Baxter International Inc. BAX entered a definitive agreement to acquire Cheetah Medical. The acquisition is expected to be completed in the fourth quarter of 2019, subject to customary closing conditions. Baxter expects the deal to remain neutral to its earnings in 2019 and 2020.
The deal is expected to replace the one-size-fits-all approach of fluid administration to a more data-driven process, catering to patients’ customized need. With this deal, Baxter expects to strengthen its foothold in the specialized patient monitoring arena, with key technology used to guide fluid management.
Rationale Behind the Deal
Baxter is acquiring Cheetah Medical for an upfront cash payment of $190 million and potential payment of an additional $40 million, based on clinical and commercial achievements. Cheetah Medical's technology is expected to serve as a basic component of an innovative platform of specialized patient monitoring technologies, which is currently under development. The platform will join Baxter’s other offerings — IV infusion pumps, IV fluids and medications — as part of an integrated system designed to aid and inform remedial decisions.
With the completion of the deal, Cheetah Medical’s non-invasive hemodynamic monitoring systems, including the latest Starling SV system, will be included in Baxter’s portfolio. These will help clinicians to take better note of the suitable amount of fluid for maintaining organ and tissue perfusion.
Baxter believes that this acquisition will help strengthen its commitment toward improving medical outcomes with an established patient monitoring technology to better inform and guide medical professionals with treatment decisions.
Given innovations and monitoring technologies of Cheetah Medical, this deal has come at just the right time for Baxter, which aims to leverage this for additional growth.
Patient Monitoring Portfolio
Patient monitoring devices are used during minor and major surgeries to monitor patients’ physiological signs and related complications. With innovation in wireless technology, physiological parameters of patients can be remotely monitored with these devices while helping to effectively determine the severity of a disease.
Per a report by Allied Market Research, the global patient monitoring devices market size was valued at $22,641 million in 2017. It is estimated to reach $37,187 million by 2025, registering a CAGR of 6.4% between 2018 and 2025.
Notably, on Aug 15, 2019, Baxter announced an agreement with COSMED srl to commercialize Q-NRG+, which is a metabolic monitoring device with indirect calorimetry technology.
Per a report by MarketsAndMarkets, the global hemodynamic monitoring systems market is expected to reach $1,167.4 million from $806.5 million at a CAGR of 6.4% between 2018 and 2023. The market is expected to grow on factors including the technological advancements in hemodynamic monitoring systems, increasing research into hemodynamic monitoring systems and government’s focus on critical care infrastructure and services.
Share Price Performance
The company has gained 12.9% in the past year against the industry’s fall of 0.8% and the S&P 500 index’s rally of 1.9%.
Zacks Rank & Other Key Picks
Currently, Baxter carries a Zacks Rank #2 (Buy). A few other top-ranked stocks from the broader medical space are Capricor Therapeutics, Inc. CAPR, GW Pharmaceuticals PLC GWPH and Neurotrope, Inc. NTRP.
Capricor with a Zacks Rank #2, has a projected third-quarter earnings growth rate of 28.2%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
GW Pharmaceuticals estimates third-quarter earnings growth rate to be 72.8%. It currently sports a Zacks Rank #1.
Neurotrope, with a Zacks Rank #2, has a projected third-quarter earnings growth rate of 27.7%.
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