Johnson & Johnson is to acquire Micrus Endovascular Corp for $480 million in order to broaden its range of medical devices that treat and prevent stroke. The acquisition of Micrus Endovascular follows the purchase of ev3 Inc, the neurovascular device manufacturer, by Covidien plc for $2.6 billion. According to the company, Micrus Endovascular combined with Johnson & Johnson's Codman & Shurtleff business will offer a complete range of stroke treatments.

Micrus Endovascular Corporation (Mircus) engaged in the developing, manufacturing and marketing of implantable and disposable medical devices for the treatment of cerebral vascular diseases. Its products are used by interventional neuroradiologists, interventional neurologists and neurosurgeons to treat both cerebral aneurysms responsible for hemorrhagic stroke and intracranial atherosclerosis. The product portfolio of the company includes microcoil delivery system, microcoil system, microcoil system accessories, helical coils, microcatheter, stent system, connecting cable and balloon catheter. The company's products are sold to hospitals and third party distributors.

The global medical devices outsourcing market is projected to reach about US$42.6 billion by the year 2015. Growth in the market is especially driven by factors such as rising demand from device end market, an increased interest exhibited by OEMs on improving productivity and simplifying supplying chain network, emergence of one-stop shops, and ability of contract manufacturing to slash costs, an added impetus for adoption especially during tough economic and financial climate.

Medical device manufacturers at all stages, face mounting pressures to reduce costs, increase margins, while still delivering product advancements, superior quality, and excellent customer service. As companies modernize their business practices, driven by the need to remain competitive, and retain critical survival capabilities, such as, agility and flexibility in a fast changing marketplace, it is opportunities galore for players in contract manufacturing market. Primary drivers for medical device outsourcing include not only the growth pattern of overall medical device market, but also the extent to which device manufacturers choose to outsource their manufacturing and assembly operations. The present frugal economic conditions have additionally reinforced the need to upgrade medical device manufacturing in a cost-effective, yet compelling way.

Against this process of re-evaluating business strategies, devising innovative ways of creating competitive advantages, and strict monitoring of expenditure, poised to benefit are concepts that reduce expenditures, and step up competitiveness. Besides these advantages, medical device outsourcing also allows OEMs to direct efforts on specialized areas including technology, R&D, marketing and sales.

Perturbed with frugal economic conditions, revenue starved companies prowl for outsourcing solutions that are cost-effective, and convert their costs from fixed to variable. Technically, the feature of multi-tenancy, or the ability to scale up or scale down services on demand, makes fiscal sense as in the present economic condition. Simplicity in implementation and low costs are prime factors driving adoption of medical device outsourcing by large and small enterprises alike. Also, the rise in the number and variety of vendor products/offerings in this space will additionally drive acceptance. The current global economic slowdown is also expected to encourage OEMs from Europe and North America to tap labor from low-cost destinations such as India and China, which offer highly skilled labor at relatively low cost. As stated by the new market research report on global market for medical devices outsourcing is expected to reach US$ 42.6 billion by 2015. As contract manufacturing gains wide acceptance and recognition, OEMs are seeking adroit ways to better manage their outsourcing partners, and preferably have to manage fewer of them. Such a trend has led to the emergence of one-stop shops, which demonstrate capability to synchronize multiple services.

Author: Paul Chapman, Analyst