MedTech: burgeoning M&A gets 2021 off to a momentous start

“Big-ticket transactions, COVID led impetus and big boys buying into niche areas – the M&A boom in the global medtech landscape gives 2021 its much-needed fillip. Just a month into 2021, the aggregate deal value of major transactions has crossed USD 8.4 billion. We anticipate continued deal momentum through Q1. Looking forward, we also envision an expanded footprint of regionally motivated transactions across geographic borders.”

MedTech is off to a highly spirited start for 2021. The M&A spree has been driven by multiple drivers, all reinforcing industry confidence in growth potential. The January M&A boom included the acquisition of companies specializing in niche segments and infection control, infectious disease diagnostics, and remote monitoring basking in the post-COVID glory. Prominent deals contributing to the momentum include:

Infection control and infectious disease diagnostics gain most from COVID spurred traction:

COVID-19 led to a substantial surge in both infection control products across healthcare settings and infectious disease diagnostics. Both segments gained from heightened demand as well as acquisition interest. Consequently, they have also topped the deal charts adding several deals and pushing boundaries on deal size.

Less than two weeks into 2021, Steris announced Cantel Medical’s acquisition in a deal valuing the latter at USD 4.6 billion. The deal value represents a revenue multiple of more than 4.5, with Cantel reporting revenue of approximately USD 1 billion and an adjusted EBIT of about USD 134 million during the fiscal year ended July 31, 2020. Driven by the intent of portfolio strengthening, the acquisition complements Steris’s portfolio of infection control products and expands Steris’ reach in the dental and endoscopy markets.

PerkinElmer acquired Oxford Immunotec for USD 591 million. Oxford has developed testing tools for infectious diseases, including tuberculosis, and its leading product, T-Spot.TB test measures T-cells formed against the bacterial antigen, differentiating between active and latent infection. The test has been validated clinically, and data generated pointing to high sensitivity and specificity. PerkinElmer’s investment spurs the company’s presence in the immunodiagnostic segment and creates a renewed landscape for investment in often ignored infectious diseases such as tuberculosis.

Thermo Fisher responded with agility for all COVID-19 response measures. The company gained substantial ground on diagnostic testings and the supply of reagents and consumables for research and vaccine validation efforts. In the third quarter, Thermo Fisher reported COVID-19 spurred incremental revenue during the quarter of USD 2 billion and guidance for 20% year on year growth on annual revenue. Betting on the expanding use of point of care / rapid diagnostics that combine the promise of sensitivity, Thermo Fisher announced Mesa Biotech’s acquisition for USD 550 million. This announcement comes at the heel of Thermo’s announcement of the USD 878 million acquisition of Halogen, Novasep’s viral vector manufacturing division with two facilities in Belgium. Mesa Biotech manufactures Accula tests, rapid point-of-care PCR- based diagnostics to detect infectious diseases, including COVID-19, Influenza-A and B, and a few other respiratory conditions. The capability of delivering results in half an hour with an RT PCR test will empower clinical decision making with sensitivity and specificity not common in other formats of rapid tests such as lateral flow. The bet on multi-fold market expansion is emphatic in the deal value and the close to 10X revenue multiple to the USD 45 million revenue reported by Mesa Biotech in 2020.

Hologic, a MedTech company focused on diagnostics for women’s health and molecular diagnostic services, gained substantially from participating in the COVID testing opportunity. The company reported December quarter revenues of USD 1.6 billion, an increase of 89% year on year. The healthy balance and incremental cashflow again spurred two back-to-back acquisition announcements by Hologic – Somatex and Biotheranostics for USD 64 million and USD 230 million, respectively. Somatic is a biopsy site marker and localization technologies leader, while Biotheranostics has developed proprietary molecular tests for breast and metastatic cancers. Hologic thus expands its tumor biopsy offerings with the minimally invasive devices designed by the Somatex in addition to its Numark family of tissue markers. Biotheranostics will enhance Hologic’s market presence in molecular diagnostics for cancer prediction and diagnostics along with the portfolio of products aligning with the overall women health service theme of Hologic.

Remote monitoring and automated surgical focus continue to gain traction:

Boston Scientific announced the acquisition of Preventice Solutions Inc. for USD 925 million and an additional USD 300 million as potential payments upon meeting commercial milestones. Founded in 2007, Preventice offers a well-established portfolio of mobile cardiac monitoring systems along with integrated AI algorithms, including BodyGuardians, a set of wearable cardiac monitors for adults and pediatric patients. Hillstrom forged a similar deal to acquire Bardy Diagnostics for USD 375 million, adding a wearable biosensor-based monitoring platform in the cardiovascular segment. Focus on remote monitoring devices has been gaining momentum, with the ongoing pandemic serving as a catalyst. With several large MedTech companies now bought in, we anticipate more rapid adoption and market expansion that, in turn, could further spur innovations in the segment. In the broader space of cardiology related acquisitions, Haemonetics also announced Cardiva Medical’s acquisition for USD 510 million, including their proprietary catheter-based vascular closure device and system.

Stryker has announced its acquisition of OrthoSensor for an undisclosed amount to acquire its sensor-based technology for total knee replacement procedures. The sensor-based device for total knee replacement is oriented towards better patient recovery and a data-driven approach for surgeons to make informed decisions. OrthoSensor’s leading product, Verasense, provides knee balancing solutions that historically have been combined for use with Stryker’s Triathlon Knee System. Stryker anticipates that other offerings of OrthoSensor will complement its surgical robotics workflow alongside postoperative remote patient monitors, wearables, and analytics.

Philips acquired medical device data integration technology developer Capsule Technologies in USD 635 million deal. Software developed by Capsule has been adopted by multiple hospitals and healthcare sites in the US. The company’s portfolio includes another opportunity area spurred by COVID-19 – patient monitoring services and products. Philips anticipates that the inclusion of this technology with its products and services will streamline the data collection and transfer to increase the pace of delivery and decision-making. Earlier in 2020, Philips had forged a USD 2.8 billion deal to acquire BioTelemetry to include its cardiovascular wearable monitoring devices. We anticipate more expanded global momentum across the spectrum of digital healthcare solutions, workflow automation, and patient monitoring solutions through 2021.

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