Dive Brief:
- Boston Scientific has agreed to acquire Baylis Medical Company for an upfront payment of $1.75 billion, adding to a growing list of 2021 acquisitions for the medtech.
- Baylis specializes in devices that facilitate access to the left side of the heart, which can be used for procedures like atrial fibrillation ablation, left atrial appendage closure and mitral valve interventions. The deal is expected to close in the first quarter of 2022 and the final amount is subject to closing adjustments.
- Boston Scientific CEO Mike Mahoney in the Wednesday announcement said the target "will add meaningful revenue, operating income, and new research and development capabilities across multiple Boston Scientific businesses, while complementing existing offerings within our electrophysiology and structural heart portfolios." Baylis has achieved double-digit year-over-year sales increases in each of the last five years, and Boston Scientific projects the company to bring in roughly $200 million of net sales in 2022.
Dive Insight:
Boston Scientific has been one of the most active medtechs in a year that's seen near-constant dealmaking. Baylis marks Boston Scientific's fifth deal of 2021 and second deal over $1 billion. The company recently spent $269 million for its remaining stake of Devoro Medical.
In the first half of the year, Boston Scientific spent $1.07 billion for Lumenis' surgical business, $925 million for cardiac monitor maker Preventice Solutions and $295 million for cardiac ablation device maker Farapulse.
The Baylis Medical acquisition does sidestep a bit M&A strategy laid out by Boston Scientific during a July earnings call. CFO Daniel Brennan said the company would prioritize tuck-in deals going forward; however, at nearly $2 billion, Baylis is the largest deal this year.
Before the deal was announced, Boston Scientific had about $2.7 billion of cash on hand as of June 30, according to Brennan.
Boston Scientific is using the deal to build out its electrophysiology and structural heart businesses, which includes the flagship Watchman LAAC device. According to a company presentation, Baylis Medical will add about $1.5 billion to the total addressable market for electrophysiology and structural heart segments, bringing the total addressable market of electrophysiology, LAAC and mitral to about $13 billion by 2024.
SVB Leerink analysts wrote the acquisition will add needed support in electrophysiology and structural heart, two of the highest growth markets within cardiology.
"Overall, we see this Baylis acquisition as a strategic lower-tech move to improve or solidify BSX’s competitive position in both EP — where BSX has been a relative underperformer due to a previously incomplete catheter product portfolio — and LAAC ... and still leaving financial flexibility to continue to pursue technology focused tuck-in acquisitions over the next few years," the analysts wrote.
The analysts added that while the majority of left atrial access procedures are for atrial ablation, Boston Scientific could expand the technology and products from Baylis into LAAC procedures, where Watchman is facing new competition from Abbott Laboratories.
J.P. Morgan analysts wrote that the majority of Baylis's projected 2022 sales are likely to come in the U.S., but Boston Scientific has the opportunity "to use its much larger geographic footprint to globalize the product line, as well as bundle it with Watchman, its upcoming Mitral product lines, and help jumpstart its newer AF ablation catheter launches."
The deal comes as Boston Scientific is managing with the unexpected hit of the delta variant across its businesses. Mahoney said during a recent analyst day that there was an "unprecedented shutdown" of non-emergency care in the third quarter, which will likely cause the medtech to miss its guidance for the quarter.
