Boston Scientific's Apama Deal To Boost Electrophysiology Arm

Boston Scientific Corporation (NYSE:BSX) recently announced plans to acquire Campbell, CA-based privately-held company Apama Medical Inc. for a total value of around $300 million. This is in line with the company’s strategy to gain traction in the Electrophysiology market, which is poised to reach a value of more than $9 billion in 2017 (as per data by Articles Factory).

The deal is slated to close in the fourth quarter of 2017, subject to customary closing conditions.

Per the acquisition agreement, subject to the attainment of certain clinical and regulatory targets, Boston Scientific is scheduled to pay a maximum of $125 million in contingent payments between 2018 and 2020 along with $175 million in cash on an immediate basis. However, the company does not expect this buyout to prove accretive to adjusted earnings in 2017 or even 2018.

Apama Medical is involved in research and development of Apama Radiofrequency (RF) Balloon Catheter System for the treatment of atrial fibrillation (AF). Per management, AF is a heart rhythm disorder which has affected roughly 33 million globally.

Through this deal, Boston Scientific aims to expand its suite of arrhythmia solutions which fall under the Electrophysiology sub-segment of the company. The company also intends to integrate its RHYTHMIA HDx Mapping System with Apama RF balloon system in order to enhance the visualization of the heart during ablation processes.

Although Apama RF balloon is expected to receive CE Mark approval in late-2018, the AF-FICIENT study results presented at the AF Symposium Annual Meeting in January have been favorable.

Interestingly, Boston Scientific’s Electrophysiology revenues improved in the last reported quarter on higher uptake of the new RHYTHMIA HDx platform. Management continues to roll out the HDx platform in Europe and recently initiated the same in the United States and Japan.

Overall, the company continues to expand the toolkit that supports RHYTHMIA HDx, providing ablation technologies that match the excellence of its Mapping System and adding tools that expand the reach and utility of RHYTHMIA HDx in different procedure types. In this context, the company plans to launch IntellaNav MiFi Open-Irrigated Therapeutic Catheter in Europe and the United States in the third quarter.

Moreover, Boston Scientific’s strategy to gain traction in the Electrophysiology sub-segment 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 see a CAGR of 7.6% from 2016 to 2022 to reach a value of $32,216 million.

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

Share Price Performance

Boston Scientific has been gaining investor confidence on consistently positive results. Over the last month, the company’s share price has outperformed the broader industry. The stock has gained 7.2%, compared with the broader industry’s 1.4% gain.

Zacks Rank & Key Picks

Boston Scientific currently carries a Zacks Rank #3 (Hold). A few better-ranked stocks in the medical sector are Orthofix International N.V. (NASDAQ:OFIX) , Luminex Corporation (NASDAQ:LMNX) and IDEXX Laboratories, Inc. (NASDAQ:IDXX) . Orthofix International and Luminex Corporation sport a Zacks Rank #1 (Strong Buy), while IDEXX Laboratories carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Orthofix International has a long-term expected earnings growth rate of 11.8%. The stock has rallied roughly 4.6% over the last three months.

Luminex Corporation has a long-term expected earnings growth rate of 16.3%. The stock gained 15.3% over the last six months.

IDEXX Laboratories has a long-term expected earnings growth rate of 19.8%. The stock gained 39.2% over the last year.

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