Bard’s Tim Ring – each said a mega-merger along the lines of Medtronic‘s (NYSE:MDT) $43 billion Covidien (NYSE:COV) buy or Zimmer‘s (NYSE:ZMH) $13 billion union with Biomet doesn’t make sense for their businesses.
"When you cut across these different business units, it is very rare in the hospital system that a hospital will contract for our neuromodulation products and our cardiology products and our, say, our EP products, so that happens very rarely," Mahoney said. "For customers who want to do that, we certainly can enable that, but we don’t see that type of bundling across multiple sectors occur very frequently, so we don’t think that portfolio in terms of bundling really is an added value, so we don’t see much benefit in that.
"I think our portfolio is positioned well. We have a lot of opportunities to improve it, but we don’t see some of the consolidation that is taking place," Mahoney added. "Maybe other than the cost benefits and some cost synergies, we don’t see a growth benefit with bundling across multiple sectors that are very disparate from each other."
Ring said that Bard doesn’t let merger & acquisition trends affect its own M&A strategy.
"What’s going on within the sector doesn’t really impact our views strategically on acquisitions generally, or the size of them. I think it’s 1 of the advantages of, frankly, the product leadership strategy that we’ve had in place for a number of years," he said, noting Bard’s #1 or #2 position in markets that represent 80% of its revenues. "When you maintain that kind of position and work hard toward that, the aspect of others consolidating doesn’t really have much of an impact on new strategy."
Both companies reported strong 3rd quarters this week, sending their respective share prices higher on Wall Street. Boston Scientific swung to black compared with Q3 2013 and upped its 2014 earnings forecast, while Bard’s Q3 earnings soared nearly 50%.
