- Boston Scientific announced Thursday it will purchase cardiac monitoring company Preventice Solutions in a $925 million deal, putting it directly into the fast-growing cardiac monitoring industry. The deal, the second in the space this week, is expected to close by mid-2021.
- Along with the upfront cash payment, the deal includes a potential milestone payment of $300 million. Preventice brought in $158 million in sales in 2020, representing approximately 30% year-over-year growth, according to the deal announcement.
- Boston Scientific has been an investor in Preventice since 2015 and holds a 22% equity stake, according to the company. The ownership should translate to a net payment of approximately $720 million upon closing and a milestone payment of up to around $230 million.
The acquisition is the second in the fast-growing cardiac monitoring space over the last two days. On Tuesday, Hillrom announced plans to purchase BardyDx for $375 million. The back-to-back cardiac monitoring deals follow Philips' $2.8 billion December purchase of BioTelemetry.
Remote patient monitoring, specifically, has been building momentum as virtual care continues to reshape the healthcare industry, and cardiac wearable companies have benefited.
Still, investors' response seemed tepid Thursday morning as Boston Scientific's stock price was trading with an increase of under 1% when the market opened.
Boston Scientific said the transaction adds to their offerings in the $2 billion cardiac diagnostics and services market, which is projected to see double-digit annual growth. Preventice products include short-term and long-term holter cardiac monitoring devices, which both BardyDx and iRhythm sell as well.
Stifel analysts said in a recent report that the broader ambulatory cardiac monitoring market is currently valued at $1 billion, and long-term holter monitoring is the fastest-growing subsegment and valued at about $300 million.
Wall Street analysts said Preventice gives Boston Scientific a larger presence in the growing cardiac monitoring market, which should also help the company's long-term insertable cardiac monitoring products.
However, J.P. Morgan analysts said that the recent activity in the space is still a positive for iRhythm and does not upend its position as the market leader.
"Rather than viewing the entry of Boston Scientific into this market as a significant threat, we view it as further validation, and with still very low penetration of extended holters into the [about] 5M annual atrial fibrillation tests per year in the US and minimal presence outside the US, we see room for several winners in this space," the analysts wrote.
Evercore analysts said that the deal makes sense strategically for Boston Scientific, writing that Preventice looks to be in second place behind iRhythm.
The move comes after a recent stumble in the cardiac space. Boston Scientific was one of the few companies last week to preannounce fourth-quarter results that underperformed, reporting a slowdown for its cardiac rhythm management business.
This week's deal announcements continue a steady run of medtech M&A to open up 2021. Deals have ranged from Stryker's and Hologic's tuck-ins to Steris' $4.6 billion planned acquisition of Cantel Medical. The jump in activity is in line with EY's projection that medical device companies would be looking to spend cash built up over 2020 after dealmaking slowed due to the coronavirus pandemic.