Last July, I wrote a post about an interesting investment by 3i in Cirtec Medical (link below), that I predicted would shake up competition among medical device contract manufacturers. Of course, much of this type of activity happens behind the scenes, especially, since the focus of most investors and industry-watchers happens to be on medical device makers, especially the large ones. That said, since I started watching the industry in the early parts of this century, I have kept my ears open for intriguing details. Today's post comes by way of one of those seemingly obscure acquisitions, which I personally believe adds fodder to the intriguing changes happening among medical device contract manufacturers, pressured by various factors.
My paths crossed with some of the folks at Corpus Medical, a while ago when working on a project. Therefore, I kept tabs over the years and flipping through some recent archives, I learned that Confluent Medical Technologies,
a large contract manufacturer (billing itself as the largest, for specialized medical devices, whatever they are, apparently) has acquired Corpus Medical.
I find this very interesting. With the economy quite hot (and probably headed towards a crash at some point in the not so distant future), an administration that is business friendly (but still can't get the medical devices taxes permanently abolished, apparently) and a rather too friendly FDA, medical device organizations, especially those like contract manufacturers are well positioned to grow, through acquisitions (Corpus), or investments (Cirtec). The question of course is, is this significant, and if so, is it a good or a bad thing.
That is a difficult question to answer. There are a few things I consider, when attempting to answer this question (which should only muddle things further, I promise!):
1. Some see consolidation as limiting customer choices. And this, can be true when viewed through a certain lens. When you have the opportunity to work with fewer vendors, your choices, the ability to get competitive quotes etc. go down. This is definitely an issue.
2. Vertical Integration is a good thing for a customer. Vendor Management, especially at the Design and Manufacturing Scaling stages is ripe with room for disaster. Companies can be made or broken during these stages, and I have seen several fall. Some people like to say, "well, 9 of 10 start-ups fail". We all know, all 9 didn't have to fail, and I can tell you (in several agonizing, long posts to come in the future) that they all didn't have to fail, and that many failed because of mismanagement at various stages. Thus, if you are managing 5 different vendors, 2 for components, 2 for design and 1 for manufacturing, I can promise, you wont be getting much sleep. You could then flip my point and say, "well, what if I picked one really huge, but bad vendor?" See, how I said things will get muddled? All said, some companies go for vertical integration, because negotiations, costs, management efforts and integration all go really well, even in cases that are far from ideal.
3. Vendors for the semiconductor industry and the IT industry, among others can serve as precedents, where they grew really big over time, and also merged and acquired each other. At the end of the day, it allowed smaller players to gain in strength by defining niches and fight nimbly against the more mature, slower moving large players. I suspect this is one of the good things for the industry, especially the customers. For newer technologies or implementations, they can go to smaller organizations.
So, like I said before, the long term impact is a bit hard to assess. But, there is consolidation happening, and it will be interesting to see where this leads all of us.
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References:
1. The release on the acquisition: http://surgicalandsupplies.medicaldevices-business-review.com/news/confluent-medical-technologies-acquires-corpus-medical-120218-6052671
2. My previous post on Medical Device Contract Manufacturers: https://chaaraka.blogspot.com/2017/07/interesting-investment-might-cause.html
3. Image, Courtesy, Pexels: https://www.pexels.com/photo/black-and-white-blood-pressure-kit-220723/
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