Let's make a med tech deal: J&J, Medtronic, Apple, Google sit on piles of cash

Med tech is attracting a huge range of strategic investors right now. Healthcare is almost universally recognized as in need of rationalization--the application of technology in the effort to achieve better outcomes at lower costs. Medical devices and diagnostics, and the data that they generate, are expected to be central to achieving that goal in the coming decades.

These med tech investors span consumer and business-oriented technology companies looking for the next big market, traditional med tech players in need of a revamp and even biopharma companies trying to sort out the application of med tech in their clinical trials and drug delivery that can give them an edge over peers.

Lots of these players have very deep pockets, according to the latest year-end figures from Moody's on cash holdings of non-financial companies in the U.S.

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Heading the list, as usual, is Apple. It's made a big splash in med tech already with the introductions of its ResearchKit, designed to serve as a basis for clinical trials executed via its smart devices and wearables, as well as its recently introduced CareKit, that's aimed at making it easier for consumers to track and integrate health information.

Apple ($AAPL) had $216 billion in cash at the end of 2015--or almost 13% of the total cash held by non-financial U.S. companies, Moody's reported. That gives it a lot more leeway to make further investments to support and expand upon ResearchKit and CareKit, both of which have thus far been well-received and rapidly adopted. Already, devices like the AliveCor Kardia Mobile EKG band are integrating with the Apple Watch--in this case to offer medical-grade EKG readings as part of a watch band for use with it. This is expected to be cleared soon by the FDA.

Even more active in med tech thus far has been Google, now known as Alphabet ($GOOG). It had $73.1 billion in cash at yearend--and it's using some of that to attack med tech on almost every conceivable front. It's got partnerships with Novartis ($NVS) on smart contact lenses and Dexcom ($DXCM) on miniature, and even disposable glucose monitors as well as a robotic surgery JV with Johnson & Johnson ($JNJ) known as Verb Surgical.

In addition Google--and competitor IBM ($IBM)--are working hard to make large-scale sense of all the massive data generated by medical devices and imaging. Both are making a slew of partnerships and conducting pilot testing on how to usefully apply artificial intelligence and machine learning to medical data.

Up first is likely to be medical imaging--IBM made a $1 billion acquisition on that front and several major partnerships and acquisitions in the last year have been aimed at offering first reads of medical images by machines, thereby offering a broader interpretational context for radiologists. Ultimately, population health is also a goal with AI and machine learning--taking that mountain of healthcare data and using it to improve outcomes for patient health.

IBM has already invested at least $4 billion in three major acquisitions in the last year or so since it created its IBM Watson Health as a separate business. So, it may need to spend some time digesting before it doles out any more of the $8.2 billion in cash that it had at the beginning of the year--some of which has likely been, or will be, consumed in these deals already.

Another potential med tech spender is Qualcomm ($QCOM), with its $30.6 billion in cash. Last fall, it acquired a patient monitoring system and it's been partnering with lots of biopharmas working to integrate med tech into their clinical trials. Qualcomm has even been rumored to be working on a $1 billion med tech JV with GlaxoSmithKline ($GSK).

The core med tech players with massive cash holdings include conglomerates Johnson & Johnson and GE ($GE), with $38.4 billion and $10.5 billion, respectively, both of which are looking for ways to drum up growth for their enormous med tech businesses. J&J just laid out a plan on how it would do exactly that, which includes building, or more likely buying into, structural heart devices such as transcatheter aortic valve replacement (TAVR) and/or the newer field of mitral valve replacement and repair that's already attracted significant strategic investor interest. For its part, GE has signed a deal with startup Arterys to incorporate machine learning into its cardiovascular image analysis.

Medical device mainstay Medtronic ($MDT) had $17.3 billion in cash--but it's still absorbing the massive Covidien buy from last year, so another major deal seems of the table at least for a while. And Abbott ($ABT) has firmly devoted itself to med tech after the split from R&D therapeutics focused AbbVie ($ABBV). The $10.2 billion in cash that it had at yearend is already overcommitted in two deals announced since--to acquire diagnostics player Alere ($ALR) for about $6 billion and cardiovascular device company St. Jude Medical ($STJ) for more than $25 billion. But the Alere deal has been showing signs of strain--as Abbott tried to back out but Alere declined to break up the deal.

Several other tech and biopharma companies with major cash stockpiles are also dabbling in med tech, particularly with the huge new Precision Medicine Initiative in the U.S. that aims to study the genomes of one million people. These include Microsoft ($MSFT) with its $102.6 billion, Oracle ($ORCL) with its $52.3 billion and Intel ($INTC) with $31.3 billion. On the biopharma side, both Amgen ($AMGN) with its $31.4 billion, in its acquisition of drug delivery partner Unilife ($UNIS) and Biogen ($BIIB) with $6.2 billion in cash, which has declared its intentions to work on wearables and ingestibles but has released few details, have evinced some interest in med tech. 

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