Health care is one of those industries where potential for high returns is increasing. Despite the advanced facilities and prevention steps taken by people, the ratio of people reported to be diagnosed with major diseases in the U.S. continues to increase. Since health care is a necessity, its demand may not be impacted by business cycles.
Medical appliances and equipment industry
The U.S. medical equipment industry’s demand is backed by the population demographics and innovating superior medical technology. The competitive advantage of individual companies depends on their skill coming up with new improved products. Large companies can gain advantages of economies of scale due to large scale manufacturing and research. Small companies can generate profits by focusing on a particular niche market, or by means of technical innovation.
The U.S. medical appliances industry is highly concentrated, with the 50 largest companies forming up to 60 percent of total sales. Recently, ArthroCare Corporation (NASDAQ:ARTC) completed its acquisition of ENTrigue Surgical (“ENTrigue”), in order to strengthen its foothold in the ear, nose and throat (ENT) surgical equipment market. ENTrigue specializes in designing and producing innovative implants, disposables and instruments for endoscopic sinus surgery.
At the moment, there are two companies that produce balloon equipment for endoscopic surgery; namely, Acclarent and Entellus Medical. Acclarent is a subsidiary of Johnson & Johnson (NYSE:JNJ) while the latter is a privately held companies. Both companies’ products are FDA approved for use in the United States.
Acquisition of ENTrigue: will it prove to be a complement to ArthroCare’s product portfolio?
Let’s analyze the acquisition made by ArthroCare Corporation (NASDAQ:ARTC) and see if it will prove to be of benefit to the company in the future.
ArthroCare Corporation (NASDAQ:ARTC) specializes in creating surgical devices, instruments, and implants that attempt to add to the surgical techniques, with the aim to improve patient outcomes. The company’s apparatus is designed to improve current surgical procedures and facilitate new minimally invasive procedures. The two fundamental products include sports medicine and ear, nose, and throat. A lot of ArthroCare Corporation (NASDAQ:ARTC)’s appliances make use of its internationally patented Coblation technology.
Similarly, ENTrigue develops innovative implants, disposables and instruments, with its particular focus on endoscopic sinus surgery including balloon dilation. The company will now function under the name ArthroCare Corporation (NASDAQ:ARTC)’s ENT, as a supplement to the ArthroCare Coblation and Rapid Rhino products, currently being used by ENT surgeons across the globe.
Presently, more than 30 million citizens in the United States are calculated to suffer from sinusitis. On average, 500,000 sinusitis patients undergo surgical treatment in the United States per year.
Attitudes towards treating ear, nose, and throat (ENT) conditions are turning toward medical appliances. Although oral treatment is still the priority treatment for ENT conditions, the patients are moving towards choosing surgical procedures to deal with problems which include chronic sinusitis. As a consequence, the amount of surgical ENT procedures has been gradually increasing since 2010 and this rising trend is expected to continue.
The major advancement in sinus surgery is the development of Balloon Sinuplasty. This has resulted in less postoperative pain and reduced the potential for infection. This has also drastically reduced post-operation recovery time. This technology has been launched by ENTrigue, Acclarent and Entellus.