UPDATE: June 12, 2019: Boston Scientific announced Tuesday it closed the acquisition of Vertiflex for $465 million in cash, with additional payments possible based on milestones over the next three years.
Dive Brief:
- Boston Scientific announced Thursday it will pay $465 million to acquire the Carlsbad, California company Vertiflex, which has marketed a minimally invasive device to treat patients with moderate degenerative lumbar spinal stenosis since 2015. Additional payments are possible in the next three years based on commercial milestones.
- Vertiflex's Superion Indirect Decompression System is designed to create space between spinous processes of the vertebrae, reducing pressure on nerves and alleviating pain. The procedure is intended for patients who have not responded to oral pain medication or steroid injections, but whose symptoms are not severe enough to warrant spinal fusion or laminectomy.
- Boston Scientific expects the device to generate $60 million in sales in 2019, a potential bump to its neuromodulation business, which had revenues of $779 million in 2018.
Dive Insight:
The Vertiflex deal is the first for Boston Scientific since its late 2018 buyout of structural heart addition Millipede, its tenth acquisition last year.
Privately-held Vertiflex gained premarket approval for the Superion system in 2015. The device targets aging populations with lumbar spinal stenosis, a common cause of lower back pain, especially in people over age 60. The condition involves gradual narrowing of the spinal canal, which compresses nerves through the back into the legs, leading to pain and cramping.
The marketing authorization was backed by data from a 400-patient, two-year trial. In a post-approval follow-up of 80 patients, Boston Scientific said at least 80% of patients reported improvement in their leg pain and overall physical function. Vertiflex has since published data indicating an 85% decrease in opioid use among Superion patients five years after treatment.
The Superion system will add to Boston Scientific's neuromodulation unit, which currently houses the company's deep brain stimulation systems, spinal cord stimulators and radiofrequency ablation systems.
Although that unit grew more than 12% in the first quarter, CEO Mike Mahoney said the company believes demand for spinal cord stimulators stands to increase. "We do feel like the market was a bit lighter in first quarter than we anticipated," he told investors on the earnings call. "But overall we see that as a strong growth market going forward and we continue to take share."
Across the company, though, Boston Scientific's sales missed analyst expectations in the first quarter. Management attributed weakness to short-term events like the market removal of certain surgical mesh products, supply chain disruptions to certain men's health products, and FDA's warning regarding potential safety issues with paclitaxel-eluting stents. The company was more focused in the first quarter on integrating 2018's many acquisitions, like men's health additions NxThera and Augmenix and TAVR enhancement Claret than on acquiring new targets, Mahoney said.
The Vertiflex transaction is expected to be immaterial to adjusted EPS in 2019 and 2020, Boston Scientific said.
The company's largest acquisition during 2018 — the $4.2 billion buyout of U.K. oncology and vascular technology manufacturer BTG — is expected to close in June or July, executives said on the most recent earnings call. The deal faced a slowdown from the FTC in February over anti-competitive concerns related to the two companies' embolization beads businesses.
Boston Scientific has received a number of key FDA approvals in recent weeks, gaining marketing authorization for its Vici stent to treat iliofemoral venous obstructive disease, a device it acquired through its August 2018 buyout of Veniti, and for its transcatheter aortic valve replacement device, Lotus Edge.
