Stryker Corp. (SYK) plans to skip the smörgåsbord when it comes to mergers and acquisitions, despite having nearly $3 billion in cash on hand and favorable market conditions.
In an interview with the Dow Jones news service, CEO Stephen MacMillan said the Kalamazoo, Mich.-based medical devices giant is looking at a lot of companies, but isn’t likely to make any big deals.
Instead, he said, Stryker will look for more “bite-size” acquisitions, similar to the two the company made last week, when it announced its acquisition of OtisMed, a custom knee replacement technology company, and certain assets of Synergetics. Those deals will cost Stryker an estimated $103 million in upfront and future royalty payments.
One of the reasons for the austerity kick, he said, is finding companies that fit the company’s renewed dedication to compliance, after a string of legal and regulatory entanglements. The company, which will have paid about $150 million over the past two calendar years as of Dec. 2009, and hired a new QA executive, to clear up issues the Food & Drug Administration found at some of its plants.
And Stryker is likely facing more, and potentially stiffer, penalties from last month’s indictmentof Hopkinton, Mass.-based Stryker Biotech, its former president and three sales managers who were slapped with federal charges of promoting the off-label use of a pair of bone-growth products and lying to the FDA.
MacMillan said that a lot of the companies Stryker looked at have had explosive growth, but were generating much of that growth on sales and marketing practices that didn’t comply with company standards.
“We think we’d have to apply a haircut in terms of their sales growth as we put them into our compliance systems,” he said.
He added that the company will also remain cautious on the hiring front, particularly in light of new costs associated with a proposed 10-year, $20 billion medical device industry tax, still looming in healthcare reform bills before Congress.