Boston Scientific To Acquire Securus Medical, Boost EP Unit

Boston Scientific Corporation (NYSE:BSX) recently announced the acquisition of Securus Medical Group, Inc — a privately-held developer of thermal monitoring system for the continuous measurement of esophageal temperature. The buyout is in line with the company’s strategy to gain traction in the global Electrophysiology (EP) market, which is poised to reach a value of around $4.73 billion by 2019 (per data by Markets and Markets).

Securus Medical Group’s integrated catheter-based probe and imaging system produces real-time images of the temperature of the esophagus and helps in performing cardiac ablation procedure by avoiding thermal injury. Notably, this infrared esophageal temperature monitoring system has received a 510(k) clearance from the FDA.

Boston Scientific plans to introduce the thermal monitoring system in the United States in the first half of 2019. Further, the company will integrate the thermal monitoring system with its RHYTHMIA HDx Mapping System improve the level of comprehensive cardiac imaging during ablation procedures.

Financial Terms of the Deal

Boston Scientific has an existing investment in Securus Medical Group and will pay a net upfront payment of approximately $40 million in cash for the remaining stake and milestone fees of nearly $10 million.

However, the transaction is not expected to be accretive to the company’s adjusted earnings per share.

A Glimpse of the EP Business

Boston Scientific’s EP business develops less-invasive medical technologies to diagnose and treat disorders of heart rate and rhythm.

In fourth-quarter 2017, revenues in this division improved 20.7% year over year to $77 million (up 17.7% at CER). The upside was driven by higher uptake of the new RHYTHMIA HDx platform. Management continues to roll out the HDx platform in Europe and recently launched it in the United States as well as Japan.

Overall, the company continues to expand the toolkit that supports RHYTHMIA HDx, providing ablation technologies that match the excellence of its Mapping System.Additionally, it focuses on adding tools that expand the reach and utility of RHYTHMIA HDx in different procedures.

In this regard, Boston Scientific expects the full-fledged commercialization of DirectSense technology in Europe and the United States in 2018 followed by a successful initial launch in Europe.

Moreover, to expand its EP business, Boston Scientific acquired Apama Medical Inc in October 2017. The company intends to integrate its RHYTHMIA HDx Mapping System with Apama RF balloon system to improve the visualization of the heart during ablation processes.

Market Potential

Boston Scientific’s strategy to boost the EP business seems to be aligned with data provided by Allied Market Research. Per the report, the global cardiac monitoring and cardiac rhythm management market is expected to reach a value of $32,216 million from 2016 to 2022, at a CAGR of 7.6%.

We believe that unhealthy lifestyle and a rise in aging population will continue to result in high incidence of cardiovascular diseases. This is supported by data provided by GBI Research. Per the report, the global cardiovascular disease market is projected to witness a CAGR of 4.1% by 2019. Within this space, the U.S. market is expected to witness the highest momentum at a CAGR of 4.7%.

Thus, the addition of the thermal monitoring system will help Boston Scientific cash in on the abundant opportunities in the global cardiac monitoring and cardiac rhythm management market.

Share Price Performance

Boston Scientific has been gaining investors’ confidence on consistently positive results. Over the past three months, shares of the company have outperformed its broader industry. The stock has rallied 5.8% versus the industry’s 4.2% decline.

Zacks Rank & Key Picks

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

A few better-ranked stocks in the broader medical sector are Bio-Rad Laboratories (NYSE:BIO) , athenahealth, Inc. (NASDAQ:ATHN) and Align Technology, Inc. (NASDAQ:ALGN) .

Bio-Rad Laboratories sports a Zacks Rank of 1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here. It has long-term expected earnings growth rate of 20%.

athenahealth is a Zacks #1 Ranked player. It has long-term expected earnings growth rate of 21.5%.

Align Technology has long-term expected earnings growth rate of 29.2%. The stock carries a Zacks Rank of 2 (Buy).

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