Urohealth Acquires Imagyn Medical
Executive Summary
Unlikely to mount their own competitive assault, small companies see the big companies as valuable marketing partners and, in some cases, deep-pocketed acquirors. Big companies, for their part, see smaller players as technology incubators that supplement, in some cases even supplant their own product development efforts. But in at least one device segment, urological and gynecological devices, there's been relatively little such platform building.
In selected high value medical device segments, most notably cardiovascular and general surgery, the deal-making frenzy of the past couple of years has been driven by large companies trying to build broad technology platforms that provide customers with a wide range of therapeutic options, and small companies who have all but given up hopes of competing with the distribution clout implicit in such platforms. Unlikely to mount their own competitive assault, small companies see the big companies as valuable marketing partners and, in some cases, deep-pocketed acquirors. Big companies, for their part, see smaller players as technology incubators that supplement, in some cases even supplant their own product development efforts.
But in at least one device segment, urological and gynecological devices, there's been relatively little such platform building. That's because the very tiny niches and applications of gynecology and urology have largely frustrated large companies in their efforts to build business of sufficient size to make their time and money investment worth while. (See “Hitting Below the Belt,” IN VIVOMarch 1997.)
Indeed, the closest thing to a consolidator the urology/gynecology markets has had recently is Newport Beach, CA-based Urohealth Systems Inc., which has seen annual revenues increase from $3.9 million in 1993 to $39.6 million last year through the acquisition of companies such as Advanced Surgical [See Deal], Microsurge Inc., and X-Cardia Inc. The company's recent merger agreement with Imagyn Medical Inc., manufacturers of minimally-invasive gynecological instrumentation, advances its claim to be a leading provider of a broad array of urological and gynecological devices.
But as it builds its portfolio of below-the-waistdevices, Urohealth's exclusive position in the industry faces a challenge. As the large platform builders such as Boston Scientific Corp. , Johnson & Johnson , Medtronic Inc. , and United States Surgical Corp.broaden their mission from cardiovascular to minimally-invasive surgery, generally speaking, they've all targeted urology and gynecology as logical strategic extensions. With their deep pockets and, until recently, high valued stocks, these companies could set off a wave of deal-doing in a segment that has resisted it until now.