ANGO and Microsulis Work Out Deal

Consolidating its earlier partnership, AngioDynamics (ANGO - Analyst Report) inked a definitive agreement to purchase certain assets of Mircosulis Medical Ltd. The transaction is expected to close this month, subject to standard conditions.

AngioDynamics will make upfront payment of $10 million along with $5 million on Dec 31, 2013 and assume $1 million of liabilities. On the basis of its performance over the next nine years, stakeholders at Microsulis might be entitled to earn-out payments.

The acquisition is expected to be neutral to AngioDynamics’ adjusted earnings for fiscal 2013. However, the deal will create value for the company’s shareholders with considerable accretion to fiscal 2014 adjusted earnings.

Following the acquisition, AngioDynamics will serve a market size of $250 million for tissue ablation systems. The company expects to emerge as a pioneer in the global tissue ablation market.

According to the agreement, Microsulis’ leading microwave ablation technology will be a part AngioDynamics portfolio. The company will also gain exclusive worldwide distribution rights for the technology. Further, AngioDynamics expects to introduce the second generation Accu2i pMTA applicator in the domestic market after closing the acquisition.

About Microsulis

Denmead, England-based Microsulis specializes in minimally invasive, microwave ablation technology for the coagulation of soft tissue. The medical device company has a global footprint with its systems installed in over 80 hospitals.

Microsulis’ manufactures Accu2i pMTA microwave ablation system with regulatory clearances in the U.S. as well as Europe. In December 2012, the U.S. Food and Drug Administration (FDA) also granted 510(k) clearance to the company’s upgraded Accu2i pMTA applicator.

Earlier, in March 2012, AngioDynamics and Microsulis entered into a strategic partnership wherein AngioDynamics gained the exclusive overseas distribution rights for Microsulis’s Accu2i pMTA microwave ablation system from May 2012 to December 2013. The agreement granted AngioDynamics the exclusive option to purchase all the global assets and certain liabilities of Microsulis until September 2013.

Our Take

AngioDynamics’ thermal ablation business has been stagnant over the last three years. In fiscal 2012, the revenues from the franchise stood at $23 million. The company envisages significant revenue synergies from the latest deal as reflected in the forecast of 20% annual growth over the following three years.

AngioDyanmics’ aggressive acquisition strategy targets high-growth areas. The company’s current focus on the burgeoning oncology market should yield positive results. The stock carries a Zacks Rank #3 (Hold). While we prefer to remain on the sidelines on AngioDyanmics, other medical stocks such as Merit Medical (MMSI - Snapshot Report), Cantel Medical (CMN - Snapshot Report) and Cyberonics (CYBX - Analyst Report), which carry a Zacks Rank #1 (Strong Buy), are worth considering.