New catheter technologies are spurring medical device companies to snap up innovators in the space as a way to stay ahead of the game. Traditional operating procedures, such as cutting around a renal artery and damaging nerves to inject or extract fluids, are a thing of the past. Many ailments - hypertension, in-stent restenosis and peripheral artery disease - are now being treated with catheters that are deemed minimally invasive.
As a result, strategic buyers will spend 2013 playing catch up, predicts Matthew Weil, managing director of Christopher Weil & Co. Inc., which invested in catheter maker Vessix Vascular Inc. in 2011.
"There's going to be a considerable shaking out in the industry over who has the patents to perform which kinds of procedures and develop devices," he adds. Treating hypertension in patients, for example, is a huge market. "There have been advances in that technology across the board."
The situation has been good for dealmaking. Laguna Hills, Calif.-based Vessix was just one of several catheter companies sold over the past couple of months. And as far as acquirers go, Boston Scientific (NYSE: BSX) and Covidien plc are among the most active. Medtronic Inc. (NYSE: MDT) and St. Jude Medical Inc. (NYSE: STJ) are currently on the hunt.
Boston Scientific purchased Vessix for $125 million in November, about one month after the firm spent $265 million for another catheter company Rhythmia Medical Inc. Also in November, Merit Medical Systems Inc. (Nasdaq: MMSI) bought Thomas Medical Products Inc. from GE Healthcare for $167 million. The Malvern, Pa.-based target makes catheter-based vascular devices.
Covidien, in its own right, completed two catheter deals in 2012. It purchased 180 Medical Inc. in August for $310 million and Reverse Medical Corp. in January for an undisclosed price.
In July alone, there were three deals between strategic buyers and sellers. Medical device company Teleflex Inc. (NYSE: TFX) followed up with the acquisition of privately-held Hotspur Technologies Inc., a developer of catheters that treat patients with obstructed blood vessels, for $15 million. Days earlier, Israeli investment firm Accelmed Medical Partners LP purchased a stake in ValCare Medical Inc., a maker of heart valve repair devices that are implanted in less invasive ways by a catheter, for $8 million. Then there's Avinger Inc., which has several approved catheter products on the market. The Redwood City, Calif.-based company received a $33 million Series D investment that helped push its Ocelot product through the regulatory process and get approval from the U.S. Food and Drug Administration to hit the market in November.
Ocelot, like other newly developed catheters, aims to provide doctors with more details of the size and nature of an arterial blockage.
That deal was preceded by Newport Medical's acquiring of early-stage percutaneous catheter developer Maya Medical for $60 million in cash in April. The company's product debuted in 2010 as a treatment for hypertension in patients who have difficulty controlling their blood pressure-a process that has yet to be perfected, Weil explains.
"Opportunities like these to refine technology will spark M&A throughout 2013," he says.