Medtronic Acquisitions a Sign of Deals to Come

NEWS TRENDS

Medtronic shrugged off recession concerns with two notable acquisitions in March.

Medtronic agreed to pay $700 million up front cash for CoreValve (Irvine, CA), plus two potential $75 million milestone payments. It is believed to be the largest acquisition of a venture-backed medical device maker since at least 1998, according to data from Dow Jones VentureSource.
The medical device firm also acquired Israeli company Ventor Technologies Ltd., for $325 million upfront.
Both Ventor and CoreValve develop replacement aortic valve systems. CoreValve specializes in heart valves that don't require chest surgery for insertion.
Analysts expect more deals to be made in the medical device sector. Part of this can be attributed to large device companies seeking ways to ensure their long-term growth.
“Opportunities are out there, and we're going to see this continue throughout 2009,” says BMO Capital Markets analyst Joanne Wuensch. She doubts that this will be Medtronic's last deal.
The outlook is not quite as rosy for start-up and small development companies, however. A new report from Moody's Investors Service says that credit conditions for medical products and devices will be negative for about the next 12 months. Affecting the credit problem are hospital cutbacks and risks related to corporate acquisitions. Even so, medtech stocks continue to outperform their counterparts in other industries.
A final note on Medtronic—the company has just announced that it will voluntarily disclose how much money it pays to doctors in consulting fees. The caveat is that disclosures would begin in 2011, for transactions that occur in 2010.