WASHINGTON, D.C. — The Federal Trade Commission (FTC) has filed a lawsuit seeking to block GTCR BC Holdings, LLC’s (GTCR) proposed acquisition of Surmodics, Inc., citing significant antitrust concerns. The FTC contends that the merger would create a dominant player in the market for outsourced hydrophilic coatings, critical to the manufacturing of life-saving medical devices such as catheters and guidewires.
The complaint, filed in the U.S. District Court for the Northern District of Illinois, asserts that the acquisition would lead to a highly concentrated market, with the combined company controlling over 50% of the outsourced hydrophilic coatings sector. Such market dominance, the FTC argues, would harm competition, stifling innovation, raising prices, and potentially decreasing the quality of products available to medical device manufacturers and, ultimately, patients.
Market Competition at Risk
Hydrophilic coatings are a specialized component essential to numerous medical devices, enabling them to glide smoothly through delicate body structures during complex procedures, such as navigating neurovascular paths or accessing peripheral blood vessels. This functionality is pivotal for procedures addressing conditions like stroke, coronary artery disease, and structural heart defects.
As the FTC highlights, the manufacturing process for these coatings demands extensive expertise, years of research, and significant financial investment. Currently, GTCR owns Biocoat, Inc., the second-largest provider of outsourced hydrophilic coatings. Surmodics, the target of the acquisition, is the largest provider in the sector. The FTC argues that this merger would eliminate the robust, head-to-head competition between the two companies that has driven innovation, competitive pricing, and higher-quality offerings.
Internal documents from both Surmodics and Biocoat reportedly acknowledge the competitive tension between the two firms, with both companies continuously monitoring each other’s strategies and vying for contracts with the same medical device manufacturers. These dynamics have benefited original equipment manufacturers (OEMs), which often depend on outsourced coatings due to the high cost and complexity of in-house production.
The FTC contends, however, that should the merger proceed, no new coating providers are likely to emerge as meaningful competitors, given the market’s significant barriers to entry.
Legal Action to Protect Market Dynamics
To prevent the merger, the FTC has requested a temporary restraining order and preliminary injunction to block the transaction while the case proceeds through an administrative hearing. The Commission voted unanimously, 4-0, to file the complaint and take legal action to halt the deal.
“Medical device makers rely on high-quality coatings in designing and bringing to market life-saving devices, such as neurovascular catheters,” said Daniel Guarnera, Director of the FTC’s Bureau of Competition. “This merger threatens to disrupt competitive dynamics that have ultimately benefited patients.”
The action reflects the FTC’s broader commitment to scrutinizing mergers in industries critical to public health and safety. The agency argues that unchecked consolidation in this market would hurt not only the manufacturers of medical devices but also the patients who depend on these products for essential medical care.
The case highlights the FTC’s continued enforcement of the 2023 Merger Guidelines, which emphasize protecting competition and preventing monopolistic behavior across key industries. A public version of the FTC’s complaint is expected to be released shortly.
The lawsuit aims to preserve competitive markets and ensure that innovation and quality remain at the forefront in sectors directly impacting healthcare outcomes.
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