Report: Medtech Mergers Could Break $100B Barrier this Year

During the first half of 2015, the total value of closed medtech mergers came in at $83 billion — a figure that tops some full-year figures from the past decade.

If this trend continues, the value of all mergers and acquisition deals in medtech could surpass $100 billion for the first year ever, according to a report from EP Vantage.

The report notes that there is no firm pattern in terms of M&A targets, with a range of technological areas involved. While the two biggest deals — Medtronic-Covidien and Zimmer-Biomet — involved scale and consolidation, many others saw companies entering new areas altogether. For example, Eurofins Scientific, which is active in food and pharmaceutical products testing, entered the in vitro testing arena when it bought Boston Heart Diagnostics.

For example, divestitures also propped up the numbers. Siemens took the fourth and fifth spots in terms of priciest deals with the sale of its hospital information technology business to Cerner for $2.7 billion and the shedding of its hearing aids product line to EQT Partners for $1.3 billion.

A Kinder FDA?

The report also notes that “a ray of sunshine” beamed from the FDA in terms of PMAs of HDEs — representing good news for innovation. The total number for both types of application approvals was 26 devices. If this trend continues, 2015 could be the best year for innovative medical devices coming to market since 2005. By way of comparison, there were 33 such approvals for all of 2014 — a 43 percent increase over 2013.

Approval times also are holding relatively steady. During the first half of 2015, the average approval time was 17.1 months, slightly off the 16.7 months for all of 2014. However, those numbers are better than the average 26.9 months for 2013.

The cardiology field saw 11 approvals — the same number for all of last year.

According to report, the faster FDA hasn’t been met with universal applause, citing a July 17 op-ed in The New York Times scolding the agency for allowing unsafe technologies on the market by adopting a more relaxed attitude toward clinical data.

“In some ways, it seems that the agency cannot win: the U.S. is widely believed to be more stringent than Europe in its assessment of medical devices, and efforts to tighten up European regulation have met with fierce resistance by industry lobbyists and patient groups,” the report’s authors write. They add that the two systems might meet in the middle, and companies could stop seeking CE mark certification before trying to enter the U.S. market.

Not all is rosy for the sector, however, as only $1.6 billion was raised in venture funding. The authors note that the first half of 2014 saw three rounds that exceeded $100 million. This year, no company has broken $60 million.

The half-year figures for initial public offerings remained fairly steady over the last half of 2014, with companies raising $705 million versus $723 million.

“With the huge and exciting changes that have gripped the industry over the past year having for the most part been brought to their respective conclusions, the sector seems to have attained a level of stability,” Elizabeth Cairns, EP Vantage medtech reporter and co-author of the report, says in a statement. “But start-ups are facing a worsening funding gap, and it will be crucial that this eases if a steady flow of safe and effective medical technologies is to be maintained.”

The report is available for download at www.evaluategroup.com/public/Reports/EPVantage-Medtech-HalfYear-Review-2015.aspx. — Elizabeth Hollis