Medical equipment and services - New deals
While other economic sectors have their ups and downs, the demand for medical equipment and services keeps growing, as technology keeps growing and aging populations in the US, Europe, and Japan require more and more intervention. Here are three recent developments in this filed. In every case, acquisitions are eliminating competition and boosting the market share of the leaders.
Johnson & Johnson expands in the cardiac field
The US's Johnson & Johnson, already the leading maker of medical equipment in the world, is planning to buy US-based Guidant, a maker of cardiac equipment. The deal is said to be worth more than $24 billion and the biggest obstacle to it maybe antitrust pressures.
Guidant is the #2 maker of implantable defibrillators (after Medtronic) and is a leading company in making stents, used to keep blood vessels open. Stents are an area in which Johnson & Johnson was a pioneer and is still a major player (#3), while Guidant is #2. (Boston Scientific is #1 in that area.) The company also makes pacemakers. Both defibrillators and stents are big growth markets.
Guidant was spun off from drugmaker Eli Lilly in 1994. It was an independent company for a decade, now will probably be part of another medial industry giant.
A December 2 Bloomberg story noted that Johnson & Johnson has acquired over 40 firms in the last decade, many of them in the medical devices area. This purchase, if it goes through, would be its biggest ever. It's previous big buy was that of Alza Corp, a maker of drug delivery systems, in 2001.
A Wall Street Journal article ("Behind the J&J , Guidant Talks: Heart Implants", 12/8/2004) notes:
But a Guidant-Johnson & Johnson deal could spur a long-anticipated round of consolidation among makers of medical devices. Medtronic and Boston Scientific, for example, have held unsuccessful merger talks in the past, but the two are still widely viewed as potential future partners.
Dialysis services: US #2 buys #3
DaVita, the owner of the second-largest kidney dialysis chain in the US bought the clinical assets of Swedish firm Gambro to enhance its position. Dialysis is a niche market, but a major profit center. The deal will cost DaVita $3 billion.
DaVita owns 570 dialysis centers across the US, along with in-patient care facilities at over 300 hospitals. In addition, it also provides home-based dialysis services.
Gambro's US division was the #3 dialysis provider. It recently settled a federal lawsuit whereby it paid doctors for referring patients to its clinics. The fine was over $300 million, and included an agreement that would ban Gambro from use by Medicare patients. Gambro also makes dialysis equipment, and will continue to supply the DaVita chain. The completed transaction would give DaVita almost 100,000 patients at over 1,200 centers.
The combination off #2 and #3 in this case was hastened by the legal settlement. The #1 dialysis provider, Germany-based Fresenius Medical Care AG, will remain the largest, though the new DaVita will be a close second.
Lens-making oligopoly comes into focus
Germany's Carl Zeiss, a leading maker of lenses and other optical equipment, announced it would by the US company Sola International, another major lens maker. The $1.1 billion deal will form one of the top three makers of lenses for spectacles. Sola is major maker of lightweight plastic lenses.
Other major eyeglass manufacturers are France's Essilor and Japan's Hoya. The #1 and #2 companies in that segment. All of these companies are involved in wider optics markets.
