FTC to File Lawsuit to Block Takeover of Medical Device Coating Company

The combined firms would control over 50 percent of the market for outsourced hydrophilic coatings, the agency said.

The Federal Trade Commission (FTC) building in Washington on Aug. 6, 2024. Madalina Vasiliu/The Epoch Times

The U.S. Federal Trade Commission (FTC) intends to lodge a complaint to block an investment company from acquiring a medical device coating business. The agency warns that such a deal threatens competition and is harmful to patients.

The FTC’s complaint seeks to block Illinois-based private equity venture GTCR BC Holdings, LLC, from acquiring Surmodics, Inc., the agency said in a March 6 statement. GTCR already owns a majority stake in Biocoat, Inc., the second-largest provider of hydrophilic coatings in the United States, after Surmodics.

“Hydrophilic coatings allow physicians to maneuver medical devices within the tight confines of the body—within a blood vessel in the brain, for example—without damaging sensitive tissue or vital structures,” the FTC said. “Medical devices with hydrophilic coatings are used in a range of interventional neurovascular, structural heart, coronary, and peripheral vascular procedures.”

If GTCR’s acquisition of Surmodics is allowed, the combined company would control over 50 percent of the market for outsourced hydrophilic coatings, the agency said.

The direct competition between Biocoat and Surmodics has “spurred lower prices, higher quality coatings, and product innovation,” the FTC said.

“The benefits of these competitive dynamics, however, would be eliminated by the proposed merger,” harming medical device manufacturers and patients, the FTC argued.

The agency said that the manufacture of hydrophilic coatings requires large investments, several years of research, and specialized expertise. Companies often tend to outsource the process to third parties with a history of expertise.

“Given these dynamics, it is unlikely any new coating provider could emerge to meaningfully compete with GTCR and Surmodics post-merger,” FTC said.

The agency plans to ask the U.S. District Court for the Northern District of Illinois to halt the transaction pending an administrative proceeding.

Surmodics disagreed with the FTC action in a March 6 statement, saying the company intends to “vigorously defend” the deal in court.

The company “respectfully disagrees with the FTC’s decision and remains committed to completing 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,” said the statement.

“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, as the Merger is pro-competitive.”

The proposed merger was announced by Surmodics in May 2024 and is valued at roughly $627 million. The company’s shareholders already approved the merger in a special meeting held in August.

The FTC commissioners voted 4–0 to approve the decision to take action against the deal.

In a joint statement, Commissioners Alvaro Bedoya and Rebecca Kelly Slaughter said the case challenges a transaction that is “part of a widespread and problematic playbook in our economy”—a private equity company first establishing a position in a specific market and then acquiring businesses in that segment to consolidate the market.

“In general, this strategy can be extraordinarily profitable for a private equity firm, but can also come at substantial cost to the market and to consumers,” they said.

“This type of consolidation playbook is prevalent and is particularly concerning when it is executed in healthcare markets, where not just money but lives are on the line.”

The Epoch Times reached out to GTCR BC Holdings and Surmodics for comment.