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Medtronic Buys Brain Aneurysm Device Maker for $150M

Zacks Equity Research
Updated

Medical technology giant Medtronic plc MDT recently purchased CA-based Medina Medical – a developer of minimally-invasive devices for treating brain aneurysms and stroke – for $150 million upfront plus milestone payments. This reflects the company’s effort to expand its footprint in the billion-dollar neurovascular market.

Notably, Medtronic already had an ownership stake in Medina Medical, prior to the recently completed acquisition. As a result, the full buyout will now allow Medtronic to benefit from a pre-tax gain in the second quarter of fiscal year 2016.  Medtronic plans to incorporate the Medina product line into its Neurovascular division within the Restorative Therapies Group (RTG).

Brain aneurysm, a vascular disorder, refers to an abnormal bulge (filled with blood) of any blood vessel in the brain and currently affects almost 6 million people in the U.S. alone. Cerebral aneurysm puts pressure on brain nerves and tissues, and in worst case scenarios, they may leak or rupture leading to hemorrhagic stroke.

Medina Medical’s unique Embolization Device is a non-surgical 3D self-expandable mesh implant that fills the inside of a brain aneurysm, thereby reducing blood flow within the bulge. The device has CE Mark approval for commercial distribution in the European Union (EU), but is not yet commercially available in the U.S.

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Post-acquisition, Medtronic believes this breakthrough technology of Medina will duly benefit its neurovascular product portfolio, particularly in the hemorrhagic stroke space. This will allow the company to rake in higher profits at its RTG segment.

Management at Medtronic expects the purchase to meet the company’s long-term financial metrics. Moreover, Medtronic expects the net impact from this deal to be neutral to the company’s fiscal 2016 earnings as the company intends to offset the dilutive impact of the transaction.

Further, management believes that once this acquisition is over, the advanced embolization technology of Medina will have tough competitive leverage over embolization coils (which are in vogue currently) in treating brain aneurysms. This, in turn, should expand Medtronic’s shares in the global neurovascular market.

A look at Medtronic’s history tells us that originally the neurovascular business of the company had two product lines: Access and Coils & Stents. It was after the company completed its Covidien acquisition (in Jan 2015), that the Pipeline Flex Embolization device of Covidien came to be part of Medtronic’s product line. Notably, the Pipeline Flex Device won CE Mark last year and received the FDA approval in Feb 2015, following which Medtronic initiated its limited launch in the U.S. market.

We believe the recent Medina acquisition is reflective of Medtronic’s solid attempts to expand its Neurovascular portfolio. Going forward, we expect the addition of more such revolutionary therapy options in this space under Medtronic’s brand name.

We are also encouraged to note that currently Medtronic is engaged in creating the industry's first true comprehensive stroke management business. With the potential combined market size in the U.S. and EU for stroke being $12.6 billion, we expect the Medina acquisition to help Medtronic capture a larger share of this huge market potential.

Currently, Medtronic holds a Zacks Rank #4 (Sell). Some better-ranked medical products 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).

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MEDTRONIC (MDT): Free Stock Analysis Report
 
ORASURE TECH (OSUR): Free Stock Analysis Report
 
NUVASIVE INC (NUVA): Free Stock Analysis Report
 
ICU MEDICAL INC (ICUI): Free Stock Analysis Report
 
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