Merit Medical (MMSI) Completes Cianna Medical Acquisition

Merit Medical Systems, Inc. (NASDAQ:MMSI) announced that it has completed the acquisition of Cianna Medical, Inc., based in Aliso Viejo, CA.

The deal was announced on Oct 1. Following the announcement, shares of Merit Medical plunged 4.7% to close at $59.10 yesterday. The transaction included an upfront payment of an upfront payment of $135 million along with a $15-million payment for securing supply chain metrics.

However, Merit Medical outperformed its industry in a year's time. The stock has surged almost 44.7%, better than the industry's 1.6% growth and the S&P 500’s 8.2% gain. Analysts believe that this Zacks Rank #2 (Buy) company has been leveraging on bolt-on buyouts to drive inorganic growth.

Merit Medical Systems, Inc. Price

Significance of the Deal

Cianna Medical is a leading player in breast cancer treatments, especially in wire-free breast localization. Its flagship SCOUT and SAVI Brachy technologies are FDA-cleared and make radiation therapy easy. Per management, the platforms are complementary to Merit Medical’s strategic biopsy initiatives.

Moving ahead, Merit Medical is likely to market Cianna Medical’s SAVI BRACHY, which uses thin tubes to deliver radiation to lumpectomy sites. Further, the company plans to retain the entire commercial and R&D teams of Cianna Medical.

Per Grand View Research, the global breast lesion localization methods market size was worth $507.7 million in 2016 and is estimated to reach $1,577.6 million by 2025, at a CAGR of 13.3%.Considering the solid prospects, we expect Merit Medical to gain traction in the niche space.

Guidance

For 2018, the acquisition will impact Merit Medical’s earnings per share to the extent of 2 cents (on an adjusted basis). Adjusted gross margins are projected to be in the range of 70-75% on the Cianna Medical products. This, in turn, might drive Merit Medical’s adjusted gross margin by 10-20 basis points. This acquisition is also likely to rake in revenues between $5 miilion and $7 million.

For 2019, the proposed transaction will be accretive to Merit Medical’s earnings, which are expected in the range of 8-13 cents per share (on an adjusted basis). Adjusted gross margins are envisioned in the 70-75% band on Cianna Medical products. This, in turn, might drive Merit Medical’s adjusted gross margin by 55-130 basis points. Revenue growth is anticipated to be within $50 million and $56 million.

Key Picks

A few other top-ranked stocks in the broader medical space are Stryker Corporation (NYSE:SYK) , STAAR Surgical Company (NASDAQ:STAA) and Veeva Systems (NYSE:VEEV) .

Stryker has a long-term expected earnings growth rate of 10% and a Zacks Rank #2.

With a Zacks Rank #1 (Strong Buy), STAAR Surgical’s has an average four-quarter positive earnings surprise of 400%. You can see the complete list of today’s Zacks #1 Rank stocks here.

Veeva Systems’ long-term earnings growth rate is projected at 19.3%. The stock carries a Zacks Rank of 2.

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