Following 2014’s summer of “med tech merger mania,” 2015 was a record-breaking year for med tech M&A--even if we exclude the $50 billion Medtronic-Covidien tie-up, 2015 still beats every other year in the past decade. But what of 2016?
Deals in the first half of the year added up to $17 billion, a drop of 79% from H1 2015’s slew of megamergers that totaled $84 billion, EP Vantage reported in its EvaluateMedTech World Preview 2016. The report only provided data until October 2016, but it’s safe to say the industry won’t come close to the $128 billion in M&A value generated in 2015. A Dec. 21 EP Vantage story pegged the value of announced—but not necessarily closed—M&A deals at $73.3 billion.
This year’s major deals include Thermo Fisher’s $1.3 billion takeover of genomics player Affymetrix, Boston Scientific’s $1.6 billion acquisition of Endo’s men’s health unit and Danaher’s $4 billion purchase of diagnostics maker Cepheid. But these don’t hold a candle to the megadeals that characterized the past couple of years. As EP Vantage puts it, it may be because industry consolidation has plateaued—“any more overlap would cause too many antitrust issues to be worthwhile.”
While deal value dropped this year, the number of deals in H1 2016 actually increased 18% over H1 2015. Mid-sized deals were on the rise in early 2016, a possible indicator that the industry has had its fill of snatching up established businesses and would turn back to acquiring smaller, nimbler companies where innovation thrives. After all, if devicemakers aren’t expending all their efforts to acquire each other, they might be able to strike some technology-based deals, EP Vantage said.
2016’s tuck-in deals include Boston Sci’s acquisition of Newark, LumenR’s in-development endoscopic tissue retractor, which will build out its endoscopy division along with its $210 million buy of gastrointestinal specialist EndoChoice. And Stryker purchased Valeant’s Synergetics USA neurology portfolio, which includes Stryker-owned assets that Synergetics sponsored during the regulatory process.
Though the resurgence of smaller deals in H1 gave hope to the startups that depend on tuck-in or bolt-on acquisitions to survive, the full-year data are discouraging. In 2016, 15 deals worth $1 billion or more have been inked, and these 15 deals also account for 85% of this year’s med tech M&A expenditure, EP Vantage reported. There may not have been a megamerger along the lines of Medtronic and Covidien’s, but this concentration of spending at the higher end of the spectrum could be worrisome for startups going forward.
As for 2017, we’re still waiting on the outcome of Abbott’s $25 billion bid on St. Jude Medical that was delayed by an FTC request for more information. The devicemaker has been on the hunt for deals ever since it spun out its R&D-driven pharma unit, AbbVie. Industry watchers were skeptical and shareholders were unimpressed when Abbott announced its intent to acquire St. Jude as it had already entered into an agreement to pick up diagnostics maker Alere for $5.8 billion. That deal is now on the rocks, with both parties suing each other. Alere, which is facing multiple investigations for its accounting and business practices, is trying to force Abbott to complete the acquisition, while Abbott filed a complaint to try to exit the deal.