ICU Medical, Incorporated (ICUI): Has This Healthcare Device Innovator Put out the ‘For Sale’ Sign?

On the upside, Hospira continues to generate strong operating cash flow, which allows it to continue investing in both its infusion pump and generic, injectable drug businesses. The company had 108 drug launches in 2012 and has 80 drugs in its pipeline, mostly focused on the oncology and infection areas. Hospira also has made strides in its vertical integration strategy, acquiring the active pharmaceutical ingredients unit of India-based Orchid Pharmaceuticals for roughly $203 million in August 2012.

Another potential acquirer is CareFusion Corporation (NYSE:CFN), the former Cardinal Health unit and a major player in the infusion therapy business with its Alaris system. Like Hospira, CareFusion has had various manufacturing problems with its pumps, dating back to 2007, and it continues to operate under a consent decree with the FDA. CareFusion Corporation (NYSE:CFN) also moved strongly into ICU Medical’s IV connector business through its 2010 acquisition of competitor Medegen, the manufacturer of the MaxGuard product line.

In FY2013, CareFusion Corporation (NYSE:CFN) has reported modest overall sales growth, as higher sales in its disposable product segments have offset lower sales in its dispensing and infusion equipment segments. While unit volumes of infusion systems were down, the company enjoyed higher sales of its connector products. In addition, the improved pricing environment for CareFusion’s equipment sales and its renewed focus on controlling costs led to a sharp gain in its adjusted operating margin.

The bottom line

The healthcare industry’s new-found focus on cost is leading it to target single-source suppliers capable of providing diverse, quality product lines at the lowest price. With a limited product portfolio, ICU Medical likely sees a good time to sell and join forces with a larger enterprise. Since it is priced at a takeover premium, investors should take a pass on ICU Medical, Incorporated (NASDAQ:ICUI). However, they should put Hospira or CareFusion on their watchlist, if either one adds this innovator to their product family.

The article Has This Healthcare Device Innovator Put out the ‘For Sale’ Sign? originally appeared on Fool.com and is written by Robert Hanley.

Robert Hanley owns shares of ICU Medical. The Motley Fool has no position in any of the stocks mentioned. Robert 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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