While other large med-tech companies are slimming their portfolios, Boston Scientific Corp. plans to beef its up considerably with the acquisition of Apollo Endosurgery Inc. for $10 per share for the 41.7 million shares outstanding. Including the debt assumed, the all-cash deal has an enterprise value of $615 million. The $10 per share price represents a 67% premium to yesterday’s $6 close for Apollo shares. The companies expect the transaction to close in the first half of 2023.
The U.S. FDA granted de novo clearance to the Apollo ESG, ESG Sx, Revise and Revise Sx systems in July, making them the first devices to receive FDA authorization for endoscopic sleeve gastroplasty and endoscopic bariatric revision procedures. The Austin, Texas-based company also offers the Orbera intragastric balloon for weight management as well as the Overstitch and Overstitch Sx endoscopic suturing systems and X-Tack Endoscopic Helix tacking system.
"Endoluminal surgery is an emerging field and a core focus for our Endoscopy business," said Mike Jones, senior vice president and president, Endoscopy, Boston Scientific. "We intend to expand our global capabilities in ELS with the differentiated innovation that Apollo Endosurgery offers, and we will continue to focus on procedural adoption as well as professional education in this exciting space. This acquisition also enables us to enter a new adjacency – the endobariatric market – and deliver strong, continued growth across our business."
Endoluminal procedures offer patients with gastrointestinal disorders and defects or morbid obesity a less-invasive option for treatment than open or laparoscopic surgery, along with reduced risk of infection and other complications.
Apollo is expected to ring up $76 million in net sales in 2022 and the sale price represents a multiple of more than 8, noted BTIG Analyst Marie Thibault. “While we are surprised at the premium paid for this acquisition, we expect these systems to complement BSX's existing Endoscopy portfolio.”
“We note that this is the second acquisition in the bariatric space in recent months,” said Thibault. “Teleflex announced the purchase of Standard Bariatrics in August for $170 million in upfront cash at closing, with potential for up to another $130 million based on commercial milestones.”
Boston Scientific does not expect the transaction to have a material impact on adjusted earnings per share in 2023, though it should be accretive in subsequent years. The consensus forecast for Apollo anticipates revenue growth of about 20% annually through 2024, bringing its contribution to the Marlborough, Mass.-based company to about $107 in two years, said Richard Newitter of Truist Securities.
Investors responded somewhat positively to the news, pushing up Boston Scientific shares, which closed at $43.81 on Monday, as high as $44.44 in Tuesday morning trading.