Covidien plc (COV) recently announced the acquisition of PolyTouch Medical Ltd., a renowned provider of mesh placement devices used for hernia repair. However, the terms of the agreement were not disclosed by the companies.
Israel-based PolyTouch Medical’s premier laparoscopic surgical device, PatchAssist, is mainly used to treat ventral hernia. Covidien has acquired the company primarily to incorporate this clinically advanced technology to enhance its soft tissue repair product portfolio. PatchAssist has been further developed into AccuMesh, which was launched by Covidien some time in early 2012.
In the most recent quarter, revenues from Covidien’s larger Medical Devices segment climbed 7% year over year to $2,004 million, driven by double-digit growth across Vascular and Energy Devices product lines. New products and higher volume contributed to growth. Within Medical Devices, sales of Soft Tissue Repair products (which includes hernia repair) inched up 1% to $222 million, as growth in the suture unit was partially masked by lower biosurgery and fixation sales.
Founded in 2009, PolyTouch Medical is a portfolio company of Misgav Venture Accelerator, which is a part of an Israel-based investment company, The Trendlines Group.
Covidien is a leading global health care products company with a rich history of developing high-quality products in a cost-effective manner. PolyTouch is its third acquisition in Israel over the past couple of months.Covidien revealed in April 2012, a definitive agreement to take over Jerusalem-based Oridion Systems Ltd. for $23.00 a share.
Earlier, in March 2012, Covidien announced a conclusive deal to acquire superDimension for roughly $300 million. Though the transaction is not expected to have a material impact on its 2012 sales, a slightly dilutive impact on earnings cannot be ruled out. The company will report the acquisition in its Endomechanical business.
Although in its nascent stage, we believe that the PolyTouch acquisition will benefit Covidien’s future growth in the extremely competitive medical devices market. It competes with Johnson & Johnson (JNJ), Becton Dickinson (BDX) and C.R. Bard (BCR), among others.
Covidien remains committed to rolling out new products and technologies, focusing on the emerging markets, and boosting market share in core segments through investments in sales and marketing infrastructure. However, sustained pricing/procedure volume pressure represents a headwind.
We currently have a long-term Neutral recommendation on Covidien. The stock currently retains a Zacks #3 Rank, which translates into a short-term Hold recommendation.Read the Full Research Report on COV
More From Zacks.com