Medtronic plcMDT recently purchased California-based privately-held medical device company - Lazarus Effect - for $100 million in cash. Notably, Lazarus Effect develops vascular interventional devices that capture and remove acute ischemic stroke-causing blood clots.
This acquisition reflects yet another attempt on Medtronic's part to create the industry's first comprehensive stroke management business. Incidentally, the deal comes close on the heels of the company's latest launch of its Arc support catheter in the U.S.
Management considers this transaction in line with the company's key growth strategy of therapy innovation. Moreover, it facilitates innovative therapeutic solutions for stroke patients and their care givers. Medtronic plans to add the Lazarus Effect product line to its Neurovascular division within the Restorative Therapies Group.
Medtronic expects this deal to remain neutral to its earnings for fiscal 2016 as management intends to offset any dilutive impact of the transaction. Over the long term, the acquisition deal is expected to satisfy Medtronic's financial metrics for acquisitions.
With this acquisition, Medtronic now owns the novel mesh technology of Lazarus Effect, called Lazarus Cover, which surrounds a stent-retriever to keep the blood clot contained in it during a mechanical thrombectomy procedure. Management believes this deal to significantly complement Medtronic's Neurovascular business and expand its capacities in delivering next-generation thrombectomy technologies.
In fact, the Lazarus Cover device complements Medtronic's Solitaire stent retriever platform, which allows easier removal of blood clots and quick restoration of blood flow through arteries in stroke patients.
With increasing incidents of ischemic strokes worldwide, the demand for administering a mechanical thrombectomy procedure, using stent-retreivers like Medtronic's Solitaire, is also on the rise. This is because in many cases, the only FDA-approved drug therapy for stroke patients, using tissue plasminogen activator (tPA), fails to dissolve blood clots completely.
With stroke being the fifth leading cause of death in the U.S. currently, healthcare providers like Medtronic are keen to offer innovative therapeutic solutions to the huge potential customer network available in the ischemic stroke space.
Statistically, of the 695,000 acute ischemic stroke victims in the U.S., about 240,000 are eligible for treatment with a stent retriever, while merely 13,000 procedures are performed annually. This clearly points out the untapped market potential that stent retriever providers like Medtronic hold in the ischemic stroke treatment space.
Moreover, according to recent trial results published in The New England Journal of Medicine (NEJM), thrombectomy procedures using a stent retriever technology have been found to have a therapeutic benefit over medical therapy alone. This further validates the ample opportunity Medtronic currently has in the stroke therapeutic space.
Going forward, we believe this Lazarus Effect acquisition will allow Medtronic to capture a larger share of the global acute ischemic stroke diagnosis and treatment market, which is estimated to reach a value of $1.9 billion by 2020.
Further, we expect this deal to expedite the U.S. regulatory approval process for the Lazarus Cover technology, which is currently pending, given Medtronic's huge customer network, competitive leverage capacity and proven expertise in the MedTech industry.
Currently, Medtronic has a Zacks Rank #3 (Hold). Some better-ranked medical product stocks are ICU Medical, Inc. ICUI , OraSure Technologies, Inc. OSUR and NuVasive, Inc. NUVA . All the three stocks sport a Zacks Rank #1 (Strong Buy).