The US Federal Trade Commission (FTC) has sued to block GTCR’s proposed $627m merger-acquisition of critical medical device coatings manufacturer Surmodics over anticompetitive activity concerns.
GTCR owns a majority stake in Biocoat, the second largest manufacturer of hydrophilic coatings used on devices such as catheters, while Surmodics is the space’s largest player. According to the FTC, Surmodics and Biocoat recognise one another as direct competitors and closely monitor each other’s business strategy, while targeting the same large, small, and startup medical device manufacturers.
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This “fierce competition” has therefore driven the companies to improve coating quality and services, lower prices, and increase innovation – all beneficial dynamics that would be eliminated were the deal to complete, the FTC said.
Since the outsourced hydrophilic coatings sector already has few competitors, the FTC alleges that if the deal proceeds, the establishment of a combined company controlling more than 50% of the market for outsourced hydrophilic coatings would “significantly increase market concentration” in the sector, giving it “reason to believe” the acquisition would violate the 2023 Merger Guidelines.
Jointly issued by the FTC and the US Department of Justice (DoJ), the merger guidelines emphasise a more aggressive approach to merger enforcement, particularly around horizontal mergers and market concentration.
The FTC’s bureau of competition director, Daniel Guarnera said: “Medical device makers rely on high-quality coatings in designing and bringing to market life-saving devices, such as neurovascular catheters.
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By GlobalData“This merger threatens to disrupt competitive dynamics that have ultimately benefitted patients. Today, the FTC is stepping in to protect patients from this unlawful acquisition.”
“Pro-competitive”?
Surmodics entered into a definitive agreement on the merger-acquisition last May, with the deal receiving shareholder sign-off in August 2024.
Asserting that the merger was “pro-competitive”, Surmodics said it “respectfully disagreed” with the FTC’s conclusions and intended to “vigorously defend” the case in court in order to complete the merger.
“Surmodics remains confident in both its rationale for the merger and the value it will bring to all stakeholders, including shareholders, customers and patients,” the Minnesota-headquartered company stated.
“We have worked constructively with the FTC over the last several months to secure regulatory approval for the merger and are disappointed by its decision to initiate litigation.”
The merger challenge marks the FTC’s first brought under the Trump Administration, which issued an executive order last month mandating that major regulators including the FTC seek executive branch approval on any new policy priorities.
President Trump designated Andrew Ferguson as the FTC’s new chairman in January. At the time, Ferguson vowed to end the previous administration’s “assault on the American way of life” and usher in a “new Golden Age” for American businesses, workers, and consumers.
Medical Device Network has reached out to GTCR and Surmodics for further comment.
