) inked a definitive agreement to acquire the outstanding capital
stock of privately-owned Vortex Medical Inc. for $15 million in
cash. The acquisition is expected to close in October 2012.
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Norwell, Massachusetts-based Vortex is a provider of medical
devices related to vascular occlusion diagnosis and treatment.
Vortex markets the patented AngioVac system which includes the
AngioVac Cannula and Circuit. The U.S. Food and Drug Administration
(FDA) have cleared this AngioVac Cannula and Circuit which is
awaiting European CE Mark approval. The system has the potential to
become the gold standard of care for the treatment of vascular
Terms of the Agreement
Besides a cash payment of $15 million, AngioDynamics will make
earn- out payments in cash, over a 10 year period. Per the
agreement, AngioDynamics will make a certain annual earn-out
payment of roughly $8 million for the first five years while annual
earn-out payments will vary on the level of net sales of the
AngioVac system for the rest of the period.
Financial Impact of the Deal
The acquisition is expected to be dilutive to AngioDynamics'
reported earnings by 9 cents for fiscal 2013. AngioDynamics
envisages incremental revenues of $1 million in fiscal 2013.
However, the company expects an approximate $5 million decrease in
operating income along with a trivial impact on EBITDA.
For fiscal 2014, the buyout will be accretive to AngioDynamics' top
as well as bottom line. The company expects the acquisition to
boost sales by $10 million in fiscal 2014.
Peripheral Vascular Product Portfolio to Benefit from
The addition of the AngioVac system to its portfolio is a major
benefit for AngioDynamics. Moreover, with an average selling price
of $11,500 per procedure, the offering is slated to improve margins
The recent acquisition supports AngioDynamics' strategy of focusing
on sustainable, profitable growth on the back of investment on
innovated and differentiated products. The deal is a strategic fit
for the company's peripheral vascular product portfolio which
includes the well regarded Namic fluid management brand acquired
from the buyout of Navilyst Medical, under its core vascular
The AngioVac system represents significant commercial potential as
statistics suggest that about one million Americans suffer from
venous thromboembolism annually, resulting in roughly 0.3 million
Annual net revenues of the AngioVac system could exceed $50 million
within the next five years. Thus, the acquisition will bolster
revenues for AngioDynamics' peripheral vascular division under its
vascular segment which faced a tough first quarter in fiscal 2013.
On a pro forma basis, revenues from the core vascular segment (84%
of total revenue) declined 2% to $69.8 million. Within vascular,
pro forma sales from the peripheral vascular sub-segment remained
nearly flat year-over-year at $43.2 million.
The acquisition will be funded with cash and cash flow from
operations. AngioDynamics ended the first quarter with cash and
cash equivalents of $18.9 million, down 62.6% year over year, due
to the Navilyst acquisition.
AngioDynamics is well positioned for sustained growth driven by
strong market adoption of the NanoKnife system and its focus on
interventional peripheral products. The acquisition of Navilyst
Medical is expected to be accretive to AngioDynamics' earnings by
at least 8 cents in fiscal 2013.
However, AngioDynamics' product lines face strong challenges from
the competitive offerings of its larger rivals such as
Boston Scientific Corporation
CR Bard Inc.
AngioDynamics currently retains a Zacks #3 Rank, which translates
into a short-term Hold rating. We have a long-term 'Neutral'
recommendation on the stock.