During the continued wave of life science M&A, companies are seeking to focus on core competencies. Once again, this trend has resulted in Boston Scientific ($BSX) snatching the medical device assets of a pharma company, this time from Endo International ($ENDP).
Last year, Boston Scientific snagged Bayer's devices to treat peripheral vascular disease for $415 million. Today it announced an agreement to acquire a good chunk of Endo's American Medical Systems (AMS) device unit for $1.6 billion. The transaction is expected to close in the third quarter of this year.
Crucially, it won't include Endo's women's health devices, such as transvaginal mesh. The mesh (including Boston Scientific's) turned out to have dangerous side effects. Endo agreed to set aside about $1.6 billion to resolve the claims related to its vaginal mesh implants, while Boston Scientific was hammered last year by unfavorable verdicts resulting in payouts as high as $26.7 million.
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| AMS 700 Inflatable Penile Prosthesis--Courtesy of Endo |
Instead, the new devices in the Boston Scientific portfolio will be in the men's health and prostate health arena. Specifically, they include the GreenLight Laser Therapy Systems for benign prostatic hyperplasia (known as BPH), the AMS 800 Urinary Control System for stress urinary incontinence, and the AMS 700 Inflatable Penile Prosthesis for erectile dysfunction. AMS is the market leader in treating all three segments.
The to-be-acquired unit had sales of about $400 million last year and operating income of about $60 million. It will give Boston Scientific a market-leading or co-leading position in 5 therapeutic categories in urology (the three aforementioned ones plus kidney stones and pelvic floor disorders), the company said during a conference call with investors.
Meanwhile, Boston Scientific's urology and women's health device unit produced $500 million in revenue last year.
Boston Scientific CEO Mike Mahoney said in a statement that the deal will "create a business with nearly $1 billion in annual sales and enable significant synergies and strong future growth prospects through portfolio innovation and international market expansion. We look forward to serving customers and impacting patient care in ways that could not be realized by either company alone." Cost savings are expected to exceed $50 million by the end of 2018.
For Endo, the deal marks its shift to the pharma world. The sale represents a loss on its $2.9 billion acquisition of AMS about three years ago. Most of what remains with Endo on the women's health side is tarred by lawsuits and safety concerns.
"The divestiture of AMS marks the continued execution of our business strategy and furthers the transformation of Endo into a leading global specialty pharmaceutical company," said company CEO Rajiv De Silva in a statement.
The announcement comes on the heels of a $600 million settlement with Johnson & Johnson ($JNJ) over a dispute related to Boston Scientific's disastrous acquisition of cardiology player Guidant. J&J had originally requested $7.2 billion.
- read the release