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Boston Scientific (BSX) Buys Lumenis to Expand in Urology

Boston Scientific BSX recently went for a major investment in the prospering space of kidney stone management. The company has entered into a definitive agreement with an affiliate of Baring Private Equity Asia (BPEA) to acquire the global surgical business of Lumenis LTD for a deal value of $1.07 billion.

Israel-based Lumenis LTD. is a privately-held company that develops and commercializes energy-based medical solutions.

A Glimpse of the Lumenis Business

The company’s surgical business includes premier laser systems, fibers and accessories used for urology and otolaryngology procedures.

Lumenis’ urology portfolio is based on its proprietary MOSES technology, which has demonstrated differentiated clinical outcomes and efficiency in the management of patients with kidney stones.

Financial Impact and Significance of the Deal

The deal details say that there will be an upfront cash payment of $1.07 billion, subject to closing conditions. Boston Scientific expects to complete the transaction in the second half of 2021, subject to the closing conditions.

The impact of this transaction is expected to remain immaterial to Boston Scientific’s 2021 adjusted earnings per share (EPS), be approximately 2 cents accretive to 2022 adjusted EPS and increase thereafter. On a GAAP basis, due to the amortization expense and acquisition-related net charges, this deal is expected to be dilutive in 2021 earnings and less dilutive or increasingly accretive thereafter.

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In this regard, we note that Lumenis' 2021 net sales are anticipated to be approximately $200 million.

Strategic Significance of the Deal

Post the integration, MOSES laser technology will be paired with Boston Scientific’s LithoVue Single-Use Digital Flexible Ureteroscope and comprehensive kidney stone management portfolio. This integration, per the company, will help enable execution of its stone franchise strategy.

Boston Scientific is highly optimistic about achieving huge synergy benefit within its Urology and Pelvic Health business from the addition of Lumenis laser portfolio, employees and surgical laser center of excellence.

The company expects the acquisition to expand its global footprint throughout Europe and Asia and accelerate the delivery of its already strong stone management product lines worldwide. Apart from top-line growth, it is also expected to contribute to Boston Scientific’s margins.

Prospering Kidney Stone Management Market

Data provided by Boston Scientific shows that globally, more than one in 10 adults develop kidney stones each year. In fact, up to 50% of these patients develop a repeat stone within five years of the first occurrence.

For complex or larger stones, external intervention is needed to remove them from the urinary tract. Laser lithotripsy is a leading modality for minimally-invasive surgery of kidney and urinary stones, whether through flexible ureteroscopy or percutaneous nephrolithotomy.

For this, the MOSES laser technology in combination with Boston Scientific’s LithoVue Single-Use Digital Flexible Ureteroscope is expected to work efficiently.

BSX Urology and Pelvic Health Grows Amid COVID-19 Woes

Due to the ‘essential’ nature of the business, within urology and pelvic health, sales from the company’s stone franchise and SpaceOAR products have shown better resilience through the pandemic months. In the just-reported fourth quarter of 2020, Urology, Pelvic Health sales grew 1% organically, normalizing for the intrauterine health divestiture. Sequential improvement was led by the company’s stone and prostate health franchises backed by strong performance of LithoVue, Resume and SpaceOAR.

Share Price Movement

Over the past six months, Boston Scientific has underperformed the industry it belongs to. The stock declined 6.4% against the industry’s 12.4% rise.

Zacks Rank and Key Picks

Currently, Boston Scientific carries a Zacks Rank #4 (Sell).

A few better-ranked stocks from the broader medical space are Envista Holding Corporation NVST, Owens & Minor, Inc. OMI and Meridian Biosciences Inc. VIVO, each carrying a Zacks Rank #1 (Strong Buy). You can see the complete list of Zacks #1 Rank stocks here.

Envista has a projected long-term earnings growth rate of 24%.

Owens & Minor has a projected long-term earnings growth rate 61%.

Meridian Biosciences has an estimated long-term earnings growth rate of 49%.

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