LeMaitre Vascular Acquires Omniflow II Manufacturer Xenotis

In an attempt to expand its portfolio of peripheral vascular devices, Massachusetts-based LeMaitre Vascular, Inc. (LMAT) acquired Xenotis – the manufacturer and distributor of the Omniflow II vascular graft – for $7.7 million on Aug 14, 2014. Per the terms of the transaction, LeMaitre made an upfront payment of $5.1 million to Xenotis. Moreover, LeMaitre assumed $1.2 million of Xenotis' bank debt and is scheduled to pay an additional $1.4 million by Aug 13, 2015.

Xenotis is an Australian company with 10 full-time employees. It produces the Omniflow II biological graft at its facility in North Melbourne, Victoria.

For the fiscal year ended Jun 30, 2014, Xenotis generated $2.3 million in revenues compared to $64.5 million clocked by LeMaitre in its most recent fiscal year ended Dec 31, 2013. Xenotis sold 95% of its products through distributors in fiscal 2014 and currently enjoys regulatory approvals in Europe, Australia, New Zealand, Canada, Brazil and several other overseas markets.

Per the LeMaitre management, Xenotis' Omniflow II vascular graft used for peripheral bypass and dialysis access is a natural match for LeMaitre's XenoSure biologic vascular patch used for precision endarterectomy and vascular reconstruction. The fact that Omniflow II has already been implanted 20,000 times since 1990 further vouches for its popularity among physicians and makes it a prized catch for LeMaitre.

The acquisition is expected to benefit LeMaitre's vascular-only sales channel, especially in Europe. Given the limited competition in biological grafts outside the U.S., the company also foresees gains from international markets in the upcoming quarters.

At present, LeMaitre is focused on a strategy of acquiring under-penetrated devices and spreading their application among a greater number of vascular surgeons leveraging its worldwide sales force. As stated by management, the impact of the Xenotis acquisition on the company's 2014 revenue and operating income will be revealed at the third quarter earnings call.

Currently, LeMaitre carries a Zacks Rank #3 (Hold). Other better-ranked stocks in the Medical Products industry include AtriCure, Inc. (ATRC), Abaxis, Inc. (ABAX) and Hospira Inc. (HSP). All three hold a Zacks Rank #2 (Buy).