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In a bid to expand into faster growing markets, medical technologies major CR Bard Inc. (BCR - Analyst Report) has agreed to purchase leading maker of silicone urinary incontinence and urine drainage products, Rochester Medical for roughly $262 million or $20 per share. The deal has been formed as a merger and is likely to close by year-end.

Market Opportunity

According to BJU International, an estimated 1.1 billion people across the globe are likely to ail from complications of the lower urinary tract or obstructions in the bladder outlet by 2018. These individuals suffer from chronic conditions like urinary retention and incontinence, which require product solutions in the home setting.

Rochester’s innovative offerings are sold in the $930 million global urology homecare market. Its Magic 3 intermittent self catheters (ISC) are garnering significant share in the $800 million global ISC market. Moreover, it holds a market leading position in the $130 million global male external catheters (MECs) market with its line of incontinence pads and MECs to treat male urinary incontinence.

Our Take

We believe that the acquisition of Rochester Medical complements BCR’s strategy to streamline its underlying business and gain access into high-growth markets with significant returns. We note that Rochester’s product portfolio is growing at a double-digit rate, specially the intermittent self-catheter business. Overall, the buyout has bolstered CR Bard’s position in the niche urology home care market.

In late August, the company also agreed to acquire leading developer and supplier of plant based hemostatic agents Medafor, Inc. to boost its surgical specialties portfolio (particularly surgical hemostats). Currently, the global market for surgical hemostats is over $1.4 billion.

BCR has a Zacks Rank #3 (Hold). Although delayed, potential benefit from the Gore litigation along with expansion into emerging markets and aggressive investments in R&D for new-product development should enable the company to drive growth in the long term.

However, the challenging Medtech and a less flexible pricing environments may pressurize prices across the board. In addition, the company continues to face procedure volume headwind and competitive pressure in the end markets. Legal issues regarding product quality also remain an area of concern.

Other medical stocks that warrant a look include STRAUMANN HLD N AKT (SAUHF), carrying a Zacks Rank #1 (Strong Buy), and The Cooper Companies (COO - Analyst Report), carrying a Zacks Rank #2 (Buy).

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