As medical device makers face “finite” capital, portfolio reshaping will likely remain a focus in the sector.

BOSTON — To reshape product portfolios for long-term success, medtech companies are likely to stay focused on tuck-in M&A and divestitures, executives said this week at AdvaMed’s The MedTech Conference.

“Scale is not a strategy,” said Zimmer Biomet CEO Ivan Tornos, speaking on a Tuesday panel. “Ten, 15 years ago, all of us were going to be bigger. I'm not going to go through all the examples. Most of them have not worked out.”

Zimmer’s acquisition strategy begins with the problem that the company is trying to solve, Tornos said. In orthopedics, that can be about efficiency, managing infection or delivering best-in-class outcomes.

“We start with the strategy, then we look at the financial business case,” said Tornos. Zimmer today looks at deals that are under $2 billion in price, he said. The company may pay slightly more for an interesting asset. Its recent purchases have included pain relief device maker Pacira BioSciences for up to $140 million, robot developer Monogram Technologies for $177 million and implant maker Paragon 28 for about $1.1 billion.

Deciding which capabilities to acquire and which to build internally takes “intellectual honesty” about a company’s strengths and needs, said Tornos. When he joined Zimmer in 2018, most of its capabilities were biomechanical. The company wanted to embrace digital technologies and robotics, he said, and now the mix is 50-50.

On the flip side, sometimes a divestiture is necessary to help a business thrive, said Rachel Ellingson, chief strategy and corporate development officer at Solventum.

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