Typical exit strategies for medical technology companies who have succeeded in developing and commercializing their products include IPO, but the prospects for this strategy have diminished in recent years. With global financial markets in disarray as they wait breathlessly to see where and when the bottom will be, the prospects for entrance, let alone exit, have gone down even further.
Another strategy toward reaching market and eventual exit includes significant investment or outright acquisition by the well established medtech companies looking for innovation. Lest one think that the chance for that exit route are any better than IPO, one should approach that notion with caution. Among the companies often noted for their investment-acquisition tendencies is Boston Scientific, but recently, CEO Jim Tobin put a wet blanket on this, noting that the company has recently shelled out more than its fair share of investment dollars (the $28 billion Guidant acquisition alone should suffice) and that any new investments or acquisitions will have to be accompanied by higher expectations of each investment, and even then Boston Scientific is unlikely to "overpay".
Similarly, one would have to expect that other companies with historically big wallets — e.g., Medtronic and Johnson & Johnson — are equally likely to be closely scrutinizing future investments to ensure that the desired returns are sufficient and achieveable. Having said that, we must note that J&J just announced that it would be purchasing aesthetic and reconstructive product manufacturer Mentor for $1.07 billion. It therefore may be the case that the real impact of the economic downturn on these big benefactors is that their plans for expansion and growth through investment may not be so much curtailed, but perhaps optimized by the economic conditions.
In other words, the business of medtech acquisition may well have simply become a buyers’ market.