Dive Brief:
- Merit Medical Systems said Monday it acquired an acid reflux treatment from Endogastric Solutions for $105 million.
- The minimally invasive device, Esophyx Z+, is designed to treat gastroesophageal reflux disease (GERD) by restoring the barrier that stops acid from the stomach entering the esophagus.
- Needham analysts said in a note to investors that the deal “makes sense,” and Merit is paying a “reasonable price.” The analysts added that the financial aspects of the deal are “attractive.”
Dive Insight:
GERD affects around 20% of people in the U.S., making it one of the most commonly diagnosed digestive disorders in the country. Patients develop symptoms such as heartburn because the failure of a barrier in the gastrointestinal tract exposes the esophagus to stomach acids. Lifestyle changes and medicines are first-line treatments, but surgery is considered when those interventions fail to improve outcomes.
Surgeons can create a new valve using a laparoscopic procedure, preventing acid reflux, but the process is associated with complications such as swallowing difficulties. Esophyx Z+ is a noninvasive endoscopic option designed to restore valve integrity without some of the downsides of laparoscopic procedures.
Endogastric first received clearance for a version of the device in 2009 and introduced the Esophyx Z+ iteration of the product in 2017. Merit expects the device to add around $30 million to its annual sales. The product will slot into a portfolio that features other gastrointestinal devices, allowing Merit to use its existing commercial infrastructure to promote Esophyx Z+.
News of the deal comes about one year after Merit made a similar-sized acquisition. In June 2023, the company paid $100 million for a portfolio of dialysis catheter products from Angiodynamics, plus a further $32.5 million for a device from Bluegrass Vascular Technologies. Merit predicted the devices would add $30 million to annual sales.
Some analysts suspected Merit had more deals lined up after it raised money in December. Merit CEO Fred Lampropoulos discussed the company’s thinking about M&A on an earnings call in April.
“It's well known that we have a good cash position. We're in a position [where] we could do things,” Lampropoulos said. “I think we have to be selective. We continue to look, but it has to be consistent with the investments and the things that we've told you that we've committed to investors. It has to fit with the business. It has to align with our sales forces and our long-term objectives.”
Merit set out the long-term objectives when it introduced its “continued growth initiatives” in February. Since then, the company has recalled kits that contained some of the plastic Chinese syringes targeted by the Food and Drug Administration.
