Boston Scientific announced on Jan. 21 that it is set to acquire the privately-held Preventice Solutions. The transaction will consist of an upfront cash payment of $925 million and an additional payment of up to $300 million as a potential commercial payment.
The acquisition is expected to close by the middle of this year and to be accretive to the company’s adjusted earnings by $0.01 per share in 2022, with it becoming increasingly accretive after that.
Boston Scientific’s (BSX) senior vice president and president, Rhythm Management, Scott Olson, said, “This acquisition will provide Boston Scientific with a foothold in the high-growth ambulatory electrocardiography space, which strongly complements our recent entrance into the implantable cardiac monitor market and will serve as an important component of our category leadership strategy in cardiac diagnostics and services – a nearly $2B market anticipated to grow double digits annually.”
In response, shares surged 2.4% on Jan. 21. In the past month, the company’s stock price has risen by 7.8%. (See BSX stock analysis on TipRanks)
Boston Scientific has been invested in Preventice since 2015 and currently, has an equity stake of 22%. The company’s equity stake will result in a reduction in the net payment for the transaction to around $720 million upon closing of the acquisition, and a payment milestone of up to $230 million.
Preventice had net sales of $158 million in FY20, up by 30% year-on-year. Preventice’s mobile cardiac health portfolio includes the BodyGuardian range of wearable cardiac monitors for adults and children, long-term and short-term Holter monitors, mobile cardiac telemetry, and cardiac event monitors.
Needham analyst Michael Matson commented about the acquisition, “We believe that the Preventice product portfolio can complement BSX’s current Rhythm & Neuro product portfolio and could potentially help to accelerate the recent launch of its LUX-Dx insertable cardiac monitor (ICM). We believe that Preventice could be a meaningful revenue growth driver for BSX and we estimate that it could add ~30 bps to its organic growth in mid-2022 and beyond; we reiterate our Buy rating.”
Overall, analysts are optimistic about the stock and the consensus is a Strong Buy with 12 analysts suggesting a Buy and one analyst recommending a Hold. The average price target of $42.67 implies a 13.7% upside potential to current levels.
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