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Boston Scientific (BSX) Eyeing Remaining 73% Farapulse Stake

Shares of Boston Scientific Corporation BSX rallied nearly 1% on Friday’s close after news of the company exploring options to purchase the remaining shares of Farapulse surfaced. With the latest development, Boston Scientific aims to strengthen its position in the Electrophysiology space on a global scale.

Farapulse, Inc, a privately-held company, is developing a FARAPULSE pulsed field ablation (PFA) system which is a non-thermal ablation system for the treatment of atrial fibrillation (AF) and other cardiac arrhythmias. In the first quarter of 2021, Farapulse became the first company to commercialize a cardiac PFA technology following the CE Mark approval for the FARAPULSE PFA System.

More on FARAPULSE Platform

The FARAPULSE platform, which is an investigational device in the United States, uses an ablation method based on pulsed electric fields (also known as irreversible electroporation) to regularize the electrical signals and prevent AF. The company also initiated its pivotal IDE trial in the United States — the ADVENT trial — in March 2021.

Financial Terms of the Deal

Boston Scientific has been actively investing in Farapulse since 2014 and currently holds an equity stake of roughly 27%. The current transaction consists of an upfront payment of $295 million for the remaining 73% stake and up to an additional $92 million as certain clinical and regulatory milestone-based payments, along with additional revenue-based payments over the next three years.

Zacks Investment Research
Zacks Investment Research

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According to the company, considering all the preceding transactions (including current equity ownership, debt and other closing adjustments) the total deal valuecomes to $450 million up front and an additional up to $125 million milestone-based payments through calendar-year 2023.

Strategic Significance

AF is a common heart rhythm disorder affecting more than 33 million people worldwide. These patients are often treated with anti-arrhythmic drugs as well as cardiac ablation therapy.

However, the Farapulse platform via the PFA system enables physicians to only ablate the required tissue and spare the nearby tissues from unintentional ablation. The PFA system creates a therapeutic electric field instead of using thermal energy sources such as radiofrequency ablation or cryoablation.

At present, the electrophysiology market, which is valued more than $6 billion, is expanding fast, growing in double digits year over year. Boston Scientific claims that adding FARAPULSE PFA system to its existing portfolio has enabled it to be the only company to offer comprehensive therapeutic options based on clinical preference and patient needs.

Financial Significance of the Deal

On an adjusted basis, the transaction is expected to be slightly dilutive to adjusted earnings per share (EPS) in 2021 and 2022, which Boston Scientific expects to offset via internal cost efficiencies and trade-offs. The transaction is anticipated to close in the third quarter of 2021, subject to customary closing conditions.

Industry Prospects

Per a report by ReportLinker, the global cardiac ablation market is projected to grow from $1,633.8 million in 2019 to $3,482.39 million by the end of 2025, witnessing a CAGR of 13.4%. Rising cases of cardiovascular disease, growing demand for minimally-invasive technology and higher awareness for effective treatment alternatives are anticipated to drive this market expansion.

Given the market potential, Boston Scientific’s investment in the PFA technology will significantly boost its Electrophysiology business.

Scenario within Electrophysiology Arm

In first-quarter 2021, Boston Scientific’s Electrophysiology sales were up 8% year over year. POLARx, the company’s second-generation single-shot cryo catheter, is off to a strong start in Europe and is yielding robust market share in the continent. STABLEPOINT, the company’s force-sensing therapeutic catheter with DiresctSense, is also gaining traction is Japan and Europe, and has begun enrollment in its U.S. IDE trial called Newton-AF.

Share Price Performance

The stock has outperformed its industry over the past year. It has risen 27.3% compared with the industry’s 20% growth.

Zacks Rank and Key Picks

Currently, Boston Scientific carries a Zacks Rank #3 (Hold).

Better-ranked stocks from the broader medical space include PetIQ, Inc. PETQ, National Vision Holdings, Inc. EYE and Envista Holdings Corporation NVST.

PetIQ, currently sporting a Zacks Rank #1 (Strong Buy), has a long-term earnings growth rate of 25%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

National Vision Holdings, which also flaunts a Zacks Rank of 1 at present, has a long-term earnings growth rate of 23%.

Envista Holdings, currently carrying a Zacks Rank # 2 (Buy), has a long-term earnings growth rate of 26.40%.

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