Varian Medical Systems, Inc. VAR recently announced an asset purchase agreement to acquire Boston Scientific’s BSX portfolio of drug-loadable microsphere and bland embolic bead products for $90 million. This will strengthen Varian’s interventional oncology segment.
Following the announcement, shares of the Zacks Rank #3 (Hold) company inched up 0.01% to $139.79 at close.
How Does Varian Stand to Gain?
Expected to close around August, this transaction is likely to remain neutral to Varian’s fiscal 2019 results, but accretive to both reported and adjusted earnings per share in fiscal 2020.
For investors’ notice, Boston Scientific’s embolization products like Embozene Microspheres, Fathom Steerable Guidewires and Renegrade HI-FLO Microcatheter Kits have been witnessing solid demand. Notably, Varian will gain from these products’ regulatory clearances in more than 35 countries.
Per management at Varian, these products complement its largest business segment — interventional oncology.
In the last reported quarter, the company’s largest business segment contributed 95.8% to net quarterly sales. Some of the noteworthy platforms in the Oncology segment are 360 Oncology, Eclipse for Proton and Eclipse Treatment planning system, which are currently much in demand.
It is encouraging to note that this buyout, in combination with the recent acquisitions of Endocare and Alicon, will boost Varian's oncology portfolio. (Read More: Varian Medical Buys Endocare & Alicon to Boost Cancer Care)
Of late, Varian Medical has been focusing on inorganic expansion through buyouts.
In May, the company entered into a definitive agreement to acquire Cancer Treatment Services International for $283 million. The takeover is expected to boost Varian Medical’s core Oncology Systems business. (Read More: Varian Medical's CTSI Buyout to Boost Oncology Services Unit)
Moreover, Varian Medical extended its Oncology portfolio with the acquisition of humediQ, the manufacturer of IDENTIFY, a surface-guided radiation therapy positioning and motion management system. By 2023, management at Varian Medical sees a $120-million market opportunity from the buyout.
Over the past year, the stock has rallied 22.8% compared with the industry’s 7.4% rally. The current level also compares favorably with the S&P 500 index’s 8.1% rally.
A few better-ranked stocks in the broader medical space are DENTSPLY SIRONA XRAY and Penumbra PEN, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
DENTSPLY’s long-term earnings growth rate is expected to be 11.5%.
Penumbra’s long-term earnings growth rate is projected at 21.5%.
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