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Merit Medical Acquires Brightwater Medical for $35 Million

Merit Medical Systems, Inc. MMSI recently announced the acquisition of Brightwater Medical for a deal value of $35 million. Notably, Brightwater Medical’s flagship product, the ConvertX, is expected to complement Merit Medical’s products like Resolve drainage catheter, InQwire guide wires, Advocate PTA balloons and other vascular products.

Following the announcement, shares of Merit Medical rose 2.3% to close at $59.10 on Jun 17, indicating that investors at Merit Medical consider this a strategic deal.

More on the Acquisition

For investors’ notice, California-based Brightwater Medical’s ConvertX Nephroureteral Stent System recently received FDA approval for the treatment of ureteral obstructions.

Management at Merit Medical expects revenues from the ConvertX product of approximately $1 million in 2019, with expectations of growth to around $25 million in the fifth full year of sales. Additionally, upon the transfer of the ConvertX manufacturing operations to Merit’s Pearland facility, management anticipates adjusted gross margin in the 70-75% range. Upon receiving a CE Mark for ConvertX, the company expects an additional gain of $15 million in revenues.

However, management at Merit Medical expects the buyout to dent earnings per share by 5 cents on a reported basis and by 3 cents on an adjusted basis.

Other Significant Acquisitions

Earlier this year, Merit Medical closed the purchase of assets from Becton, Dickinson and Company BDX.  The assets acquired are soft tissue core needle biopsy products sold under the trade names of Achieve Programmable Automatic Biopsy System, Temno Biopsy System, Tru-Cut Biopsy Needles, Aspira Pleural Effusion Drainage Kits and Aspira Peritoneal Drainage System. These products will be sold by Merit Medical’s global direct sales force and distribution partners. Notably, the transaction is expected to expand Merit Medical’s operating margin and increase its cash flow in 2019.

Apart from this, Merit Medical recently acquired a small U.S.-based entity, Laurane Medical, with manufacturing operations in Europe. The acquired company specializes in the bone biopsy business.

A Peek Inside Merit Medical’s Product Portfolio

The recent acquisition is expected to broaden Merit Medical’s product offerings.

It is encouraging to note that in recent times, the company has launched products like EmboCube Embolization Gelatin, basixTAU Inflation Device, Prelude Prestige Splittable Sheath Introducer, Prelude Ideal Sheath Introducer and PreludeSYNC Radial Hemostasis Device.

Merit Medical’s HeRO product line has been another key contributor to growth. HeRO Graft, Super HeRO Adapter and HeRO Ally Revision Kit are the three platforms within the company’s HeRO family of dialysis devices, which see robust demand.

Price Performance

Over the past year, shares of this Zacks Rank #2 (Buy) stock has rallied 16.9% against the industry’s 2.6% decline. The current level also compares favorably with the S&P 500 index’s 3.2% rally.

Other Key Picks

Other top-ranked stocks in the broader medical space are DENTSPLY SIRONA XRAY and Masimo Corporation MASI, each carrying a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

DENTSPLY’s long-term earnings growth rate is expected at 11.5%.

Masimo’s long-term earnings growth rate is projected at 16.1%.

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