Purchase of Bayer unit bulks Boston’s peripheral portfolio


Divestment mania continues: today it is Bayer’s turn to slough off a non-core unit. The conglomerate is selling its interventional device business to Boston Scientific in an all-cash deal worth $415m that will net Boston several of Bayer’s Medrad-branded products, including the AngioJet and Jetstream devices Bayer itself obtained through acquisitions.

The interventional unit is one of the smaller businesses within the German company’s medtech operations, with sales of $120m in 2013. Boston’s existing peripheral vascular devices business did $789m-worth of business during 2013, so the future combined unit could bring in nearly $1bn per year for the company.

As for Bayer, it is sticking with its much larger diabetes management and radiology operations. The firm’s total 2013 device sales were estimated at $2bn, according to EvaluateMedTech, so the group is stopping far short of a full exit from medtech.

Bayer says its radiology efforts make it the global leader in contrast-enhanced diagnostic imaging equipment, contrast agents and technologies to oversee dosing of both contrast media and radiation. Its diabetes devices include blood glucose-monitoring systems, lancing devices and diabetes management software. With its $14.2bn purchase of Merck’s over-the-counter products last week, Bayer is obviously happy to remain diversified (Bayer-Merck deal confirms the new normal, May 6, 2014).

History of acquisitions

Boston is shoring up its peripheral intervention business after the devastation wreaked by the failure of Medtronic’s renal denervation device, Symplicity, in late-stage trials. This knocked out the renal denervation programmes that were being pursued by many cardiovascular specialists, including Boston (Decision time for renal denervation firms as Symplicity trial yields little comfort, March 31, 2014).

While Boston has not definitely stated that it has shuttered its renal denervation project, its decision to delay it resulted in a pretax impairment charge of $55m during the first quarter this year.

The Bayer purchase is Boston’s biggest since it bought Vessix Vascular, through which it obtained the ill-fated denervation device, in November 2012. However, while the Vessix deal was worth $425m in total, $300m of this was tied to development and sales milestones, not all of which will now be met.

The company’s prior buy of Cameron Health in June of the same year was a much more successful purchase. With a potential total value of $1.4bn, if this purchase had gone awry it could have cost Boston dearly.

However, the terms of $150m up front and a further $150m on the approval of Cameron’s subcutaneous implanted cardioverter-defibrillator (S-ICD), which arrived a year ahead of schedule in October 2012, mean that the billion or so more is contingent on sales, and should therefore be relatively easy for Boston to pay.

Bayer and Boston expect today's transaction to close by year end, antitrust rules permitting. Boston says it will have no effect on adjusted earnings per share in 2014, and will be accretive by approximately one cent in 2015 and increasingly so thereafter. On a GAAP earnings per share basis, Boston expects the deal to be slightly dilutive in 2014, immaterial in 2015, and accretive afterwards, though less so than on an adjusted EPS basis as a result of acquisition-related net charges and amortisation, which will be determined after closing.

It is to be hoped that Boston’s Bayer buy follows the Cameron rather than the Vessix model.

To contact the writer of this story email Elizabeth Cairns in London at elizabethc@epvantage.com or follow @LizEPVantage on Twitter

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