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Boston Scientific (BSX) Enhances Core Business With Buyout

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Zacks Equity Research
·4 min read
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Boston Scientific Corporation BSX recently inked a deal to acquire Preventice Solutions, Inc. – a company it has invested in since 2015. Notably, Preventice Solutions is a privately-held company offering a complete portfolio of mobile cardiac health solutions and services, comprising ambulatory cardiac monitors, mobile cardiac telemetry and cardiac event monitors.

Notably, the buyout is expected to close by mid-2021, subject to customary closing conditions.

The acquisition is likely to boost Boston Scientific’s core Rhythm and Neuro segment.

Financial Terms of the Deal

Per terms of the agreement, Boston Scientific will acquire Preventice solutions for $925 million in cash plus $300 million, post achievement of certain commercial milestones. Presently, Boston Scientific has a stake of about 22% in Preventice Solutions, which is anticipated to lead to a net payment of around $720 million post completion and up to about $230 million as milestone payment.

The company expects the buyout to prove immaterial in 2021 with respect to its adjusted earnings per share, accretive by at least a penny in 2022 and increasingly accretive thereafter.

Significance of the Acquisition

With the rising prevalence of cardiovascular disease globally, there is an emphasis on the need for early detection and management of individuals with risk of a cardiac event. With the adoption of wearable external cardiac monitor to diagnose heart rhythm problem, Boston Scientific will enable physicians to develop an optimal and personalized treatment plan.

This acquisition will lend Boston Scientific a presence in the thriving ambulatory electrocardiography space that highly complements the company’s recent foray into the implantable cardiac monitor market. This will act as a key component when it comes to the company’s category leadership strategy in cardiac diagnostics and services.

Industry prospects

Per a report by Fortune Business Insights, the global cardiovascular devices market size was valued at $49.90 billion in 2018 and is projected to reach $82.20 billion by 2026,at a CAGR of 6.4%. The rising incidence of cardiovascular diseases coupled with the introduction of advanced technological diagnostics devices for the diagnosis of heart diseases is driving the market.

Another Notable Development

This month, Boston Scientific announced the receipt of the FDA’s approval for its WaveWriter Alpha portfolio of Spinal Cord Stimulator (“SCS”) Systems. The U.S. commercial launch of the SCS Systems is expected to commence during the first half of 2021.

In December 2020, Boston Scientific decided to divest its BTG Speciality Pharmaceuticals business to Stark International Lux S.A.R.L. and SERB SAS for $800 million in cash. From Boston Scientific’s point of view, the divestment will help the company focus on the core Interventional Medicines business, which was originally the primary driver behind the BTG acquisition. This business has delivered strong growth so far and is now expected to exceed Boston Scientific’s original goal of $175 million in synergies.

Price Performance

In past three months, shares of the company have gained 1% compared with the industry’s growth of 7.2%.

Zacks Rank and Key Picks

Currently, Boston Scientific carries a Zacks Rank #4 (Sell).

A few better-ranked stocks from the broader medical space include AdaptHeath Corp. AHCO, Quidel Corporation QDEL and Meridian Bioscience Inc. VIVO, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of Zacks #1 Rank stocks here.

AdaptHealth has a projected long-term earnings growth rate of 720%.

Quidel has a projected long-term earnings growth rate of 25%.

Meridian Bioscience has a projected long-term earnings growth rate of 16%.

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