FTC Challenge Intensifies as Illinois and Minnesota Join Opposition to Surmodics Buyout

The Federal Trade Commission's (FTC) legal challenge against the $627 million private equity takeover of Surmodics has gained momentum as Illinois and Minnesota join the fight. This development marks a significant escalation in the ongoing battle over market consolidation in the pharmaceutical industry, particularly in the outsourced hydrophilic coatings sector.

State Attorneys General Bolster FTC's Case

Illinois and Minnesota have been added as co-plaintiffs in the FTC's amended complaint against private equity firm GTCR's proposed acquisition of Surmodics. The move underscores growing concerns about market competition and innovation in the pharmaceutical device coating industry.

Illinois Attorney General Kwame Raoul expressed his apprehension, stating, "The proposed acquisition of Surmodics by a private equity firm represents a troubling trend of wealthy investors attempting to limit competition and innovation in a market while extracting advantages that come from eliminating competitors." Raoul emphasized the potential impact on Illinois residents, warning that the acquisition could "increase prices... by putting profits before people."

Market Consolidation Concerns

The FTC's complaint alleges that GTCR, which already owns a majority stake in Biocoat, is attempting to consolidate the outsourced hydrophilic coating market. According to the FTC's analysis, Surmodics and Biocoat are the top two players in this sector, collectively accounting for over 50% of the market share.

The federal agency argues that the merger would eliminate competition that has historically driven down prices, improved quality, and fostered innovation. The FTC has identified Harland and DSM as the third and fourth largest players in the market, with other "fringe competitors" lacking the capabilities of Surmodics and Biocoat.

Industry Response and Next Steps

Surmodics, which accepted GTCR's $627 million takeover offer in May 2024, has maintained its stance that the merger is "pro-competitive." In a statement following the initial FTC complaint in March, the company expressed disagreement with the FTC's decision and reaffirmed its commitment to completing the merger.

As the legal challenge intensifies with the addition of state-level opposition, the pharmaceutical industry watches closely. The outcome of this case could have far-reaching implications for market dynamics, innovation, and pricing in the medical device coating sector and beyond.