10 of the Most Controversial Deals in Medtech
Some companies were able to overcome the odds despite controversy and close on the acquisitions. Others weren’t as fortunate, and the mergers folded. MD+DI has compiled a list of some of the most controversial deals the medtech industry has ever seen.
Earlier this week, it was announced the Delaware Court of Chancery ruled that Hillrom must proceed with its $375 million acquisition of Bardy Diagnostics. Chicago, IL-based Hillrom wanted to back out of the deal because it claimed Medicare rate cuts for long-term cardiac monitoring constituted a material adverse event in the acquisition agreement. Hillrom said it plans to appeal the decision. It still remains to be seen if the deal will go through.
It’s not the first time a medtech deal has been in jeopardy. MD+DI has compiled a list of 10 mergers and acquisitions that have faced controversy and, in some cases, insurmountable odds. We should note, not all of the deals closed and some came to a screeching halt.
NGS Rivals Terminate Deal After FTC Complaint
What happens when you put Illumina, Pacific Biosciences (PacBio), and the Federal Trade Commission together? Probably nothing good since Illumina wanted to acquire its longtime rival. (Editor’s note: Well anytime there’s a proposed acquisition and the FTC is involved it’s not going to be pretty – as we get further into the list.) Illumina announced in 2018 that it wanted to bring Pacific Biosciences into the fold for $1.2 billion.
The deal would have given San Diego, CA-based Illumina long-read sequencing capabilities, which means it can decode longer pieces of DNA with high accuracy. However, FTC criticized the deal claiming it had the potential to create a monopoly in the next-generation sequencing market.
Both companies backed out of the deal because of the “lengthy regulatory approval process the transaction has already been subject to and continued uncertainty of the outcome.” Illumina ended up paying PacBio a termination fee of $98 million.
Google Gets Fit(bit)
Antitrust issues were a sticky point in Google’s acquisition of Fitbit. EU regulators began a probe into the $2.1 billion deal in August of 2020 because of the amount of data Google would have access to if the deal were to come to pass.
But despite initial protest, the deal closed earlier this year. In turn, Google gained an important foothold in the wearables market. Google would now be more efficient in competing with the Apple Watch with Fitbit.
The Biggest What If in Medtech
Heartware and Thoratec were once two of the biggest players in the Left Ventricular Assist Device Space. The two were undisputed rivals before being acquired by larger strategics. But once upon a time, Thoratec tried to purchase HeartWare for $282 million.
The deal came to a screeching halt because of … you guessed it antitrust concerns from the FTC.
But eventually, both companies went through more twists and turns than an Agatha Christie novel. Thoratec backed out of the deal and was picked up St. Jude Medical. A few years later, Abbott acquired St. Jude inheriting Thoratec’s LVAD system. Medtronic acquired HeartWare in 2016, for $1.1 billion.
The Dublin-based company would face many issues related to HeartWare’s HVAD technology prompting it to finally pull the plug on the technology.
The outcome leads to one of the biggest What If’s in medtech. What if Thoratec was successful in acquiring HeartWare?
Time Clears all FTC Hurdles
In November of 2019, Stryker sought to strengthen its position in the fast-growing trauma and extremities segment. To do this Stryker made an offer to acquire Wright Medical for $4 billion. End of story. Well not quite. The merger faced opposition from FTC.
In order to get FTC’s blessing for the deal, Stryker divested all assets related to finger joint implants and STAR total ankle replacements. The companies sold these assets to Carlsbad, CA-based DJO Global.
The deal finally closed a year later in November of 2020.
Going in Different Directions
Deals don’t always end over anti-trust issues. Sometimes it comes down to two companies not being able to work things out. That was the case between Organovo and Tarveda Therapeutics.
But let’s step back for a second. In 2019, San Diego, CA-based Organovo hit the hard-reset button after failing to generate decisive scientific data to support prolonged functionality and therapeutic benefit of its liver tissue candidate. The company was exploring strategic alternatives. This led Organovo to submit a proposal to merge with Tarveda Therapeutics in late 2019.
Things went south in April of 2020 when Organovo shareholders voted down the deal.
If the merger had gone through the combined company would have operated under the name of Tarveda Therapeutics.
The COVID Effect
Thermo Fisher Scientific was on the verge of becoming a diagnostics juggernaut. Rumors of the Waltham, MA-based company’s interest in acquiring Qiagen began in late 2019. However, Qiagen terminated talks of the then proposed merger around Christmas eve. It wasn’t until early March, as the pandemic began to spread to the U.S., that Thermo Fisher Scientific made an offer of $11.5 billion to pick up the testing specialist.
But things changed quickly. Because of the pandemic, Qiagen’s diagnostic sales were boosted significantly. The company’s operating income jumped to 84% to $186 million according to a report from Reuters.
Because of the exemplary test sales, Qiagen shareholders held onto the company a bit tighter. Even Thermo Fisher Scientific upping the offer to $12.5 billion wasn’t enough to sway the enlo Netherlands-based company’s shareholders.
Eventually, Thermo Fisher Scientific stepped away from the deal entirely.
Violation of MOU
A little more than a year ago, Second Sight Medical Products said it would lay off 84 of its 108 employees because of the negative impact from COVID-19. The company said at the time it was winding down operations. And in June of 2020, Second Sight said there would be a public auction of its assets by GA Global Partners.
Then Pixium stepped up to acquire the implantable visual prosthetics company. And things were going well until Second Sight took a $27.9 million private placement. Pixium’s response was swift. The company said Second Sight’s private placement violated the terms of the memorandum of understanding both companies entered into on January 5.
The company said it offered Second Sight a chance to renegotiate the MOU in order to allow the pursuit of the business combination while preserving the contractual balance and the interests of Pixium Vision and its shareholders. Pixium said in a release that Second Sight never responded to the proposals it made in good faith nor demonstrated any willingness to reach such an agreement.
Most Transformative Deal in Medtech
Medtronic was already a powerhouse. But when it announced it would acquire Covidien – the company was going to move beyond that level and perhaps become a titan of the industry.
The acquisition was controversial and labeled as “tax inversion” deal. The acquisition would have the medtech giant lower its tax burden by relocating its headquarters to Dublin, Ireland – the location of Covidien’s HQ. The Medtronic-Covidien deal and others like it came under fire from the Obama Administration and other progressive politicians because they involve American companies using mergers with overseas companies to move their headquarters out of the country.
Despite protests, the $43 billion deal was closed in June 2015.
Illumina Challenged Again
Illumina’s back. This time the NGS specialist makes the list for its proposed acquisition of Grail – a liquid biopsy powerhouse known for its massive clinical trials and exorbitant financings. EU regulators and the FTC have challenged the $7.1 billion deal saying it violates anti-trust laws. Illumina is pushing back.
What gives this deal a sense of irony is that Illumina spun Grail out in 2016. Yup, in a way Grail was once part of Illumina. The verdict is still out and history is still being written for this particular deal.
The Saga of Abbott and Alere
One of the most notable acquisitions to go through litigation – involved Abbott Laboratories and Alere. Before Abbott closed on the diagnostics maker, the companies went back and forth trading complaints in the courts and eventually seeking mediation for the merger dispute.
Abbott was gung-ho about the acquisition at first but became lukewarm when Alere disclosed a federal grand jury subpoena related to a U.S. Foreign Corrupt Practices Act investigation involving sales practices from 2013 to 2015 in Asia, Africa, and Latin America.
At the time Abbott even offered up to $50 million to walk away from the proposed merger, but Alere’s board rejected the offer.
Eventually, both parties worked out their differences and the $5.3 billion merger closed in 2017. The Alere acquisition would go on to bolster Abbott’s testing offerings during the pandemic.
Article source: Qmed and MD+DI