Medical device companies opted to fill in their portfolios with niche acquisitions during the 1st quarter, rather than venturing into new treatment areas or looking to diversify, according to a report by a healthcare investment bank.
Acquisition activity in medtech was "defined by companies’ leveraging core-competencies and expanding distribution channels, not diversification or ventures into a new field of medicine," according to the Walden Group’s "Q1 2014 Strategic Healthcare M&A Report."
As examples, the report cited a raft of medical device acquisitions that have closed since late last year or were pending as of early this year, including:
- Smith & Nephew‘s (FTSE:SN, NYSE:SNN) $48.25-per-share acquisition of ArthroCare;
- Zimmer‘s (NYSE:ZMH) $13 billion Biomet acquisition;
- A string of buyouts by Stryker (NYSE:SYK), including the $172 million acquisition of Berchtold Holding; the $120 million Patient Safety Technologies acquisition; the buyout for an undisclosed about of Pivot Medical; and the blockbuster $1.7 billion acquisition of acquisition of Mako Surgical;
- Globus Medical‘s (NYSE:GMED) foray into robotic surgery with the Excelsius Surgical acquisition;
- St. Jude Medical‘s (NYSE:STJ) pending bet on CardioMEMS and its Champion device.
Other "savvy" medical device companies sought to increase organic growth via new product launches during the quarter, according to the bank’s analysis, including Covidien (NYSE:COV), Abbott (NYSE:ABT), Baxter (NYSE:BAX) and Boston Scientific (NYSE:BSX).
Medical device companies should tailor their plans so that "pricing, cost and reimbursement structures facilitate product sales," according to the report. Boston Scientific scored on that metric when Health Net decided to cover its S-ICD defibrillator, according to the analysis, which also cited LDR Holding (NSDQ:LDRH) and its Mobi-C spinal implant.
LDRH shares hit a 52-week high after the medical device company was granted a reimbursement code that boosted the payback rate, according to the report.
"Spine specialist LDR Holding developed a new standard of care of cervical disc conditions,” according to the analysis. “In addition to its unique motion preservation features, Mobi-C offers a a simplified surgical technique as compared to the competition."