This lifted off imi stockhouse thread...
"If J&J wanted to purchase IMI what value would you place on IMI. They have the 1,2,3 Cholesterol Test. They have PreVu. They have four or more cancer test that work better than any test on the market. My estimate is $440M
Reuters
Medical Products Firms Enjoy Merger Boom
Sunday August 22, 7:39 pm ET
By Jessica Hall
PHILADELPHIA (Reuters) - Petri dishes, artificial spinal discs and blood-testing strips may not seem particularly exciting, but the makers of these medical products have been fetching high prices this year.
Merger volume spiked as the larger players expanded into new specialties, and niche companies with just one or two "gee whiz" products sought new funding or wider distribution, health care investment bankers said.
For the first eight months of 2004, the number of medical device merger deals in the United States jumped to 106, up 63 percent from a year ago, according to research firm Dealogic.
The total value of those deals skyrocketed to $15.8 billion, compared with $1.1 billion for those in the year-earlier period, Dealogic said.
"There's some good firms out there with one or two really great ideas -- but maybe not 20 great ideas -- that aren't big enough to really build a business on ... but make a great bolt-on acquisition for someone else," said an investment banker who requested anonymity.
Last month, orthopedic device maker Stryker Corp. (NYSE:SYK - News) agreed to pay $120 million for privately held SpineCore Inc., which is developing artificial spinal discs.
The product, which is in the early stages of human testing, is designed as an alternative to spinal fusion surgery. That marks a growing movement in device technology -- to help the aging population avoid the complications and costs of surgery.
The deal would give SpineCore extra funding and the broader distribution it would lack on its own. Meanwhile, Stryker would close the gap between itself and Johnson & Johnson (NYSE:JNJ - News), which is close to launching an artificial spinal disc in the United States.
"The acquisition of technology by purchase is less risky from a time perspective and cheaper than putting people in a lab," said Randolf Katz, a partner in the Irvine, California, office of law firm Bryan Cave.
Katz represented Irvine Biomedical Inc., a specialty cardiac product company that recently sold an 86 percent stake to existing shareholder St. Jude Medical Inc. (NYSE:STJ - News) for $47 million.
BIG MONEY IN BEAKERS
The year has brought some large deals, but the big-money deals have focused on such staid areas as glass beakers and glucose test-strips.
Fisher Scientific International Inc. (NYSE:FSH - News) in March agreed to spend $2.7 billion to buy Apogent Technologies Inc. (NYSE:AOT - News), whose products include microscope slides, glass tubes and test kits.
Meanwhile, Abbott Laboratories Inc. (NYSE:ABT - News) said in January it would acquire diabetes test-maker TheraSense Inc. (Nasdaq:THER - News)for $1.2 billion to boost its own lackluster monitoring business.
Some of the privately held companies that have accepted takeover offers had simultaneously pursued initial public offerings in an effort to find the best returns.
The luxury of being able to weigh the public markets against one or more takeover offers has raised the price tag for these smaller companies, investment bankers said.
Earlier this month, Empi Inc., which makes devices used for pain management, rehabilitation and physical therapy, accepted a $360 million bid from orthopedic devices company Encore Medical Corp. (NasdaqNM:ENMC - News).
That deal came just three weeks after Empi set terms for an initial public offering that would have given the St. Paul, Minnesota, company an estimated market capitalization of just $276 million, according to documents filed with the Securities and Exchange Commission (News - Websites) .
Merger activity may slow down later this year, with deals focusing on smaller investments in companies with spinal products, heart-strengthening treatments and devices that help patients avoid surgery or that work in tandem with drugs.
"We're 80 percent of the way through the 20 percent of the companies that were worth anything," said one health care investment banker.
Many companies are "too young with no real growth plan to justify going public and maybe too risky to be bought yet," the banker said. "So go back to the incubator, get some (venture capital) funding and wait a few years."
NO DOT-COM FRENZY
Some investors have tried to tout the boomlet of mergers in the medical devices sectors as the new "dot-com" wave or compare it to the biotech frenzy of the 1990s.
Others have a more sober view, saying medical device deals rarely make headlines and the brands usually aren't household names.
"You show someone a plastic thing that you stick in someone's artery and people go, 'Oh, that's it?"' said Bryan Cave lawyer Katz.
"It's just boring compared with the promise of something intangible like a biotech compound that may or may not cure cancer," he said. "But there's value there." |
