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Butterfly Floating Into Public Scene

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·3 min read
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- By Barry Cohen

A firm named by FierceBiotech as one of the top merger and acquisition targets in medtech is going public via a special purpose acquisition company. Butterfly Network will become a wholly-owned subsidiary of Longview Acquisition Corp.(NYSE:LGVW), which is backed by Glenview Capital Management.

In mid-2020, Longview itself went public in a $300 million initial offering. The Butterfly deal is expected to close in the first quarter of the year, after which Longview will be renamed Butterfly Network Inc. and start trading on the New York Stock Exchange under the ticker "BFLY." Glenview, meanwhile, is set to control 7.6% of the future company's outstanding stock. The company said it considered at least 50 targets before choosing Butterfly.

Butterfly's key product is a point-of-care iQ device that has been approved in the U.S. for scanning multiple parts of the bodies of children and adults, including the heart, abdomen, blood vessels and lungs, such as to monitor pneumonia in patients with Covid-19.

The $2,000 system is also used in lower economic areas of the world to do diagnostic imaging. The handheld transducer plugs into a smartphone or tablet and can be used just about anywhere. It is employed by more than 300,000 health care professionals, according to the company.

Butterfly's system is being used at more than 30 Atrium Health locations, including the health system's Covid-19 testing centers, emergency departments, intensive care units and Sanger Heart & Vascular Institute.

"For decades, the mental image of a doctor has been someone with a stethoscope around their neck," Rasu Shrestha, Atrium's chief strategy and transformation officer, told FierceBiotech. "Going forward, this revolutionary portable ultrasound device may be just as critical for the medical professional. Our teams are already using it to provide care for heart patients, and we anticipate this device ushering in a new era of frontline care."

The only current public company to make the medtech target list is TransEnterix Inc. (TRXC), the Morrisville, North Carolina-based robotic surgery producer.

Less than a year ago, TransEnterix received a fast Food and Drug Administration approval for its machine vision system, which acts as an artificial intelligence-powered surgeon's assistant.

The company's guidance technology could be a nice addition to companies developing robotic surgery systems and in combination with TransEnterix's established Senhance digital laparoscopic platform for minimally invasive procedures

The opportunity is substantial. TransEnterix estimates robotic technologies are used in only about 25% of open surgeries in the U.S. and Europe. And in the larger field of laparoscopic surgery, usage is even lower.

It is expected that robotic surgeries will grow into a $16 billion market in 2023, up from about $3.7 billion just two years ago.

At just under $3, TransEnterix shares are light years away from the $75 it traded for in August 2018. If there's any bright spot, it's that the stock is up nearly 400% since December. Analysts' consensus is TransEnterix is a hold.

Medtech M&A is expected to pick up this year after a sluggish 2020, when activity was stifled by the impact of the coronavirus on elective surgeries, routine checkups and health screenings.

Raj Denhoy, managing director and an equity research analyst at Jefferies, thinks the leading medtech companies are eager to deal. He told FierceBiotech that dealmaking has been "part of the DNA space for a long time," but that companies are no longer looking for acquisitions for scale, but at those firms that can bring innovative products and technologies.

Disclosure: The author has no position in any of the companies mentioned in this article.

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This article first appeared on GuruFocus.