Boston Scientific puts up $1B in cash to buy Lumenis surgical line from private equity

Dive Brief:

Boston Scientific announced Wednesday that it will buy Lumenis' global surgical business in a $1.07 billion upfront cash deal. The acquisition was made with an affiliate of Baring Private Equity Asia, which bought Lumenis in a 2019 deal that valued the company at more than $1 billion.
Boston Scientific will acquire a portfolio consisting of laser systems, accessories and fibers for urology and otolaryngology procedures, led by Lumenis' Moses laser used as a minimally invasive treatment for patients with kidney stones. The private equity firm will keep ownership of Lumenis' global aesthetics and ophthalmology businesses.
The move is Boston Scientific's second major acquisition of 2021 after buying up Preventice Solutions, a cardiac wearables maker, for $925 million in January. The latest deal is expected to close in the second half of 2021.

Dive Insight:

Boston Scientific has been working with Lumenis for over 20 years and currently sells the urology laser portfolio in Japan and the U.S. The acquisition expands Boston Scientific's reach with the portfolio into all geographic markets, including Europe and "high-growth regions like China," according to the company.

Lumenis' laser portfolio has posted a double-digit compound annual growth rate from 2015-2019, and the surgical business is expected to bring in about $200 million in net sales in 2021, according to the deal announcement.

Evercore ISI analysts wrote that the deal "makes a ton of sense" and called Boston Scientific's estimate of a $200 million contribution in 2021 conservative if the products perform above pre-pandemic levels, which the projection suggests.

The portfolio generated $197 million in sales in 2019, with a decline to about $165 million in 2020 due to the impact of the coronavirus pandemic, according to Evercore.

The portfolio adds to Boston Scientific's urology business, which struggled in 2020 as the pandemic took a toll across the company. Sales for the Urology and Pelvic Health segment declined year over year by 9% to about $1.3 billion last year.

SVB Leerink analysts wrote that Lumenis is "a smart strategic fit" for Boston Scientific and places the medtech in "higher-growth adjacent markets."

For example, Boston Scientific expects Lumenis' laser portfolio to grow between 10-12% in a post-pandemic environment, above the company's estimates for a weighted average growth rate for the urology and pelvic health market of about 6% through 2022 and a 7% growth rate specifically for the stone laser market, according to SVB Leerink.

The analysts believe that the acquisition should also help drive growth for Boston Scientific after the company stumbled a bit throughout last year.

"Ultimately, we continue to believe that BSX's long-term growth story ... is built on a solid foundation of proven execution and one of the most compelling product portfolios across some of the highest-growth markets in MedTech, and we believe this acquisition should help sustain at least a high-single-digit growth trajectory over the next few years," the analysts wrote.

Needham analyst Mike Matson speculated the deal could signal a faster pace of acquisitions going into the year for the company, after a pandemic-spurred pullback in 2020.

The acquisition continues medtech's M&A run in 2021. Deals have ranged between tuck-ins from Hologic and Hillrom to Boston Scientific's Preventice buy and Steris' $4.6 billion acquisition of Cantel Medical. After roughly 10 deals in January, M&A slowed a bit in February until last week when NuVasive and Axonics announced tuck-in moves of their own.

This story has been updated to reflect comments from SVB Leerink analysts.