Boston Scientific (BSX) has decided to acquire California based, privately held Asthmatx for an upfront payment of $193.5 million. An additional $250 million is scheduled for payment on achievement of certain milestones till 2019. While the transaction is expected to dilute 2011 and 2012 EPS by 2 cents, it should break even in 2013 and become accretive thereafter. The transaction, subject to clearances, is expected to be completed by the fourth quarter.
Asthmatx is focused on the development of less-invasive, catheter-based bronchial thermoplasty procedure, meant to treat severe persistent asthma patients above 18 years of age who have not benefited from inhaled medications. Its Alair bronchial thermoplasty system has received approval from the US Food and Drug Administration (FDA) in April 2010. This is a less-invasive procedure which has been observed to be safe and effective in managing severe asthma.
Asthma, one of the most common and costly diseases in the world, affects more than 20 million people in the US, according to the Asthma and Allergy Foundation of America. About 10%-15% of asthma patients suffer from severe persistent asthma. Viewing this huge potential, Boston Scientific expects the acquisition of Asthmatx to provide significant contribution to the Endoscopy division going ahead.
Boston Scientific’s Endoscopy division develops and manufactures devices to treat diseases of the digestive and pulmonary systems. During the second quarter of fiscal 2010, this division recorded an 8% year-over-year increase in sales to $265 million. While sales in the domestic market increased $7 million, sales in the international market increased $12 million. Higher sales were primarily due to the US launch of the WallFlex biliary stent system and continued commercialization of the WallFlex esophageal stent.
We currently have a Neutral recommendation on the stock.
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