Life is full of choices, not all of them pleasant. For device makers of late, this definitely holds true.
Firms in the venture capital end of things are not necessarily worried that VC has utterly abandoned med-tech, but it would appear that the start-up might find the going tough, even though firms with a little more development are getting more love from investors. As my colleague Amanda Pedersen noted in Medical Device Daily recently, a recent report by CB Insights (New York) indicates that the number of VC deals for med-tech continues to tail off, dropping from 184 in the third quarter of 2010 to 147 in the second quarter of this year. This despite the fact that investors dropped $1.9 billion into med-tech in the second quarter. Amanda's coverage appeared in the July 22 edition of MDD.
The problem for small firms is confirmed by a MoneyTree report published earlier this month, which states that in the just-completed second quarter, only 44 start-up med-tech companies managed to win over investors, a 27% drop over the same quarter in 2010. While this report also notes that more money is going into med-tech, it's not new money. Med-tech exits are accounting for a larger share of the cash plowed into med-tech firms, which means that VC firms are having a tougher time getting new investors on board.
Is Wall Street any better off? Depends on whom you ask. According to an Aug. 9 story in the Wall Street Journal, this summer isn't even remotely reminiscent of Valentine's Day for large device makers. The story states that big-time device firms such as Medtronic (Fridley, Minnesota) are taking a pounding on Wall Street over concerns about the device tax, the cuts in reimbursement due to healthcare reform law, and price pressures from payers of all stripes.
There have been a number of acquisitions lately, such as the Johnson & Johnson (J&J; Brunswick, New Jersey) buyout of Synthes (Solothurn, Switzerland), which rang in at $21 billion, a sum that dwarfs the recently announced buy-out of Motorola (Schaumberg, Illinois) by Google (Mountain View, California), but it's not often that med-tech acquisitions are larger than those in the various segments of the IT industry.
On the other hand, the established firms aren't doing so well in terms of market cap. Edwards Lifesciences (Irvine, California) has not done well since the July advisory committee, and its shares are still going for less than $70 a share after hitting more than $90 earlier this year, while Medtronic's stocks are going for about $31 despite having hit more than $42 earlier this summer.
Okay, so it's not the summer of love for med-tech. Still, it's the summer doldrums, and a little distance from the debt ceiling mess might shore up a lot of things in the global economy, not just the fortunes of med-tech firms. The message here, basically, is stay tuned. There's a lot more to come.