M&A has bounced back strongly in 2021, with the number of takeovers surpassing all of 2020 by the midpoint of the year and continuing to rise as summer turned to fall. Here, are four key takeaways from the bumper crop of medtech acquisitions.
There are lots of ways to spend $1 billion
The deals of 2021 have a common cause. After hunkering down and then, in some cases, thriving as the pandemic hit and testing demand exploded, medtech companies entered 2021 with large cash reserves and lists of acquisition targets that included players that lacked the portfolio diversity and scale to weather the downturn in elective procedures.
That common cause birthed a diverse range of deals. Rather than pile into one hot sector, medtech dealmakers ranged across the landscape to ink buyouts of companies operating in all corners of the industry.
"We've seen transactions in diagnostics, cardiology, dental. There were certainly times in the past where deals were often focused on one sector, but what really just stood out is that we've seen such a broad array of transactions," Scott Tuhy, lead medical device analyst for Moody's Investor Service, said earlier this year.
A look at the deals worth more than $1 billion gives a taste of the diversity. Steris targeted the dental and endoscopy markets with its $4.6 billion takeover of Cantel Medical; Baxter is adding connected care capabilities through its $10.5 billion Hillrom buyout; Philip Morris' $1.5 billion Vectura takeover covers inhaled drug delivery assets; and Boston Scientific, GE Healthcare and Medtronic have struck $1 billion-plus deals in the cardiology, ultrasound, and ear, nose and throat sectors.
Diagnostics firms flex financial muscle
One clear thread to emerge from the knot of medtech deals in 2021 is the demand for diagnostics assets. With COVID-19 testing reshaping the diagnostic sector, Agilent, DiaSorin, Hologic, Invitae, LabCorp, NeoGenomics, PacBio, PerkinElmer, Roche and Thermo Fisher have all inked acquisitions.
As in the broader medtech space, the takeovers cover a wide range of types of diagnostic tests with clusters of activity in certain hot areas. The two biggest diagnostic deals of 2021 so far both involve multiplex testing. In March, Roche agreed to pay $1.8 billion to buy GenMark Diagnostics, a provider of technology for testing a range of pathogens from a single sample. Weeks later, DiaSorin unveiled a $1.8 billion deal to buy Luminex to grow its multiplex molecular testing business.
The back-to-back deals shook up a market fought over by companies including BioFire and Qiagen. By snapping up GenMark and Luminex, Roche and DiaSorin positioned themselves to compete for a space that was growing 15% a year even before the pandemic reset thinking about the importance of infectious disease testing.
While the biggest diagnostic takeovers of 2021 have involved multiplex testing, cancer is the most active area of dealmaking so far. This year has seen continued jostling for position in the liquid biopsy space, with Agilent inking a $550 million buyout of Resolution Bioscience and NeoGenomics — a former target for Guardant Health — acquiring Inivata for $390 million.
Pacific Biosciences paid $600 million upfront to buy Omniome for short-read sequencing capabilities. The acquired assets will support PacBio's alliance with Invitae, which bolstered its recent push into personalized cancer monitoring by picking up Genosity for $200 million. Hologic, one of the most active dealmakers of 2021, bought molecular cancer test developer Biotheranostics for $230 million, before going on to expand in acute care testing by acquiring Mobidiag for $795 million.
Cardiac wearables lead push into connected care
Beyond the diagnostics space, a cluster of deals involve cardiac wearables and the broader connected care space. Philips got the ball rolling late last year by inking its $2.8 billion acquisition of BioTelemetry. Weeks later, Boston Scientific contributed to a fast start to dealmaking in 2021 — and signaled its intent to be highly acquisitive this year — with a $925 million move for Preventice.
Hillrom unveiled its own play for the sector, a $375 million bid for Bardy Diagnostics, the day before Boston Scientific released news of the Preventice deal. However, Hillrom tried to back out of the deal amid concerns about reimbursement changes, only to then decide to close the takeover against a backdrop of reports that it was in talks with Baxter.
Official news of Baxter's bid for Hillrom came early last month, when the partners unveiled a $10.5 billion agreement. Baxter framed the takeover as an attempt to expand in connected care, enabling it to capitalize on the digitalization of hospitals and the move of more care to home settings. The move of care to the home began before the pandemic but was accelerated by COVID-19, increasing interest in cardiac wearables and the broader remote monitoring sector.
The trend extends to the orthopaedic sector, where Stryker re-entered the M&A game after closing its $4 billion takeover of Wright Medical by acquiring sensor developer OrthoSensor. The takeover gave Stryker control of products including remote patient monitoring wearables.
SPACs offer startups an alternative exit
While OrthoSensor opted for a M&A exit, other privately held medtechs have chosen to go public by merging with special purpose acquisition companies. The SPAC mergers, which offer startups a way to raise money and list on public markets, reflect the broader trends in medtech dealmaking in 2021, with diagnostics and connected care to the fore.
On the diagnostics side, LumiraDx entered into a SPAC merger to raise money to support its attempt to wrestle the market for rapid COVID-19 tests from companies such as Abbott. The slowdown of the COVID-19 testing market over the summer led the SPAC to slash the value of the merger, but LumiraDx still exited the process with additional funds and a Nasdaq listing.
Prenetics is set to join LumiraDx on public markets through a SPAC deal that will give it $459 million to fund efforts in a range of diagnostics niches, including consumer genetics, colorectal cancer screening and COVID-19 travel testing. The progress of Prenetics and LumiraDx was accelerated by their role in COVID-19 testing.
Away from diagnostics, Pear Therapeutics entered into a SPAC merger to raise $400 million to grow its prescription digital therapeutic business and Memic Innovative Surgery lined up a $360 million raise to muscle in on the robotic surgery market.