What’s a paltry $1 billion acquisition when you have made the largest medtech acquisition in history? (It cost Medtronic $50 billion to buy Covidien.)
The medtech megamerger has become such a trend over the past couple of years that it is almost passé these days. But what should not be glossed over is how large companies like Medtronic are making moves to service a particular disease from end-to-end.
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That is the rationale behind the Irish company’s purchase of HeartWare International, the ventricular assist device maker, for $1.1 billion announced on Monday. HeartWare, based in Framingham, Massachusetts, makes the world’s smallest full-support ventricular assist device that aims to reduce the invasiveness of VAD implants, improve patient recovery, and patient outcomes.
HeartWare’s products are for patients with severe symptoms of congestive heart failure. Medtronic has other devices to detect heart rhythm problems as well as manage them, devices that jolt a person back to life when they undergo a sudden cardiac failure, and provide cardiac resynchronization therapy. But these don’t address patients with advanced heart failure in the way HeartWare’s VADs do.
“The addition of (Heartware) further fills out (Medtronic’s) heart failure portfolio with the addition of a product to address the sickest end stage heart failure patients …,” wrote Danielle Antalffy, an analyst with Leerink Partners, in a research note following the acquisition announcement.
With this acquisition in the $800 million VAD market, Medtronic is playing follower to its smaller rival St. Jude Medical, which acquired HeartWare’s competitor Thoratec for $3.3 billion in October only to agree to be acquired by Abbott six months later.
A Deep-dive Into Specialty Pharma
A specialty drug is a class of prescription medications used to treat complex, chronic or rare medical conditions. Although this classification was originally intended to define the treatment of rare, also termed “orphan” diseases, affecting fewer than 200,000 people in the US, more recently, specialty drugs have emerged as the cornerstone of treatment for chronic and complex diseases such as cancer, autoimmune conditions, diabetes, hepatitis C, and HIV/AIDS.
Both St. Jude Medical and Medtronic want a bigger piece of the heart failure pie, but Medtronic is also beefing up its services business to manage this chronic disease.
In fact, just one day after announcing its intent to buy HeartWare, the company launched a new service in the U.S. targeting heart failure. The Beacon Heart Failure Management Service combines data from Medtronic implantable cardioverter defibrillator (ICD) or cardiac resynchronization therapy (CRT) devices with post-acute monitoring from the company’s Care Management Services to enable providers to focus in on the highest-risk heart failure patients and evaluate early intervention options that may preempt a heart failure event from occurring.
A few years ago Medtronic bought telemedicine company CardioCom that remotely monitors heart failure patients. In other words, the Irish medtech giant is betting that a device plus services approach to chronic diseases like heart failure will prove to be the winning combination in an increasingly value-based healthcare system.
“Healthcare systems are under increasing pressure to improve patient care while also driving down associated cost. MCMS is committed to helping our customers deliver better patient outcomes while addressing these challenges,” said Sheri Dodd, vice president and general manager, Medtronic Care Management Services, in a statement. “With its combination of implanted device diagnostics, daily monitoring, and qualified expertise, Beacon is just one way Medtronic is innovating to provide clinically-meaningful services to hospitals, physicians, patients, and payers.”
