Will Medtronic-Covidien deal curb digital health acquisitions trend?

By Brian Dolan
08:36 am
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Zephyr Covidien BioPatchOn Sunday giant medical device company Medtronic entered into a definitive agreement to acquire another big medical device company, Covidien, for $42.9 billion in cash and stock. While the deal still needs to clear the required regulatory hurdles, the combined company would mark considerable consolidation in medtech. One financial analyst who follows the companies closely said it would likely lead to a slowdown in smaller medtech acquisitions.

"It makes sense that Stryker is contemplating a deal with Smith & Nephew, and we would not be surprised to see Johnson & Johnson and Abbott Laboratories at some point look to get bigger in medtech. In our opinion, this means small-cap medtech companies in cardio, spine, and extremities may no longer be targets over the near to intermediate term," RBC Capital Markets analyst Glenn Novarro wrote in a research note, according to a report in Investor's Business Daily.

Last month MobiHealthNews exclusively reported that Medtronic had acquired peel-and-stick wearable heart monitor company Corventis for about $150 million. A few weeks before that MobiHealthNews also broke the news that Covidien had snapped up wearable medical device maker Zephyr Technologies for an undisclosed sum. Last year Medtronic acquired home health monitoring company Cardiocom, too

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While RBC's Novarro argues the Medtronic-Covidien deal would lead to a slowdown in acquisitions for smaller medical device companies like those noted above, but Medtronic Chairman and CEO Omar Ishrak said the combined company would -- as a result of the deal -- commit and additional $10 billion in technology investments over the course of the next decade into early stage venture capital investments, acquisitions, and research and development here in the US.

"The medical technology industry is critical to the US economy, and we will continue to invest and innovate and create well-paying jobs," Ishrak said in a statement. "Medtronic has consistently been the leading innovator and investor in US medtech, and this combination will allow us to accelerate those investments. These investments ultimately produce new therapy and treatment options that improve or save lives for millions of people around the world."

MobiHealthNews has tracked well over a dozen acquisitions in 2014 so far, but the Medtronic-Corventis deal might tamp down M&A activity for medical device-focused digital health startups over the next few years.

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