CryoLife Inc. CRY recently announced that it has agreed to acquire On-X Life Technologies Holdings for around $130 million. The deal is expected to conclude by Jan 2016.
Austin, TX-based On-X develops mechanical heart valves that have been implanted in more than 200,000 patients. The company’s revenues have improved at a compounded annual growth rate (CAGR) of 13% over the last four years. On-X reported revenues of approximately $33 million in 2014.
On-X’s aortic valve is the only mechanical valve to receive U.S. FDA labeling requiring an INR (international normalized ratio) level of only 1.5-2.0. INR refers to a system established by the World Health Organization (WHO) and the International Committee on Thrombosis and Hemostasis for reporting the results of blood coagulation (clotting) tests.
CryoLife noted that this provides the device a unique competitive advantage over its peers. The acquisition will expand the size of CryoLife’s total addressable market, which in turn, will open up more growth opportunities. With the takeover, CryoLife will be able to enter the mechanical valve market, which is valued at $220 million.
The addition of On-X’s marketing team will further strengthen CryoLife’s U.S. sales team. The company believes that post acquisition On-X will continue to post double-digit compounded growth over the next four years (2016-2020).
Meanwhile, CryoLife’s expanding product portfolio will drive top-line growth, in our view. In July this year, the company’s BioGlue product received an expanded indication from the Japanese Pharmaceuticals and Medical Device Agency (PMDA). BioGlue is a surgical adhesive used in cardiovascular surgeries.
Previously, BioGlue was approved for aortic dissection procedures in Japan. With the new expanded indication, the product can be used for adhesion and support of hemostasis for aortotomy closure sites, suture/anastomosis sites and suture sites on the heart. The additional indication doubles CryoLife’s estimated market opportunity in Japan from $5 million to $10 million.
Notably, Cryolife recently announced plans to settle the PerClot patent dispute with Medafor Inc., a subsidiary of C.R. Bard BCR. PerClot is an adhesive forming hemostatic powder intended to stop bleeding. The current settlement will significantly lower CryoLife’s legal expenses, which will boost profits.
Zacks Rank & Key Picks
CryoLife carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the same space include Masimo Corp MASI and Steris Plc STE. Both the stocks sport a Zacks Rank #1 (Strong Buy).
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