Will the consolidations bring synergy?
Abbot has recently made two acquisitions. In its first deal, it acquired OptiMedica, a privately-held Silicon Valley-based ophthalmic device company. Abbott Laboratories (NYSE:ABT) purchased it for $250 million, net of cash, plus an additional payment of $150 million upon completion of certain developments, such as regulatory or sales milestones. By acquiring this company, Abbot will be able to expand its vision care business into the femtosecond laser-assisted surgery market.
Currently in the ophthalmic sector, most cataract procedures are performed manually. The acquisition of OptiMedica Catalys will enable Abbot to perform some of the technical steps in this surgery with precise, computer-guided femtosecond laser technology. This will help the company in entering the rapidly developing laser cataract surgery market. As the population in developing nations’ grows, it is anticipated that the demand for vision care will rise as well. In 2013, nearly 22 million cataract surgeries are anticipated to be performed globally.
In its second deal, Abbott Laboratories (NYSE:ABT) has acquired another privately-held company, IDEV Technologies. This company develops next-generation medical devices for interventional radiologists, vascular surgeons and cardiologists. Abbott Laboratories (NYSE:ABT) purchased this company for $310 million, net of cash and debt. This acquisition will complement its existing peripheral technology portfolio and expand its portfolio of guidewires, balloon dilatation catheters and stents. This technology will help in treating peripheral artery disease patients, which is currently a growing concern around the world.
Both acquisitions have been made at the right time. Due to the rising trend of cataract surgeries and peripheral artery diseases around the globe, these acquisitions are expected to strengthen Abbott Laboratories (NYSE:ABT)’s financial position.
Now let’s talk about ThermoGenesis Corp (NASDAQ:KOOL). The company is a smaller player in the industry, but its recent merger is expected to provide the company with an edge over the industry leader. ThermoGenesis Corp (NASDAQ:KOOL) is a leading supplier of enabling technologies for the processing and storage of stem cells and other biological tissues. Last week, it announced it announced it would enter into a merger agreement with TotipotentRx. TotipotentRx, a privately held company, is a specialized developer of cell-based therapies in the field of regenerative medicines and is the sole provider of cell-based products and services to Fortis Healthcare System. After this merger, the combined company will be named Ceska Therapeutics, and it is expected to become the first fully-integrated regenerative medicine company. Regenerative medicines will solve the problem of rising costs of medicines and could save $250 billion per year. These medicines are expected to become one of the major components of future global healthcare system, and are anticipated to create a $20 billion addressable market by 2020.
This merger will give ThermoGenesis Corp (NASDAQ:KOOL) the ability to commercialize the new cell therapies rapidly and cost effectively. Besides that, the benefits of this merger include the strong position of Ceska in both developed and emerging markets. This has broadened ThermoGenesis Corp (NASDAQ:KOOL)’s product offerings and added significant value to the business. It also holds the potential to create additional shareholder value through growth in its core business and development in major therapeutic areas.
Final thoughts
By making timely and relevant acquisitions, both companies have strengthened their positions in the industry and are now all set to serve their customers with an even more diverse product range. Abbott Laboratories (NYSE:ABT) already has a very good record of registering profits, as the company’s revenues and per share earnings have been constantly increasing over the years. After making the above-mentioned two acquisitions, it will be able to reach and serve more patients with improved solutions than ever before.
On the other hand, ThermoGenesis Corp (NASDAQ:KOOL)’s previous record is not as strong as Abbott Laboratories (NYSE:ABT)’s. The company’s revenues are decreasing and net losses are increasing as compared to earlier years. But after its recent merger, it will become one of the first integrated regenerative medicine producing companies and one of the first providers of practical, commercializable cell therapies. This will provide ThermoGenesis Corp (NASDAQ:KOOL) a core competency to compete with the industry giants, eventually increasing its market share and generating higher profits. Therefore, I would buy both of these companies.
The article Two Medical Device Companies Making Smart Acquisitions originally appeared on Fool.com and is written by usman iftikhar.
usman iftikhar has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. usman is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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