Leading health care products maker
Covidien
(
COV
) is buying California-based privately held BARRX Medical in a bid
to bolster its presence in gastrointestinal diseases therapy
space.
The Ireland-based company has cut a definitive deal to acquire
all the outstanding shares of BARRX Medical for $325 million. The
agreement also calls for future milestone payments.
BARRX Medical makes devices (ablation catheters/systems) for
treating gastrointestinal diseases and Barrett's esophagus
syndrome, a pre-cancerous condition of the lining of the esophagus
(tube which carries food from the throat to the stomach).
Barrett's esophagus syndrome affects about 1% of the American
adults, generally with gastroesophageal reflux disease (GERD). If n
ot treated, the condition can lead to esophageal adenocarcinoma,
which is associated with a five-year survival rate of below
15%.
BARRX's devices (offered under the HALO moniker), which use
bipolar radiofrequency (
RF
) waves, provide a uniform and controlled ablation that removes the
diseased tissue and stimulates re-growth of normal cells.
The acquisition, which is subject to regulatory clearances and
other customary closing conditions, is expected to consummate by
January 31, 2012. Covidien said that the deal complements its
energy-based product portfolio and is in tandem with its strategy
to invest in products that can offer global competitive
advantage.
The transaction is not expected to have a material impact on
Covidien's sales, operating margin and earnings in fiscal 2012.
Following the deal closure, BARRX Medical will become a part of the
company's Energy product line in its larger Medical Devices
division.
Covidien is a leading global health care products company with a
rich history of developing high-quality products in a
cost-effective manner. It competes with
Johnson & Johnson
(
JNJ
),
Becton Dickinson
(
BDX
) and
C.R. Bard
(
BCR
), among others.
The company exited fiscal 2011 strongly, powered by solid
performance by its core Medical Devices division. Both revenues and
adjusted earnings for fourth-quarter fiscal 2011 beat the Zacks
Consensus Estimates, benefiting from an extra selling week.
Covidien remains committed to rolling out new products and
technologies, focusing on emerging markets, and boosting market
share in core segments through investments in sales and marketing
infrastructure. Moreover, the company is expanding its portfolio
through acquisitions and strategic collaborations.
However, pricing/procedure volume pressure and rising raw
material costs remain headwinds. We are currently Neutral on
Covidien, supported by a short-term Zacks #3 Rank (Hold).
BARD C R INC (
BCR
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BDX
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COV
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