Dive Brief:
- Boston Scientific has agreed to acquire Austin, Tex.-based Apollo Endosurgery for $615 million, the companies said on Tuesday.
- The offer of $10 per share is 67% higher than the stock’s closing price on Monday.
- The acquisition may complement Boston Scientific’s endoscopy business as it targets GI endoscopists, while allowing the company to enter the endobariatric market, said J.P. Morgan analyst Robbie Marcus.
Dive Insight:
Apollo makes devices for endoluminal surgery (ELS), a type of minimally invasive surgery that is performed using an endoscope through the GI tract, minimizing external incisions. The company received clearance from the Food and Drug Administration in July for its Apollo ESG system for endoscopic sleeve gastroplasty, and for its REVISE system for endoscopic bariatric revision procedures.
"Endoluminal surgery is an emerging field and a core focus for our Endoscopy business," Mike Jones, Boston Scientific’s president of endoscopy, said in a news release. He added that the deal would enable the company to enter the endobariatric market and grow its business.
Boston Scientific plans to fund the purchase using a combination of cash on hand and available credit, BTIG analyst Marie Thibault wrote in a research note. The deal is expected to be immaterial to Boston Scientific’s earnings per share in 2023, and accretive thereafter. Boston is the 12th-largest medtech firm in the world by revenue, with sales last year of $11.9 billion.
Apollo expects 2022 revenue of $76 million, almost an eighth of its $615 million price tag.
“While we are surprised at the premium paid for this acquisition, we expect these systems to complement BSX's existing Endoscopy portfolio,” Thibault wrote.
The purchase is expected to close in the first half of 2023. It’s one of a few recent acquisitions announced in recent months, including J&J’s planned $16.6 billion purchase of Abiomed, after a slow period for medtech M&A.
“It’s interesting to see two recent MedTech M&A deals struck at 52-week highs,” J.P. Morgan’s Marcus wrote. “We don’t want to make too much of this, but as management teams from both sides of the table sit down to negotiate, this might be the outcome investors see going forward as cash-rich large caps look to supplement growth and technology.”
Shares of Boston Scientific gained about 1% to $44.15 in mid-morning trading on Tuesday.
