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The news: A group of private equity firms teamed up to take a majority stake in the medical distributor Medline.
The private equity firms Blackstone, Carlyle and Hellman & Friedman announced the deal on Saturday. GIC, Singapore’s sovereign wealth fund, is also investing in Medline.
The Wall Street Journal and several other news outlets reported the deal was worth more than $30 billion. Medline and its new investors didn’t publicly disclose the size of the deal.
The details: Medline’s senior management team will stay in place. The Mills family, which founded the company and continues to hold leadership roles, will remain the largest single shareholder.
Forbes estimated that the Mills family will retain a 25% stake in Medline. The company didn’t confirm that estimate. The Wall Street Journal reported that Blackstone, Carlyle, and Hellman & Friedman are equal partners in the deal.
Medline will remain a privately held company. The deal is expected to close near the end of 2021.
Several news sources, including The Wall Street Journal, Axios and Forbes, are describing the deal as the largest leveraged buyout in more than a decade.
The backstory: Axios reports that private equity firms have been eyeing Medline for years. In April, The Wall Street Journal reported that Medline had started a formal process of searching for investors.
According to Bloomberg, at least eight investment groups considered making an offer, but only two, the winning group and Brookfield Asset Management, submitted final bids.
The impact: Medline is the largest private medical distributor in the U.S. The company reported $17.5 billion in revenue last year. But it’s still relatively small compared to public competitors.
In 2020, publicly held health care distributors Cardinal Health and Mckesson reported $152.5 billion and $237.6 billion in revenue, respectively.
In a press release, Medline says it plans to use the new investment to offer more products, expand into international markets and invest in its global supply chain.
Medtronic stops distribution of heart pump due to safety issues
(Image: Elise Dela Cruz)
The problem: Last week, the medical device company Medtronic stopped distributing its HVAD heart pump after uncovering reports of neurological issues, such as strokes.
According to the Food and Drug Administration, patients using Medtronic’s pump had a higher rate of neurological problems and death than patients using other devices. Medtronic had previously received reports that some pumps were failing to restart.
The HVAD heart pump is intended for patients with a type of advanced heart failure. The device can serve as a bridge to a heart transplant. It can also remain in patients who aren’t eligible for a transplant.
The response: Unlike Peloton’s dangerous treadmills, Medtronic can’t simply ask patients to return their problematic devices.
The company is telling the 4,000 patients who have been implanted with the device not to remove it because the risks likely outweigh any benefits.
An independent panel of clinician advisers is writing recommendations to reduce the risk of neurological problems for patients living with the device. The support program will also provide financial support to some patients and caregivers.
In addition to taking care of the patients who already have the device, Medtronic has been collaborating with the medical device company Abbott, which sells a competing heart pump, to make sure patients have access to the treatments they need.
In a press release, Abbott says it has the capacity to provide heart pumps for any patients who need them and train doctors who want to use them.
During an Alliance Bernstein investor conference last week, Medtronic CEO Geoff Martha pointed to a study published in May as one of the reasons the company decided to pull the device.
“It’s not that our device is performing worse than expected, as defined by our U.S. clinical trial results,” he said. “It’s that new data is emerging that shows Abbott’s device has fewer neurological events and lower mortality rates.”
Background: Medtronic acquired HeartWare International in 2016 for about $1.1 billion. The HVAD system was the company’s flagship product, which the FDA approved in 2012.
At the time, Medtronic estimated the market for miniature heart pumps was $800 million. The company expected it to grow by around 10% in the following years.
However, the concerns about the safety of Medtronic’s device have been growing for years. An FDA database shows 35 recalls going back to 2013.
The FDA database shows five recalls for Abbott’s HeartMate 3 device, approved in 2017. The FDA shows 11 recalls for a predecessor, the HeartMate II, approved in 2008. However, in 2014, investors accused Abbott’s subsidiary Thoratec of hiding facts about a recall related to HeartMate II, according to Mass Device.
In 2018, Medtronic recalled some pieces of the pump’s power source after patients reported that the power source sometimes became disconnected. The issue rarely caused serious problems for patients.
Another recall came in April 2020, after 92 patients complained that some components of the pump broke before implantation. In November, Medtronic recalled some pumps after reports that some patients were having trouble restarting their devices.
In both those cases, a few patients died because of the defects. However, that was a small proportion of the thousands of patients who had used the device by that time.
Medtronic issued one more recall in February, related to problems with the device’s power cables, which had led to 12 deaths, according to the FDA. The company also planned to update the device’s instruction manual.
The most recent announcement adds neurological problems to that list of issues, but the previous problems also contributed to the decision to stop distributing the device.
Between January 2009 and April 2021, Medtronic received more than 100 complaints about pumps not restarting, resulting in 14 patient deaths.
Medtronic blamed a faulty component used in three lots for some of the issues related to restarting, but it couldn’t identify a root cause for problems with other lots.
“Our system has had a number of quality issues since we acquired it that we haven’t been able to completely resolve,” Martha said during the investor conference. “It’s a challenging decision to make given the blood, sweat and tears we’ve invested … but this is clearly the right decision for patients.”
The money: In a press release, Medtronic told investors that the decision to stop distributing the HVAD system would probably have little impact on earnings. The HVAD system generated $141 million in revenue in fiscal year 2021.
According to The Wall Street Journal, JP Morgan Chase analysts expect the financial impact to be neutral for Medtronic and slightly positive for Abbott.