SunMed soaks up Avanos' respiratory health business for $110M

Just a few months after expanding its respiratory and anesthesia device portfolio by purchasing some of Vyaire Medical’s hardware, medtech manufacturer SunMed is shining its light on yet another acquisition target.

This time around, the clouds have parted for Avanos Medical, which has agreed to sell off its respiratory health business to SunMed. The segment includes the Ballard, Microcuff and Endoclear brands of closed-suction catheters, endotracheal tubes and other devices used to help prevent ventilator-associated events, or VAE, such as sepsis, pneumonia and pulmonary embolism.

Last year, Avanos' respiratory device department brought in just under $136 million in net sales, down nearly 14% from the previous year, according to the company's full-year earnings report. That made it the smallest of Avanos’ segments, which include the respiratory health and digestive health businesses within the chronic care division, and the acute pain and interventional pain businesses within the pain management division.

In a Thursday filing (PDF) with the U.S. Securities and Exchange Commission, Avanos said SunMed’s total purchase price will weigh in at $110 million.

The acquisition is expected to close sometime in the fourth quarter of this year, Avanos said in the filing. It’ll hand over to SunMed not only all of the inventory and both fixed and intangible assets associated with the respiratory health business but also the long-term leases for two of its manufacturing facilities in Mexico.

Additionally, for up to three years after the buyout closes, Avanos will offer “various transitional services” to SunMed as needed. Those services could include product manufacturing and distribution, invoicing, regulatory support and more, according to the filing.

SunMed CEO Hank Struik said in a company announcement that adding Avanos’ devices to its portfolio will make SunMed “the premier manufacturer” of high-quality anesthesia and respiratory consumables.

“These products are the standard bearers of closed-suction and endotracheal consumables, and we deeply admire the clinical results that these exceptional products provide for patients in critical care and the trust they have built with practitioners,” he said. “Leveraging the expertise behind these successful brands, this transaction also supports our ability to drive growth and innovation, not just for the respiratory brands we are acquiring, but for our comprehensive breathing care platform.”

Avanos, meanwhile, is counting on the sale to “meaningfully transform” its financial profile by allowing the company to double down on its “higher-margin and higher-growth markets,” CEO Joe Woody said in Avanos’ announcement. That’ll include prioritizing its remaining digestive health and pain management offerings, while also looking for “future M&A opportunities” within those areas, per Woody.