UPDATE: May 16, 2022: Medtronic has completed its acquisition of Intersect ENT, adding to the company’s ear, nose and throat portfolio.
The Friday announcement follows a requirement from the Federal Trade Commission for Medtronic to divest Fiagon, a subsidiary of Intersect, for the deal to go through.
Medtronic will acquire Intersect’s Propel and Sinuva sinus implant product lines and technology, intellectual property and a California facility, according to the announcement. Intersect employees will join Medtronic as part of the deal.
The company announced last August plans to buy Intersect for $1.1 billion. At the time, J.P. Morgan and Evercore ISI analysts praised the acquisition as a good strategic fit
Dive Brief:
- The Federal Trade Commission told Medtronic to divest Fiagon to clear a barrier to its $1.1 billion takeover of Intersect ENT. The regulator called for the divestiture to stop consolidation of the markets for ear, nose and throat navigation systems and balloon sinus dilation products.
- Intersect outlined plans to sell Fiagon, which it bought in a 60 million euros ($63.3 million at Wednesday's rate) deal in 2020, to Hemostasis in March in connection with the FTC review process. The agency has confirmed Medtronic must offload Fiagon within 10 days of acquiring Intersect.
- The agreement also requires Medtronic and Intersect to obtain prior approval from the FTC for 10 years before buying ENT navigation systems and balloon sinus dilation assets. The agency inserted the clause to prevent consolidation that could drive up the cost of healthcare in the U.S.
Dive Insight:
Fiagon became the fourth company on the U.S. balloon sinus dilation market last year, establishing itself alongside Johnson & Johnson’s Acclarent and Stryker’s Entellus Medical in the small band of businesses seeking to challenge Medtronic’s position in the sector.
Medtronic’s $1.1 billion takeover of Intersect would neutralize that emerging threat while simultaneously thinning the ENT navigation field, where the medtech company competes against Acclarent, Stryker, Brainlab, Karl Storz and Fiagon.
Intersect, foreseeing how the reduction in competition would play with the FTC, found a buyer for Fiagon earlier this year. The FTC accepted the proposal, positioning Hemostasis to challenge Medtronic for the markets.
“Hemostasis is an established participant in the ENT medical device segment and has the expertise, sales infrastructure and resources to restore the competition that otherwise would have been lost pursuant to the Acquisition,” the FTC wrote in its analysis. “Hemostasis will be able to begin manufacturing its own supply of ENT navigation systems and balloon sinus dilation products from day one.”
The deal enables Hemostasis to enter the market immediately because it will acquire all assets related to the Fiagon business and obtain all third-party consents before the takeover closes. Hemostasis plans to retain Fiagon employees.
The FTC framed the divestiture as a way to stop Medtronic’s Intersect takeover from leading to higher prices and reduced innovation. The regulator has appointed Jeryl Hilleman to monitor the compliance of the companies with the order.
Medtronic commented on the order in an emailed statement.
“In August 2021, we announced our plans to acquire Intersect ENT, expanding Medtronic’s ear, nose, and throat portfolio," the company said. "The acquisition is expected to close in the first quarter of our fiscal year 2023 ending July 29, 2022, subject to the satisfaction of customary closing conditions. We will announce further details following a successful close.”
The company declined to provide further comment specific to the divestiture.
