Megamergers was the big trend in the medtech world in 2014, and analysts and experts alike believe that the move to a value-based healthcare system will require scale in the future.
Bigger is better.
So it would seem to make sense for smaller players like St. Jude Medical to merge with another company or be swallowed up by a bigger entity.
In an earnings call Wednesday, Daniel Starks's CEO made it amply clear that he did not share the current conventional wisdom about size and medtech strength in a changing landscape.
Here's an edited version of the exchange that took place between Deutsche Bank analyst Kristen Stewart and Starks, according to a transcript of the call from Seeking Alpha.
Stewart: So I think Dan, if you could just maybe I know you just went through why you have conviction on the accelerating sales growth, but I guess we’re seeing a lot of your competitors out there doing larger transactions, you guys have really been doing some smaller tuck-in deals. At what point I guess would you think that perhaps some of the organic growth opportunities are not materializing as expected, would you then be willing to consider maybe a little bit bolder move from an M&A perspective?
Starks: Well, you asked a good question Kristen. However the hypothesis that you raise is not a realistic scenario in our view. You suggest if the growth drivers that are currently within our program do not get traction, and what we see is that our growth drivers are getting traction.
For us it’s not a matter of just being a larger company. It’s a matter of how big are the problems we are addressing and how much impact can our technology have on the financial success of our customers. And so we think about heart failure and how much of a priority the economics and patient outcomes of heart failure are, same for atrial fibrillation, same for chronic pain and we are uniquely positioned to have a major impact on the success of customer programs for all three of these disease states. And we think that this makes us big enough to be relevant, big enough to have a seat at the table and sets us up for a superior level of sustainable sales growth on a long term basis.
So the idea of talking about what if none of that's true then what would we do, that's a scenario that we really do not expect to face.
In other words, if any company is mulling a merger with or takeover of the Minnesota device maker, perish the thought.