JPM24: Boston Scientific picks up Medtronic’s urology neuromod rival Axonics for $3.7B

Boston Scientific is growing its urology portfolio with a $3.7 billion deal to acquire Axonics, makers of neurostimulation therapies for urinary and fecal incontinence.

Currently a chief competitor in the space with Medtronic, Axonics offers both rechargeable and recharge-free sacral implants with battery lives rated from at least 10 to over 20 years. It obtained an FDA approval for its fourth-generation rechargeable device in January 2023.

The transaction shakes out to $71 in cash per share, more than 20% over Axonics’ trading price the Friday before the deal was announced on January 8, during the first day of the J.P. Morgan Healthcare Conference in San Francisco. Minus Axonics’ cash and equivalent holdings of about $300 million, the total enterprise value comes to about $3.4 billion.

“This acquisition also enables our entry into sacral neuromodulation, a high-growth adjacency with opportunities to expand access to care for patients,” Meghan Scanlon, president of urology at Boston Scientific, said in a statement. The companies expect to close the deal in the first half of this year, with the 10-year-old Axonics and its about 800 employees to become a wholly owned subsidiary.

Boston Scientific calls sacral nerve neuromodulation as an “underpenetrated opportunity” in the U.S.—while Axonics has described it as “historically a ‘secret’ therapy due to incumbent’s monopoly and lack of investment in patient awareness”—with a market size estimated at $800 million in 2022 that is expected to double to $1.6 billion by 2028.

Medtronic, meanwhile, has put forward its InterStim family of long-lasting implants, and has also been developing tibial nerve neuromodulation therapy for overactive bladder.

Boston Scientific’s acquisition also includes Axonics’ Bulkamid—an FDA-approved, hydrogel-based urethral bulking injection for treating female stress urinary incontinence, a condition estimated to affect 28 million people—which it picked up through a $200 million deal in early 2021.

In an early peek at its 2023 earnings report, the California-based Axonics said it expects full-year earnings to top $366 million, including more than $291 million in sacral neuromodulation revenue and over $74 million from Bulkamid—the latter up 44% over the prior year. Fourth-quarter sales, meanwhile, are expected to land just above $109 million.

“Revenue grew 27% in 4Q23 and 34% in FY23, driven by higher utilization and share of wallet at existing customers and the onboarding of new accounts,” Axonics CEO Raymond Cohen said in a statement. “In 2023, our team is humbled and gratified that clinicians used Axonics therapies to treat approximately 100,000 incontinence patients globally.”

Axonics had been scheduled to make an investor presentation Monday during the J.P. Morgan conference but backed out after announcing the deal. Boston Scientific has slated its fourth-quarter earnings release for January 31.