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Edwards Lifesciences’ Acquisition of Valtech Cardio: Must-Know Details

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Deal overview

On November 28, 2016, Edwards Lifesciences (EW) announced the acquisition of Valtech Cardio for $340 million in stock and cash. The deal also includes an additional milestone payment of up to $350 million to be paid over the next ten years.

The acquisition is expected to be completed by early 2017. According to the acquisition terms and conditions, Valtech Cardio is required to spin off its early-stage transseptal mitral valve replacement technology program prior to the completion of the acquisition. However, Edwards Lifesciences will have the option to purchase the program and its associated IP (intellectual property).

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A brief introduction of Valtech Cardio

Valtech Cardio is an Israel-based company and is the developer of the Cardioband system for transcatheter mitral and tricuspid valve repair. The Cardioband transseptal mitral repair system received CE Mark approval in September 2015, and the CE Mark trial for its tricuspid valve repair indication in under progress.

While this system is not approved in the US, the Cardioband system is still being seen as a potential competitor for Abbott’s (ABT) Mitraclip. Abbott’s Mitralclip has been approved in Europe and under approval trials in the US.

In September 2015, Heartware International had announced an agreement to acquire Valtech Cardio, but the deal was terminated in January 2016. Later, in August 2016, Medtronic (MDT) acquired Heartware International. Boston Scientific (BSX) is another major medical device player in the US and is looking to bolster its market share in the mitral regurgitation treatment space.

EW’s deal rationale

Edwards Lifesciences has shown significant interest in the mitral and tricuspid regurgitation treatment areas over recent years. The company acquired CardiAQ Valve Technologies in 2015 and bought an option to acquire Harpoon Medical, most likely in 2017. With this same focus, Edwards Lifesciences acquired Valtech Cardio.

EW expects the acquisition to have a potential sales impact of $10 million–$15 million in 2017. The adjusted net EPS (earnings per share) in 2017 is expected to be negatively impacted by ~$0.1. The company also granted additional share repurchase authorization of $1 billion aimed at offsetting dilution from the acquisition.

To participate in the growth of Edwards Lifesciences, investors can invest in the Vanguard S&P 500 ETF (VOO), which has ~0.11% of its total holdings in EW.

Now let’s discuss the performance and growth potential of EW’s Surgical Heart Valve Therapy segment.

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