STJ ST. Jude Medical, Inc.

Medtronic (MDT) has completed two acquisitions – Salient Surgical Technologies for $525 million and Peak Surgical for $120 million. This echoes the inorganic route that the company has taken to strengthen its presence in the advanced surgical devices market.

Salient Surgical deals with haemostatic sealing of soft tissue and bone in a variety of surgical procedures including orthopedic surgery, spine, open abdominal and thoracic procedures. Following this deal, Medtronic’s Surgical Technologies portfolio would include Aquamantys system with Transcollation technology. Salient records annualized revenue of about $100 million. Medtronic already holds an ownership stake in Salient, excluding which the transaction value would be approximately $480 million.

Peak Surgical specializes in surgical instruments based on its PlasmaBlade technology. The Peak PlasmaBlade consists of disposable cutting devices with insulation technology that provides accuracy similar to that offered by a scalpel and bleeding control with minimal thermal tissue damage. The technology is approved for several applications – Ear, Nose and Throat (ENT), plastic reconstructive, orthopedic and general surgery.

Peak Surgical’s annualized revenue is $20 million. After taking into account Medtronic’s current stake in Peak Surgical, the transaction value comes to approximately $105 million.

During the last reported quarter, revenues from Surgical Technologies segment increased 13% to $266 million (9% at CER). Medtronic has been looking at diversifying its portfolio over the past few quarters as its core segments – Cardiac Rhythm Disease Management (CRDM) and Spinal have been witnessing several challenges and lower revenues. However, the two recent acquisitions are unlikely to have any significant impact on the top line in the near future as Surgical Technologies account for only 7% of total sales.

Fiscal 2011 has been one of the most challenging years for Medtronic stemming from the macroeconomic downturn and decreased utilization. Besides, the company faces tough competition from several players including Boston Scientific (BSX) and St Jude Medical (STJ). The company to its credit is undertaking several steps to better adapt to the changing environment.

 
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