Medtronic Looking Inside After Acquisitions: Bloomberg Forum
New York, Jan. 30 (Bloomberg) -- Medtronic Inc., which spent more than $8 billion on acquisitions last year, will focus now on making those purchases work together, even as the world's biggest pacemaker company develops technologies for treating heart and other ailments.
The purchases by Minneapolis-based Medtronic added devices ranging from ear tubes to spinal cages in some fast-growing areas of medical technology.
``I'd never rule out major acquisitions,' Chairman and Chief Executive William George told the Bloomberg Forum. ``(But) we see the opportunity to extend our reach by going deeper into the therapy of the disease states which we're already treating, and trying to treat people not just initially but over their whole lifetime.'
Medtronic started making pacemakers -- implantable devices that pace the heart to maintain normal rhythm -- in 1960, according to Hoover's Inc. The company is the world's biggest maker of heart rhythm-management devices such as pacemakers and implantable defibrillators.
The company, though, wasn't a major player in the market for angioplasty products, such as stents, the small metal-mesh tubes used to prop open cleared arteries. The market for heart stents is now about $2 billion worldwide, led by Guidant Corp., Medtronic's closest rival in the heart-rhythm management device industry.
So in late 1998, Medtronic said it would buy Arterial Vascular Engineering Inc., one of the top three U.S. stent makers along with Guidant and Boston Scientific Corp. The acquisition was completed in January 1999 for $4.1 billion.
Spinal Products
That purchase closed the day after Medtronic completed its $3.6 billion acquisition of Sofamor Danek Group Inc., which makes rods, screws and plates implanted to stabilize the spine.
Medtronic added Sofamor Danek to its division that makes electrical stimulation to fight pain and tremors. When the acquisition was announced in November 1998, the company estimated the market for spinal implants was increasing at about 25 percent a year, compared with growth of less than 10 percent a year for pacemakers.
With the $840 million purchase of Xomed Surgical Products Inc. in November, Medtronic entered a new area -- ear, nose and throat devices. Xomed already had a marketing agreement with Sofamor Danek for an image-guided surgery system.
``Any time we can find a company like Sofamor Danek or Xomed that is the world leader in a field that's growing at 25 percent a year and they're growing at 30 percent plus, great, we'll do it,' George said. ``But there aren't a lot out there right now.'
Though Medtronic's acquisition spree was intended to boost future earnings, it occasionally has had the opposite effect. The company said in mid-February that the Arterial Vascular unit had less revenue than expected in its fiscal third quarter as competition intensified in the stent market.
The division won U.S. approval for its new S670 stent system in November, and Medtronic said sales are looking good.
``For the first time Medtronic is really well-positioned in the interventional vascular market,' George said.
Jan/30/2000 13:26
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