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BSX to Acquire Cameron Health

Zacks Equity Research

In an attempt to strengthen its Cardiac Rhythm Management (“CRM”) business, Boston Scientific Corporation (BSX) is on its way to acquire privately held, California based Cameron Health for an upfront payment of $150 million. This deal will provide the company with a novel defibrillator, the S-ICD system, the world’s first and only commercially available subcutaneous implantable cardioverter defibrillator (“ICD”).  

The S-ICD system scores over traditional ICDs with respect to placement as the former can be placed beneath the skin and leaves the heart and blood vessels untouched. The traditional ICDs, on the other hand, require thin, insulated wires (leads) to pass through the venous system and into the heart. According to Kenneth A. Ellenbogen, Professor of Medicine and Director of the Electrophysiology Laboratory at the Medical College of Virginia, the S-ICD system should become first-line therapy for patients who may benefit from not having a lead in the heart.

The S-ICD system received CE Mark approval in 2009 although the device has yet to be approved in the US. With an expedited review status, Cameron Health submitted its PMA application to the US Food and Drug Administration (:FDA) in December 2011. Boston Scientific anticipates FDA approval for the S-ICD System in the first half of 2013.

Besides upfront payment, another potential $150 million would be paid to Cameron Health upon FDA approval of the S-ICD System. Over the 6-year period, following FDA approval of the device, an additional $1.050 billion of potential payments would be made contingent upon achievement of certain revenue-based milestones.

Boston Scientific will fund these payments through the cash flow of its business. The company’s cash flow balance has been quite buoyant and adjusted free cash flow for the latest fiscal came in at $1.27 billion. The transaction, likely to be completed in the second or third quarter of the current fiscal, would dilute 2012 bottom line (on an adjusted basis) by a penny and almost break-even in 2013.


The challenges at Boston Scientific’s core segments consisting of stents and defibrillators do not show any sign of near-term abatement. The company continues to experience pricing pressure in the US and Europe. Additional challenges are softness in procedural volume due to economic uncertainties and competitive product launches. This scenario has affected other players in the MedTech sector as well, such as Medtronic (MDT) and St Jude Medical (STJ).

Despite the various headwinds currently at play, product launches made in the recent past should provide some cushion to its top line. Several other products are slated for launch over the year, which should benefit the top line.

We have a Neutral recommendation for Boston Scientific. The stock retains a Zacks #3 Rank (“Hold”) in the short term.

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