2012 smashes record for Chinese investment in U.S. deals

At $6.5 billion, Chinese investment in U.S. projects during 2012 bested the previous 2010 record of $5.8 billion and shows few signs of slowing down, according to a report released Friday by New York-based research firm the Rhodium Group.
Investors from China, Taiwan and Singapore are grabbing investment opportunities in the US.

Chinese and Taiwanese investors, boutique VCs and PE firms are looking for technologies: like Medical devices, IT and mobile and energy companies that are pre and post revenue companies.
"We are looking at technologies that have potential" said Mr Huang from Taiwan based investor fund.

Special attraction towards medical device industry, since the US investors don't have ready funds to invest gives the Chinese and Taiwanese investors a tremendous opportunity to grab at young budding companies in Spine, Orthopedics, Women's health and believe or not Obesity and Diabetes companies.

Orange County, Ca continues to seek attention in the Spine, Diabetes and Obesity Space.
 2011-12 saw investments of up to 5 billion worth of new deals involving Chinese capital already in the pipeline, 2013 looks likely to continue the upswing.
The U.S. sectors drawing the most Chinese investment in the last year were medical devices, health care,  oil and gas, advanced manufacturing, utilities, real estate and hospitality.
But Silicon Valley and Orange County's medical technology and high tech market is also proving to be an investment magnet as Chinese firms and investors flock to California companies.

If the trend of increased Chinese investment holds true, the new influx of investment capital could be big news for the OC's and Silicon Valley real estate market. So look what's happening. Investors are investing in multiple sectors mainly: New medical technologies eg; obesity (worlds biggest unmet need) or in orhtopedics and spine industry, which is an imminent need in China, so importing US made product to China's booming health care market. Investing in real estate, which grows as industry in OC and Silicon Valley increases.

Investors from HongKong and China who are moving out of real estate are not investing in real estate in US, they did that 2 yrs ago, now acting smart and grabbing technologies and innovations that investors are unable to get funded by VCs. US VCs will take 6-8 months to activate their funds on young innovative companies, this window is enough for smart investors to invest up to $5 Mil to $10M in technology companies and getting the upside. Its amazing how investors have become smarter and taking more risk as US innovation is at its peak, but investments have not cought up to it, due to the recession.

 As China slows down, the investors and experts think there is going to be a big health care bubble in the US  and worldwide as healthcare becomes the biggest priority in the next couple of years, which will give investors larger multiples on their investment. Looking at the rising M&A trend, some Japanese and Singapore investors are exploring M&Aopportunities buying out companies at the budding stage and retaining the innovators and management teams. Singapore, Chinese PEs and experts are catching on that trend in the med device sector.
According to Reportthiker.com.  China is already the third largest medical device market in the world, after the United States and Japan. Within 5 to 7 years, China will surpass Japan and become the second largest medical device market in the world.

Sharp Rise in Obesity Surgery Rate: You Only Need to Walk Down The Street

Sharp Rise in Obesity Surgery Rate:
Irvine, Ca based company has a next generation, minimally invasive medical device to treat obesity and diabetes. Company has secured IP, and is raising capital to conduct clinical trials outside USA and get CE mark.
Obesity is not just USA's problem. Australia, New Zealand, UK, Germany, Saudi Arabia, Mexico, Canada and Latin America is seeing unprecedented obesity rates. China's one child policy is creating a generation that is super obese and India is soon becoming a diabetic capital in the world.
The number of obesity surgeries in New Zealand has risen nearly 100 per cent over the past six years and "you only need to walk down the street" to see why, a surgeon says.
Ministry of Health figures show 389 gastric bypass surgeries were performed in the public health system over the past year - nearly six times more than in 2005-2006.
Health Ministry electives manager Clare Perry said it was a sign of increased funding that the number of surgeries had gone up.
In 2010,  millions were made available to District Health Boards to carry out bariatric surgeries.
"This funding is expected to provide an additional 3000 bariatric operations nationally over four years, an average of 175 per year, which has been achieved.
"You just need to walk down the street to see New Zealand's obesity problem, and it is a problem of deprivation.
"It's not just the fact that people are fat, it's all the associated health problems that come with it."
Rates of cardiovascular disease, diabetes and liver diseases - all associated with obesity - have skyrocketed over the past decade.
According to Diabetes New Zealand,  more than 208,000 New Zealanders have Type 1 or Type 2 diabetes.In UK 1.2 million people are waiting for bariatric surgery
About 50 people are diagnosed as having diabetes in New Zealand every day.
He said while the increase was substantial, they were still dealing with relatively small numbers.
"It's a sign of a few things, firstly there are increasing numbers of morbidly obese people needing the surgery, there are also more hospitals and greater funding to provide access, and there is a better understanding of the benefits and outcomes of this surgery so it's increasingly being seen as a viable treatment."
Many hospitals only had the capacity to treat the chronic diseases which were often the secondary symptoms of obesity. Each surgery generally costs about $30,000

Spinofix, Inc Poised for Growth or Acquisition. Stand-Alone, Low Cost Spine Fixation Technology

Spinofix, Inc Poised for Growth or Acquisition.

Stand-Alone, Low Cost Spine Fixation Technology  

Irvine, CA Dec 21, 2012 – Spinofix, Inc., a medical device company focused on providing next generation, low cost stand-alone alternatives to traditional spinal fusion, today announced that it is ready for growth capital or acquisition. Spinofix has researched the US and international markets which includes China, Taiwan, India, Middle East, Europe and Latin America.

90 Percent of the spine fusion surgery internationally and 80 percent of US market is open fixation procedures. Spinofix has come up with innovative devices to treat  patients with less hardware and provide substantially equivalent fixation. Product is going through the testing process. Company received its ISO 13485 certification Q2 of 2012 and hoping to get a CE mark in a few months.

“We are pleased to reach this significant milestone and inquiries from companies to acquire the technology now” said Glenn Morimoto, Chief Marketing & Sales Officer of Spinofix, Inc. “We are poised for growth or acquisition, this could be a larger company or even a Private Equity play, we are open to options that makes sense to us”. “Spinofix system has experienced tremendous response from worldwide surgeons and we look forward to achieving FDA approval in the US” said Morimoto.

 “The cross connector systems  is an exciting option for spine surgeons performing lumbar fusion surgery as it can create immediate stability and fixation once it’s properly positioned.” says Dr. Brian Pariera from the Bay Area.  “The unique design of Spinofix products is intriguing and can attract surgeons if displayed at a spine convention or get the sales representative’s foot in the door, that itself is a opportunity for an exit” said Mr David Luvisa, Managing Director at HunterWise Financial, who has been successful in Spine company transaction. “In spine industry we all know, that metals drive biologics, there are some biologic companies who don’t have a spine fixation product, this may be the differentiating technology to acquire before international players grab the opportunity or it becomes too expensive.” said Luvisa.
Spinofix, Inc is located in Irvine, Ca and one of the innovative companies with a small team and aggressive strategy to bring a next generation technology to the conventional spine surgery market. www.spinofix.com

Can investors profit from medical devices M&A boom in 2013?

Can investors profit from medical devices M&A boom in 2013?

Posted on Dec 18, 2012

A recent Reuters article indicates medical devices M&A activity is poised to take-off in 2013. This after activity has fallen to a near low since 2009.  Is there a way that investors can benefit from such mooted M&A activity?

With all the pressures from payors, the 2.3% medical devices sales tax and healthcare reform, companies are looking for angles to optimize operations, and add new innovations to boost future revenues and profits.

The article suggests companies within the orthopedics/spine and cardiovascular space are most likely to benefit. That’s actually quite reasonable since large medical devices companies in these spaces are very profitable and cash-rich. They’re also hungry for new innovation, much of which will be sourced from outside. Also, in these sub-sectors innovations can be very much game changing (clinically and commercially) with opportunities to tap large markets. Private equity buyers will typically pay an EV/EBITDA multiple of 7-10x. This enables them to use considerable debt to leverage the transaction and still have sufficient cash-flow to pay down the new debt.

Strategic buyers are often willing to pay more. They may use less debt to facilitate the transaction (typical financing routes include using cash on balance sheet, share transactions and of course, debt). But a strategic buyer is also usually looking for some kind of business synergies. This could include leveraging a new innovation, getting their foot in the door of physician offices,  sales force, utilizing existing expertise in a given space, cost synergies and other rationales.

But even then, a strategic buyer will pay 5X to 10X to pre-revenue company with decent technology. Typically trategic buyer will pay 10-20x EV/EBITDA multiple.. For a buyer to pay over 20x EV/EBITDA, the acquisition has to work out fantastically well. Occasionally they do.

For some reason Orange County has seen some great companies and terrific exits. Companies have made multiple in the range of 5 to 20X. Orange County is hub for ophthalmology, spine, obesity, cardiovascular and diagnostic companies.

Keep in mind strategics and private equity investors are no fools. There is a very good reason why they (strategics) generally stay between a 5-10x  for a pre-revenue company and 10x to 20x EV/EBITDA multiple – because at this level, they have a very good chance of earning a positive return.