- Teleflex plans to buy hemostatic product specialist Z-Medica for $500 million upfront, with potential for a future $25 million milestone payment. The acquisition of bleeding control products with current applications in trauma surgery, emergency and military medicine and interventional segments is expected to close in the fourth quarter.
- The deal is expected to add a projected $60 million to $70 million benefit in fiscal year 2021 and on track to exceed cost of capital by the fourth year after the acquisition. Teleflex CEO Liam Kelly told investors Thursday at least 80% of Z-Medica sales happen in North America, so it's looking to expand in international markets and into new medical segments as well.
- Teleflex also reported $628 million in third-quarter revenues, a 3.1% year-over-year decline amid an estimated $78 million hit due to COVID-19 impacts. A brighter spot in the quarter was growing momentum for enlarged prostate treatment UroLift thanks to a newly launched national direct-to-consumer campaign, Kelly touted.
Teleflex has not yet returned to growth in the COVID-19 environment, but its third-quarter results were still good enough to beat Wall Street's consensus estimates for the critical care and surgery-focused medtech. Some businesses did achieve positive year-over-year gains in the quarter, including vascular access products and interventional urology.
The roughly 11% growth in interventional urology, which houses Teleflex's benign prostatic hyperplasia (BPH) treatment UroLift, came despite an estimated 29% negative impact to revenue as a result of COVID-19 impacts. Sales in that unit approached $82 million, but Teleflex believes it's setting the stage for further growth in 2021 thanks to the ramp-up of its DTC campaign for UroLift.
Kelly reported that the campaign was turned on to "full strength" in early September and web traffic for UroLift is up 150%. More urologists are asking for training as a result of patients asking about the treatment, Kelly said. The company trained 120 additional urologists during the third quarter. Kelly also said that particularly during the pandemic, more of the procedures are shifting from hospitals to the doctor's office setting.
Teleflex is also banking on Z-Medica, currently held by private equity firm Linden Capital, to be a growth driver as soon as next year.
Negatives reported by the company, in addition to hits from COVID-19, include a $4 million hit during the quarter from a recent catheter recall that Kelly said will continue to have an impact over the coming quarters until the product can be sold again, likely not until September 2021.
Altogether, Teleflex was not confident enough to be able to reinstate 2020 financial guidance.
"My crystal ball is cloudier than it's ever been," Kelly said, noting increasingly positive trends through October but acknowledging wariness surrounding a global resurgence of COVID-19 cases.