) recently announced the acquisition of PolyTouch Medical Ltd., a
renowned provider of mesh placement devices used for hernia repair.
However, the terms of the agreement were not disclosed by the
Israel-based PolyTouch Medical's premier laparoscopic surgical
device, PatchAssist, is mainly used to treat ventral hernia.
Covidien has acquired the company primarily to incorporate this
clinically advanced technology to enhance its soft tissue repair
product portfolio. PatchAssist has been further developed into
AccuMesh, which was launched by Covidien some time in early
In the most recent quarter, revenues from Covidien's larger
Medical Devices segment climbed 7% year over year to $2,004
million, driven by double-digit growth across Vascular and Energy
Devices product lines. New products and higher volume contributed
to growth. Within Medical Devices, sales of Soft Tissue Repair
products (which includes hernia repair) inched up 1% to $222
million, as growth in the suture unit was partially masked by lower
biosurgery and fixation sales.
Founded in 2009, PolyTouch Medical is a portfolio company of
Misgav Venture Accelerator, which is a part of an Israel-based
investment company, The Trendlines Group.
Covidien is a leading global health care products company with a
rich history of developing high-quality products in a
cost-effective manner. PolyTouch is its third acquisition in Israel
over the past couple of months.Covidien revealed in April 2012, a
definitive agreement to take over Jerusalem-based Oridion Systems
Ltd. for $23.00 a share.
Earlier, in March 2012, Covidien announced a conclusive deal to
acquire superDimension for roughly $300 million. Though the
transaction is not expected to have a material impact on its 2012
sales, a slightly dilutive impact on earnings cannot be ruled out.
The company will report the acquisition in its Endomechanical
Although in its nascent stage, we believe that the PolyTouch
acquisition will benefit Covidien's future growth in the extremely
competitive medical devices market. It competes with
Johnson & Johnson
), among others.
Covidien remains committed to rolling out new products and
technologies, focusing on the emerging markets, and boosting market
share in core segments through investments in sales and marketing
infrastructure. However, sustained pricing/procedure volume
pressure represents a headwind.
We currently have a long-term Neutral recommendation on
Covidien. The stock currently retains a Zacks #3 Rank, which
translates into a short-term Hold recommendation.
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