Medtech market competitor consolidation on the rise

The healthcare industry faces a less daunting period of recession compared to many industries (we’ve covered it here and here), but still faces different and tough dynamics during this period.

Although demand for healthcare is more inelastic than other products and services, new business in healthcare (development and innovation) requires financing, a particularly  scarce commodity during the recession.  Well established companies with existing revenue streams are able to draw on those streams to fund new development.  However, early stage and startup companies demand financing from 3F ( "family, friends and fools"), since they do not yet have other revenue streams.  So, an obvious polarity is set up:  big companies with money seeking innovation versus small companies with innovation but little money.

Hence, the young startup has become a very real acquisition target by established companies.

If we look at one of our favorite markets, for surgical sealants, glues, hemostats, wound closure and anti-adhesion, here is a past list of acquisitions in this arena, a robust amount of activity before the financial meltdown took place: 

 

 

Company

Year Acquired

Omrix Biopharmaceuticals

2008

Altana Pharma

2007

American Medical Instruments

2006

Berlin Heart

2006

Biomet

2006

Confluent Surgical

2006

Quill Medical

2006

Surgical Specialties

2006

Closure Medical

2005

Aventis Behring

2004

Interpore Cross

2004

Onux Medical

2004

PPL Therapeutics

2004

Cohesion

2003

Gliatech

2003

Fusion Medical Technologies

2002

Medlogic Global

2002

Focal

2001

Source: MedMarket Diligence, LLC, Report #S175, "Worldwide Surgical Sealants, Glues and Wound Closure Market, 2009."

In early 2009, we have already seen some struggles among young companies in this sector, such as Haemacure, in financing their operations and continued development.  Given that there are so manny active companies in this area (our report #S175 profiles over 135 companies), we anticipate in 2009 a significant amount of interest and potentially acquisitions by the well established players.

See our report #S175 table of contents, including companies profiled, for potential acquisition targets.

 

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