Originally Published MX November/December 2002
EDITOR'S PAGE
When More Means Less
While finance activities in many sectors of the economy have fallen off over the past year, medtech and other healthcare-related sectors have been extraordinarily active.
According to the Health Care M&A Report, healthcare ranks first among all sectors of the mergers and acquisitions market for 2002, with nearly 660 deals valued at some $92 billion through the end of the third quarter. The medical device industry played a strong role in increasing the healthcare total, posting 104 deals in the first three quarters of the year.
Stephen M. Monroe, a partner with the research firm of Irving Levin Associates Inc. (New Canaan, CT) predicts that "2002 will close with approximately $100 billion funding nearly 850 deals in the healthcare industry. The dollar value of the deals announced will be one of the highest for healthcare in the past 10 years."
A similar story can be found in the venture capital markets, where healthcare firms raised approximately $5 billion in the first three quarters of the year. According to Growthink Research (Venice, CA), venture capital investments in 2002 are "on pace for healthcare's best year ever."
And once again, medical device companies have been in the thick of it. According to Growthink, device companies raised more than $304 million (26.7%) of the $1.1 billion in venture dollars invested during the third quarter of this year. Some 34 device companies received venture funding, with an average deal size of nearly $9 million.
Even so, medtech companies are hardly awash in funding, and the number of healthcare companies receiving venture funding in the third quarter actually dropped by 38% compared with the previous quarter.
Perhaps that drop is only a momentary blip, but it still bears watching. When venture funding supports fewer early-stage companies, the number of companies ripe for acquisition—sometimes at bargain prices—is bound to be greater. In the long run, those trends could cause medtech companies to experience the ultimate falloff in activity.
Copyright ©2002 MX
