Covidien plc (COV) recently signed a definitive agreement with The Spectranetics Corporation (SPNC), under which the latter will acquire Covidien's Stellarex drug-coated angioplasty balloon (DCB) platform for $30 million. Designed to treat peripheral arterial disease, Stellarex DCB is part of Covidien’s vascular product line.
Covidien somewhat indicated the move with an SEC filing in Oct 2014 which stated that the company will likely divest some in-development vascular assets so that the pending $43 billion merger with Medtronic, Inc. (MDT) can commence under the antitrust law.
Divesture of Stellarex DCB is subject to the approval of the Federal Trade Commission and other regulatory agencies, as well as closure of the Medtronic-Covidien merger, which is slated to complete by early 2015.
Covidien’s shares closed little changed at $92.42 yesterday. The stock is up roughly 38% so far this year.
With the inclusion of the Stellarex DCB platform, Spectranetics intends to provide comprehensive treatment solutions for complex vascular conditions. Management expects the Stellarex technology to prove accretive to the company’s near-term revenues and also expand operating leverage over time.
The Stellarex DCB platform is currently not approved for sale in any market. Spectranetics’ board anticipates that the platform will receive European CE mark approval in late 2014 or early 2015, following which it expects an immediate European launch of the product.
Meanwhile, sanction by the U.S. Food and Drug Administration (FDA) is expected in 2017. Spectranetics expects contributions of at least $100 million from the platform to its annual revenues within two to three years of commercialization in the U.S.
In Oct 2014, C.R. Bard Inc.’s (BCR) Lutonix 035 DCB Catheter became the first drug-coated balloon to be cleared by the FDA for percutaneous transluminal angioplasty. Meanwhile, Medtronic is aiming for an FDA approval for its IN.PACT Admiral DCB in 2015.
Presently, Covidien carries a Zacks Rank #4 (Sell) while Spectranetics holds a Zacks Rank #2 (Buy). GW Pharmaceuticals plc (GWPH) is currently a better-ranked stock in the medical products industry with a Zacks Rank #1 (Strong Buy).
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