It's time for FierceMedicalDevices (and the whole Fierce crew) to take a breather for the holiday season. But before we do, let's reflect on some of the major trends that affected the med tech industry over the past 12 months.
Med tech enjoyed a brief thaw in the public markets, with a minisurge of IPOs. VC funding continued to stagnate, forcing promising startups to find alternative sources of cash. The Supreme Court set off an earthquake in the diagnostics industry, invalidating the idea that natural genes could be patented but affirming the notion that patents are viable for genes altered by man. Many med tech companies spent the year streamlining, even spinning off parts of their operations into separate businesses. Finally, after a superslow 2012, a number of big M&A deals cropped up, indicating a belief that size mattered in a global med tech market.
So let's recap and contemplate. A side note: We'll keep track of major news during the holiday season, but daily newsletter publication resumes on Jan. 2.
And now, the year's top trends:
A (small) thaw in the public markets. After the economic crash several years back, life sciences IPOs dwindled to almost nothing. But in the early part of 2013, biotech IPOs began trickling out and then shifting into high gear. By late summer, diagnostics companies and even some medical device operations followed suit, taking a chance on what became a boomlet of IPOs in both sectors. Diagnostics operations such as Foundation Medicine ($FMI), Oxford Immunotec ($OXFD), and Veracyte ($VCYT) all successfully hit the public markets. Another diagnostics maker--Biocept Laboratories--filed IPO plans in late fall but was still waiting to pull the trigger in December. On the device side, insulin pump maker Tandem Diabetes ($TNDM) and spinal implant maker LDR ($LDRH) successfully hit the public markets. And Inogen, a maker of portable oxygen devices, filed IPO plans just in December. While not every company moved forward (diagnostics developer CardioDx pulled its IPO in November, citing poor market conditions), the trend offered a release for some promising med tech companies seeking new sources of investment to propel product development and commercial sales.
VC funding stagnation. Med tech venture capital investment continued its decline and stagnation during 2013. It's true there was a small uptick in the 2013 third quarter. According to data from the latest MoneyTree Report by PricewaterhouseCoopers and the National Venture Capital Association, investors poured $566 million into 65 medical device industry venture deals, a 12% hike in dollars but an 8% drop in deals over the previous quarter. The numbers reflected a continued, ongoing malaise in VC investments for early-stage startups. Investors prefer less risk these days, so they've been shifting their money toward companies with a product near or at approval. Companies sought creative alternatives, including crowdfunding, large investor syndicates, debt financing and cash infusions from larger med tech rivals.
Molecular diagnostics lawsuits. In June, the Supreme Court tossed out some of Myriad Genetics' ($MYGN) patents regarding BRCA-related cancer diagnostic tests and upheld others. In doing so, the decision blew open the door to competition, and LabCorp ($LH), Invitae, Quest Diagnostics ($DGX), BioReference Laboratories ($BRLI), Gene By Gene and Ambry Genetics followed suit with BRCA-related tests of their own. Myriad has dominated the market for BRCA tests and has subsequently sued every company that entered the market as a competitor, alleging violation of its patents. Most have countersued. Hopefully in 2014, some sort of legal resolution will more clearly establish a way forward with genetic test patents in the wake of the Supreme Court's decision.
Streamlining. Abbott Laboratories ($ABT) split in two in 2013 in order to unlock revenue potential for its various business lines. The Abbott that remains now focuses on medical devices, diagnostics, nutritional products and generic drugs. Abbott spun off its name-brand drug business into a separate operation called AbbVie ($ABBV). Abbott wanted to focus more on devices and diagnostics because they'll be more robust, reliable businesses as the population ages. As of July 1, Covidien ($COV) spun off a new company dubbed Mallinckrodt ($MNK), which took over its pain management drugs and medical imaging diagnostics. The Covidien that remains is a juggernaut focused on medical devices and medical supplies. Other companies took a different tactic for streamlining, with med tech giants including Boston Scientific ($BSX), St. Jude Medical ($STJ) and Quest Diagnostics ($DGX) streamlining through job cuts
High-dollar deals. After a lackluster 2012, M&A deals and major investments returned to a more healthy clip in 2013. KKR bought an 80% stake in Panasonic Healthcare, orthopedics device maker Stryker ($SYK) closed its surprise $1.7 billion buyout of Mako Surgical, and Baxter ($BAX) snatched up Swedish dialysis rival Gambro for about $4 billion. And Abbott ($ABT), prepping for its future, spent a combined $560 million on two companies focused on eye surgery and stents. Thermo Fisher's ($TMO) $13.6 billion acquisition of competitor Life Technologies ($LIFE) cleared European approval and was on the verge of a U.S. regulatory signoff as of mid-November. Covidien ($COV) also made a huge move, making a deal to snatch up Given Imaging, the maker of the PillCam oral endoscope, for $860 million. Other big M&A deals will likely crop up soon. Among them: Johnson & Johnson ($JNJ) wants to sell its Ortho Clinical Diagnostics arm in a deal that could bring in up to $5 billion. And rumors remain that the private equity outfits that bought orthopedic device maker Biomet for $11.4 billion in 2007 now want to sell it for more than $12 billion. -- Mark Hollmer (email | Twitter)