Boston Scientific makes $4.2B offer to buy BTG and build out its oncology, vascular franchises

Boston Scientific HQ
Boston Scientific has been eyeing BTG and its complementary portfolio for a the tuck-in acquisition for at least two years, according to CEO Mike Mahoney, who described the hand-in-glove fit in a conference call with investors. (Boston Scientific)

Boston Scientific has reached a deal to absorb BTG for $4.2 billion in cash, acquiring a pipeline that could transform its oncology franchise from one primarily offering delivery tools into a $500 million interventional cancer therapy business.

The medtech giant also expects the move to add more than $400 million in revenue to its peripheral intervention segments, plus synergies between the two companies’ operations amounting to over $175 million over the next three years.

BTG counts 1,600 employees across three main businesses—including cancer and vascular interventions, and a portfolio of specialty antidotes for snake bites and drug overdoses—will give Boston Scientific the opportunity to expand into new therapies down the line, including radiotherapies under development for lung and breast cancer, as well as venous interventions for pulmonary embolism.

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“BTG’s unique interventional medicine products are a perfect complement to our current portfolio and provide entry into over a billion dollars of new attractive peripheral segments in which BSX does not currently compete,” Jeff Mirviss, president of Boston Scientific’s peripheral interventions division, said on a conference call with investors.

In addition, although it is based in London, 90% of BTG’s revenues come from the U.S., with only 10% arriving internationally. Boston Scientific, which makes about 43% of its money overseas, sees this as an opportunity to pull BTG’s established products up through its global marketing and commercialization teams and into new markets.

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The transaction has been unanimously approved by the boards of directors of Boston Scientific and BTG, and is expected to close in the first half of next year through an English court-sanctioned scheme of arrangement. BTG’s three largest shareholders, covering about a third of the company’s outstanding shares, have already committed to vote in favor of the deal.

“We are confident that the addition of these therapies to our portfolio will ultimately advance patient care in ways that could not be realized by either company alone, while also allowing us to realize substantial revenue and cost synergies and provide a strong return for investors,” said Boston Scientific CEO Mike Mahoney, who expects to see a 7% to 8% return on invested capital by the third year, and 9% to 10% return by the fifth.

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BTG’s interventional medicine offerings include the TheraSphere Y-90 radiotherapy and the Galil cryoablation system, used to treat patients with liver, kidney and other cancers. Those will slot in beside Boston Scientific’s products for prostate, colorectal, stomach and esophageal cancers, as well as its coil, micro-catheter and guidewire offerings.

TheraSphere, consisting of glass microspheres that deliver high doses of localized radiation, is also in early-stage development in lung and breast cancer, as well as bone metastases.

BTG’s portfolio also includes the EKOS vascular system, which helps break down blood clots in patients with pulmonary embolisms, deep vein thrombosis and peripheral arterial occlusions by using acoustic pulses in combination with clot-dissolving drugs. EKOS was the first device treatment cleared by the FDA for pulmonary embolism, according to Boston Scientific. It also includes a bioconvertible vena cava filter, the Sentry, which is just starting to be launched in the U.S.

BTG also collects royalties on the prostate cancer drug Zytiga, marketed by Johnson & Johnson, although those revenues are expected to decline due to patent expirations and new generic options.

Both Boston Scientific and investment analysts compared its BTG proposal to its $1.6 billion purchase of Endo's men's health device unit, American Medical Systems, from three years ago.

AMS' revenues were also split 90/10 domestically and internationally, Boston Scientific said, which gave it the potential to spread overseas.

"In many ways we think it could be as transformative as the 2015 AMS acquisition, which moved BSX into men's health and urology and has been a source of considerable growth since," Jefferies analysts said in a note to investors, describing BTG's interventional medicine and oncology portfolios as the "hidden gem" in the deal.

However, they described its non-core pharma and licensing holdings as having little strategic value for Boston Scientific in the long-run, with BTG's CroFab snake bite antivenom facing increasing competition since being approved in 2000. 

Editor's note: This story was updated with perspective from Jefferies analysts.

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