Medical device companies face significant opportunities from targeting the retiring baby boomer generation. Device innovations in blood disorders and heart conditions have gotten a large focus, but the foray into drug development has caught many analysts by surprise. Will this pay dividends? And what other strategies are they taking to hedge against domestic headwinds? Below, I present my take on Baxter International Inc. (NYSE:BAX) and Medtronic, Inc. (NYSE:MDT).
Baxter International Inc. (NYSE:BAX)
Baxter is a leading company engaged in medical devices and pharmaceuticals. In late January, it decided to acquire OBI-1, a hemophilia compound that is still under investigation, as well as related assets. It is buying the compound from Inspiration Biopharmaceuticals. Ipsen Pharma S.A.S will provide the manufacturing operations. The compound is being investigated for the possible treatment of acquired hemophilia A, as well as congenital hemophilia A with inhibitors. Unlike other hemophilic disorders that mostly affect males, acquired hemophilia A affects both sexes.
Baxter has been on the frontline of researching and providing solutions for hemophilic conditions, so investing in OBI-1 is a good opportunity to open a new market. Baxter is expected to pay an upfront payment of $50 million for the asset and manufacturing operations. It will then be expected to pay around $20 million depending on regulatory approval in the U.S as well as for foreign approval. Additional payments may be made depending on their approval when sales amount to more than $100 million. The compound is in Phase III of clinical studies.
Baxter boasts a wide portfolio insofar as hemophilia is concerned. It has at least 60 years of experience in treating hemophilia, and it has developed various choices of therapy for both hemophilia A and B. The company, through its subsidiaries, has also invested in other products for life threatening illnesses and acute medical conditions. Apart from pharmaceuticals, the company also has invested in the manufacture of medical devices that continue to be used in hospitals globally.
Medtronic, Inc. (NYSE:MDT)
This medical device giant has been able to register strong growth due to prudent investment in an aging population. The company manufactures medical devices that cater to heart diseases. But it has not been exactly smooth sailing for the market leader. There are challenges, like the excise tax that has been introduced on the sale of medical devices. But Medtronic is hedging by penetrating China, which is evident from last year’s acquisition of China Kanghui Holdings. Medtronic is also working hard to have an increased presence in the orthopedic implant market, thereby threatening other giants, such as Zimmer Holdings. Zimmer Holdings had made a similar Chinese strategic acquisition, which enabled it to ultimately generate more than 20% of its revenue from Asia.