Medical Device Startups Hit Record High in M&A Activity with 28 Deals and 2 IPOs in Q3 2016

CB Insights’ latest Q3 medical device report shows that IPO activity among major companies has hit a low point since last year. So far in Q3 2016, there have been only 28 M&A deals and two IPOs in the medical device sector, compared with eight IPOs during the same period last year.Although IPO activity among medical device companies has slowed, M&A activity in 2016 has reached a record high. Meanwhile, the scale of exits this year is highly likely to surpass that of last year, undoubtedly,This Year Will See a Surge in Market Exits.

Since 2012, the medical device industry has begun to secure relatively stable capital flows. In 2016, crossover investors—typically mutual funds focused on public markets—increased their activity in the medical device sector, driving private company financing to reach $3.5 billion.

For the third quarter, we analyzed the medical device industry using CB Insights data—covering 28 M&A deals and 2 IPOs—to identify the largest medical device companies and the most powerful acquirers in the sector.

In 2016, exit activity in the medical device industry continued its upward trend, with a year-on-year increase of 60%. Since 2012, there have been a total of 96 initial exits (including77 acquisitions and exits, and 19 IPOs）。

As of the third quarter of 2016, medical device companies had completed 30 exits, including 28 mergers and acquisitions (M&A) and two initial public offerings (IPOs) (see below).

Pulse Biosciences

Launched this May, Pulse Biosciences, formerly known as Electroblate, is a development-stage medical device company. The company is dedicated to developing an electro-signaling platform with oncology therapeutic applications. Its proprietary Nano-Pulse Electrical Signaling (NPES) technology leverages nanosecond pulsed electric fields to induce cellular signaling and activate cellular pathways within tissues. The company has a market capitalization of $50 million. This novel proprietary platform technology is known as Nano-Pulse Electrical Signaling, or “NPES.”

Tactile Systems

In July this year, Tactile Systems, a company focused on the research and development of devices for treating chronic swelling, went public with a market capitalization of $166 million. Tactile Systems Technology primarily manufactures and sells the Flexitouch Lymphedema System, which is designed to help patients manage lymphedema—a chronic or progressive condition that is often a sequela of cancer treatment—through home-based therapy.

Laborie Medical Technologies

Laborie Medical Technologies is a multinational corporation dedicated to the development, manufacturing, and sales of medical devices and catheters for urology and gynecology. Its products aid in the diagnosis and treatment of urinary and fecal incontinence, as well as other pelvic floor disorders. The acquisition of Laborie Medical Technologies by Patricia Industries for $640 million set a new record for the largest private equity buyout since 2012. Patricia Industries is a subsidiary of the Swedish investment company Investor AB.

Advanced Accelerator Applications

French company Advanced Accelerator Applications is dedicated to developing diagnostic and therapeutic products, including PET (Positron Emission Tomography) and SPECT (Single-Photon Emission Computed Tomography) imaging solutions. The company focuses on molecular imaging for diseases such as cancer and personalized pharmacotherapy. It operates 17 production and R&D facilities across Europe, Israel, and North America, with more than 270 employees spread across 10 countries worldwide. At the time of its IPO in 2015, the company was valued at $617 million, ranking second on the list.

Next are ConforMIS, Topera Medical, and Glaukos, each with exit valuations exceeding $500 million.

ConforMIS

ConforMIS is dedicated to the development and commercialization of medical devices for osteoarthritis and joint injuries. The company’s intellectual property portfolio includes patents and patent applications covering imaging software, image processing, implant design, surgical techniques, instrumentation, and manufacturing across knee, hip, spine, and small joint disciplines. ConforMIS’s knee implants and instrumentation are designed to address osteoarthritis at all stages.

Topera Medical

The RhythmView system developed by Topera Medical assists electrophysiologists in identifying the sources of arrhythmias. This system provides real-time electrocardiographic activity maps, helping electrophysiologists diagnose and treat arrhythmias such as atrial tachycardia, atrial flutter, ventricular tachycardia, and atrial fibrillation (AF).

Glaukos Corporation

Glaukos is an ophthalmic medical technology company focused on developing and commercializing revolutionary products and procedures to transform the treatment of glaucoma, a blinding eye disease. By leveraging minimally invasive glaucoma surgery (MIGS), the company has reformed traditional approaches to glaucoma treatment and management.

Medtronic is the most active acquirer in the medical device industry. Since 2012, the company has acquired eight companies. Interestingly, the six most active acquirers have all shown strong interest in startups within the cardiovascular system sector. Among the seven companies acquired by Medtronic, five—including TWELVE, Aptus Endosystems, and Medina Medical—are dedicated to treating cardiovascular diseases.

 TWELVE

TWELVE, born out of The Foundry, is dedicated to revolutionizing mitral valve replacement.

Aptus Endosystems

Aptus Endosystems is a medical device company dedicated to developing advanced endovascular aneurysm repair (EVAR) technologies. The endovascular grafts and helical anchor technology developed by Aptus Endosystems enable physicians to ensure the controllability and durability of surgical repair while performing minimally invasive EVAR procedures.

Medina Medical

Medina Medical is a developer of minimally invasive treatment devices for cerebral aneurysms and stroke.

Tied for second place, Abbott and St. Jude Medical each acquired three companies, lagging far behind the leader. Similarly, five of the six acquired companies were focused on the treatment of cardiovascular diseases, including Topera Medical and Endosense.

 Endosense

Endosense is a medical technology company dedicated to enhancing the efficacy, safety, and usability of catheter ablation procedures for treating arrhythmias. The TactiCath force-sensing ablation catheter developed by Endosense features contact force measurement capabilities, enabling physicians to perform real-time, objective measurements of contact force during catheter ablation.