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Boston Scientific to Boost MedSurg Unit Via Augmenix Buyout

Zacks

Boston Scientific Corporation BSX recently announced an agreement to buy Augmenix, Inc. to strengthen its Urology and Pelvic Health arm within the MedSurg business. Based in Bedford, MA, privately-held Augmenix is a manufacturer and marketer of the SpaceOARSystem. Subject to customary closing conditions, the transaction is expected to close early in the fourth quarter of 2018.

Augmenix’s SpaceOARSystem is the therapy applied to decrease common and incapacitating side effects from receiving prostate cancer radiotherapy. Having treated more than 30,000 patients globally, SpaceOAR hydrogel has received CE Mark and FDA approval.

Financial Terms of the Deal

Boston Scientific is going to make a net upfront payment of approximately $500 million in cash. This will be followed by an additional payment of around $100 million on meeting certain sales-based milestones.


However, the transaction is expected to prove accretive to the company’s adjusted earnings per share starting 2020.

Market Potential

Per Boston Scientific, more than 1.1 million men are diagnosed with prostate cancer globally every year and around 400,000 men undergo prostate radiotherapy. Further, product sales are expected to be around $50 million in 2018 and $90 million in 2019, driven by widened U.S. reimbursement, commercial adoption and an addressable market valuing around $750 million. In view of this, we believe the move taken by Boston Scientific is a strategic one.

Other Acquisitions in Focus

We are impressed with Boston Scientific’s recent acquisitions, which have added several products (though many are under development) with immense potential. The company recently announced signing of an agreement to buy California-based privately-held VENITI, Inc., the developer of VICI VENOUS stent system for treating venous obstructive disease (instances of abnormal, blocked or damaged veins).

In the last reported quarter, Boston Scientific announced four compelling tuck-in acquisitions, namely, Claret, Cryterion, nVision and Securus. All the buyouts target high-growth markets, enhance the company’s category leadership strategy, leverage its existing global capabilities and enrich the company’s short-term and long-term growth profiles.

Prior to this, the company had also announced consolidations of NxThera and nVision in Urology and Pelvic Health, EmCision in Endoscopy, Securus in Electrophysiology and Millipede in Structural Heart. According to Boston Scientific, these transactions will bring in a host of exciting new market expansion opportunities in excess of $16 billion by 2021.

Price Performance

Shares of Boston Scientific have outperformed its industry in a year’s time. The stock has returned 25% compared with the industry’s 18.6% growth.

Zacks Rank & Key Picks

Boston Scientific currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the broader medical space are Integer Holdings Corporation ITGR, Intuitive Surgical ISRG and Masimo Corporation MASI.

Integer Holdings’ expected long-term earnings growth rate is 15%. The stock has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Intuitive Surgical’s long-term expected earnings growth rate is 14.7%. The stock carries a Zacks Rank #2.

Masimo’s long-term expected earnings growth rate is 14.8%. The stock has a Zacks Rank #2.

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