Health care major Covidien (COV) has completed its takeover of California-based privately held BARRX Medical for roughly $325 million. The Ireland-based company forged a definitive deal to acquire all the outstanding shares of BARRX Medical in November 2011. The agreement also calls for future milestone payments.
BARRX Medical makes devices (ablation catheters/systems) for treating gastrointestinal diseases and Barrett’s esophagus syndrome, a pre-cancerous condition of the lining of the esophagus (tube which carries food from the throat to the stomach).
Barrett’s esophagus syndrome affects about 1% of American adults, generally with gastroesophageal reflux disease (“GERD”). If not treated, the condition can lead to esophageal adenocarcinoma, which is associated with a five-year survival rate of below 15%.
BARRX’s devices (marketed under the HALO moniker), which use bipolar radiofrequency waves, provide a uniform and controlled ablation that removes the diseased tissue and stimulates re-growth of normal cells.
The acquisition reinforces Covidien’s presence in gastrointestinal diseases therapy space. It complements the company’s energy-based product portfolio and is in tandem with its strategy to invest in products that can offer global competitive advantage.
With the deal closure, BARRX Medical will now become a part of Covidien’s Energy product line in its larger Medical Devices division. The transaction is not expected to have a material impact on the company’s sales, operating margin and earnings in fiscal 2012.
Covidien is a leading global health care products company with a rich history of developing high-quality products in a cost-effective manner. It competes with Johnson & Johnson (JNJ), Becton Dickinson (BDX) and C.R. Bard (BCR), among others.
Covidien remains committed to rolling out new products and technologies, focusing on emerging markets, and boosting market share in core segments through investments in sales and marketing infrastructure. Moreover, the company is expanding its portfolio through acquisitions and strategic collaborations.
However, Covidien faces intense competition, reimbursement uncertainty and sustained pricing and procedure volume pressure. We are currently Neutral on the stock, backed by a short-term Zacks #3 Rank (Hold).
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