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Surmodics (SRDX) Boosts Portfolio With Vetex Medical Buyout

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  • SRDX

Surmodics, Inc. SRDX recently acquired Galway, Ireland-based, privately held Vetex Medical Limited — a medical device developer and manufacturer specifically focused on venous clot removal solutions. Per the deal, Surmodics acquired Vetex for an amount of $39.9 million, with an agreement of additional payments of up to $7 million, of which $3.5 million are guaranteed, subject to completion of certain product development and regulatory milestones.

This buyout is likely to provide a boost to Surmodics’ product portfolio, while diversifying its revenues and expanding customer base.

Financial Details of the Transaction

The buyout will be dilutive on a GAAP and adjusted basis on Surmodics’ business in fiscal 2021 and is projected to be accretive on an adjusted basis, excluding acquired intangible asset amortization expense, starting from the second half of fiscal 2023. For fiscal 2021, the company estimates buyout-related costs and acquired intangible asset amortization expense to range between 10 cents and 12 cents per share. The company intends to release updated fiscal 2021 guidance, including the impact from the Vetex buyout, during its third-quarter earnings announcement.

Significance of the Buyout

The buyout will enable Surmodics to broaden its thrombectomy with a second FDA 510(k) cleared device — the ReVene Thrombectomy Catheter.

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Per management, the buyout underscores Surmodics’ commitment toward the expansion of its thrombectomy platform to eliminate thrombus in venous vascular beds through an innovative technology, which provides substantial improvement over current therapies.

On the back of two ground-breaking, FDA-cleared mechanical thrombectomy devices, the company now holds a strong position when it comes to the treatment of both arterial and venous thrombosis. The deal integrates the strength of the Vetex technology and its capable team with the abilities of Surmodics’ Pounce thrombectomy technology, which will allow the latter to advance its thrombectomy platform development for the treatment of pulmonary embolism in the future.

Notably, the company anticipates beginning clinical evaluation work for the Pounce Arterial Thrombus Retrieval System to get rid of clot in peripheral arteries in the second half of fiscal 2021 and for the ReVene Thrombectomy Catheter to remove clot from veins in fiscal 2022. In fact, an estimated timeline for further commercialization will be announced later this fiscal year.

Market Prospects

Per a report by Allied Market Research, the global thrombectomy devices market was worth $982 million in 2016 and is anticipated to reach $1.39 billion by 2022, witnessing a CAGR of 5.9% during the forecast period (2016-2022). Hence, the acquisition is well-timed for Surmodics.

Recent Developments

In April, Surmodics announced the successful first uses with patients for two devices within its Sublime Radial Access Platform — the Sublime Radial Access Guide Sheath and Sublime Radial Access .014 RX PTA Dilatation Catheter.

Also, the company’s product sales improved 0.8% on a year-over-year basis in its fiscal second-quarter 2021 results, while sales in its In Vitro Diagnostics segment recorded a 9% growth from the prior-year quarter.

Price Performance

Shares of the Zacks Rank #3 (Hold) company have gained 27.6% in a year’s time, compared with the industry’s growth of 18.2%.

Key Picks

Some better-ranked stocks from the broader medical space are Veeva Systems Inc. VEEV, Envista Holdings Corporation NVST and Baxter International Inc. BAX, each currently carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Veeva Systems’ long-term earnings growth rate is estimated at 15.8%.

Envista Holdings’ long-term earnings growth rate is estimated at 26.4%.

Baxter International’s long-term earnings growth rate is projected at 9.3%.

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