ICU Working to Improve Margins After Smiths Acquisition Setbacks

With roots as a supplier of infusion consumables, ICU enhanced its product mix through the transformative acquisition of Hospira Infusion Systems from Pfizer in 2017 by bringing infusion pumps, a broader consumables offering, and IV solutions manufacturing into the fold. The firm has become a more complete provider with the acquisition of the Smiths Medical division (various IV-related products and other medical supplies) in 2022. In our view, ICU’s focus on building a more comprehensive portfolio adds to the long-term stability of its revenue mix thanks to lengthy contracts and a hallmark razor-and-blade model in its systems business. We think unrivaled scale in consumables may help it to generate excess returns eventually, though its portfolio has lost differentiation. In infusion systems, although we believe ICU faces an uphill battle in competing with leader Becton Dickson, we believe this space offers an attractive opportunity to exploit high switching costs in this industry.