Covidien has been one of the more active acquiring medtech companies in recent years.
CEO José Almeida provided a little more detail on the company’s acquisition strategy on Friday’s fourth-quarter earnings conference call when asked about the acquisition of Given Imaging.
In December, Covidien announced that it was buying the Israeli imaging firm for $860 million in cash. At the time, a Covidien executive explained that the acquisition would help the company expand into specialty market of gastrointestinal imaging. The Given System includes the PillCam, a single-use capsule ingested by the patient, a portable data reader worn by the patient and the proprietary RAPID software that downloads and analyzes the data.
“Covidien is always looking for opportunities to expand into specialty [areas] or expand into procedures,” Almeida said Friday in response to an analyst’s question overall M&A strategy and the Given acquisition. “Given is directed toward the specialty of GI where we think we can get more momentum.”
With Given, the company can immediately access Europe, Almeida said. He added that in late 2011, Covidien purchased Barrx Medical to help the company’s expansion into the same GI market, and that business is doing well.
Almeida noted that the company has a full slate of acquisitions for 2014 that vary by size.
“So the size of the acquisition will be managed according to the opportunity. Like I said before, we are not afraid of a larger size acquisition, but those larger-size acquisitions are not easy to come by and above everything Covidien is focused in delivering value to our shareholders,” he said.
On Friday, the company announced two other transactions, one in China and one in Brazil, but didn’t disclose any financial details, or indeed the parties involved.
On the call Almeida said that the one in Brazil is an “outright acquisition” and the one in China is a “joint venture.” The purpose of these two transactions is to test the waters and see whether Covidien can serve the so-called value segment in emerging markets – in other words, serve a new type of customer that is more sensitive to cost.
“First of all, is the market as big as we are thinking; how competitive it is, what is the pricing situation, can we compete with some our products there or do we need to have a brand new platform of products … so we have a lot of assumptions that the team is putting together and we believe it will be a good learning experience for us,” Almedia said.
— By Arundhati Parmar, Senior Editor, MD+DI