Medical device company Boston Scientific (BSX) has seen its stock soar by 34% year-to-date, reaching all-time highs last week. To sustain this momentum, BSX has announced a definitive agreement to acquire Silk Road Medical (SILK) for $27.50 per share in cash, equating to an equity value of approximately $1.26 billion.
- The buyout price represents a 27% premium over yesterday's closing price for SILK. Based on SILK's FY24 revenue guidance of $194-$198 million, BSX is paying about 6.4x sales for the acquisition. This multiple seems reasonable given SILK's projected revenue growth of 11% year-over-year, driven by its leading product, the TCAR System.
- The TCAR System is the highlight of this acquisition. Unlike traditional methods for treating carotid artery disease, such as surgery or stent placement, TCAR employs a minimally invasive procedure that reverses blood flow away from the brain to prevent plaque from causing a stroke. Since FDA approval in 2015, nearly 100,000 patients have been treated with TCAR, and physician adoption continues to rise.
- In Q1, TCAR procedures increased by 15% to 6,725, driven by growing physician adoption, higher patient awareness, and expanded Medicare coverage. About two years ago, the Centers for Medicare & Medicaid Services expanded TCAR coverage to include standard surgical risk patients within the Vascular Quality Initiative’s TCAR Surveillance Project.
Financially, the addition of SILK won't significantly impact BSX in the near term. BSX expects the acquisition to be immaterial to adjusted EPS in 2024 and 2025 but accretive thereafter. Over time, BSX's extensive sales and distribution network should help the TCAR System become a more significant contributor, complementing its core cardiovascular business, which saw nearly 16% sales growth in Q1.
