2019 was an average year for medtech M&A. 2020, not so much.
Thanks to Thermo Fisher Scientific and Invitae, two groups brave enough to push ahead with multibillion-dollar acquisitions during a pandemic, the total value of medical device M&A announced in the first half of 2020 nudged over $15bn. This is still a distressingly low figure, however the real shock is not the value of the deals announced, but of those that have closed.
The medtech deals completed so far in 2020 have a total value of less than $2bn. This is despite mergers worth a total of more than $21bn remaining open. The Covid-19 pandemic seems to have made it harder to hammer out the legal or financial complications of closing deals than it did to conduct the negotiations in the first place.
Of course, the pandemic is not the only element at play. The largest pending deal is Stryker’s $11.5bn purchase of Wright Medical, which was announced in November but has since run into trouble with the US Federal Trade Commission and the UK’s Competition and Markets Authority. Given that last December the FTC scuttled Illumina’s proposed $1.2bn acquisition of Pacific Biosciences, this is a serious threat.
Investors however have shaken off concerns, with Wright’s share price trading just below the acquisition price of $30.75. The deal was not expected to close until the latter half of 2020 anyway. It might still meet this schedule, thus boosting 2020’s numbers, but the involvement of the antitrust watchdogs mean this cannot be relied on.
Partly owing to the lack of this deal, the average size of completed mergers is lower than at any point in the past decade. The mean acquisition size was just $108m in the first six months of 2020; this figure has been erratic over the past 10 years but shows an overall downturn since 2015.
It is also interesting that the two big acquisitions announced so far in 2020 are both diagnostics deals. The unveiling of the $11.5bn Thermo Fisher-Qiagen deal predates the WHO’s designation of Covid-19 as a pandemic, and thus the deal has little to do with tests for the coronavirus itself – though Qiagen has subsequently developed and launched Covid-19 tests.
Image Credit: Elizabeth Cairns / Evaluate