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Medtronic (MDT) to Expand Neuroscience Line With XENT Buyout

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Medtronic plc (MDT - Free Report) recently entered into a definitive agreement with Intersect ENT , wherein the former has agreed to acquire Intersect ENT for $1.10 billion. The move is intended to expand Medtronic's product portfolio for ear, nose, and throat procedures while specifically targeting the chronic rhinosinusitis (CRS) market.    

The deal is expected to close toward the end of Medtronic's 2021-22 fiscal year (ending April 2022), subject to the satisfaction of customary closing conditions, including receipt of regulatory clearances and approval by Intersect ENT's stockholders.

The latest acquisition will allow Medtronic to bolster its Neuroscience Portfolio.

Financial Terms of the Deal

Under the terms of the deal, Medtronic has agreed to acquire all outstanding shares of Intersect ENT for $28.25 per share in an all-cash transaction, implying an enterprise value of nearly $1.10 billion.

Following the closure of deal, the transaction is expected to prove accretive to Medtronic's weighted average market growth rate (WAMGR) and will be neutral to its adjusted earnings per share in the first year and accretive thereafter.

Significance of the Deal

The acquisition will enable Medtronic to bolster its portfolio of products used for ear, nose and throat procedures. Intersect ENT’s complementary product lines and customer base will advance Medtronic's efforts to offer best solutions for patients suffering from CRS.

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Intersect ENT offers the PROPEL and SINUVA sinus implants which are clinically verified solutions that open sinus passageways and deliver an anti-inflammatory steroid to help in healing.

Intersect ENT's PROPEL implant is used primarily in hospitals and ambulatory surgery centers. It is a bioabsorbable, drug-eluting implant inserted after sinus surgery to preserve open passageways and offer an anti-inflammatory steroid to sinuses. SINUVA implants are used primarily in the office environment for the treatment of recurrent sinus obstruction due to nasal polyps in adult who had ethmoid sinus surgery.

By combining these products with Medtronic's navigation, powered instruments, and current tissue health products, the company aimed to offer a wide-ranging variety of solutions to help surgeons treating CRS patients.

Intersect ENT's sinus implants are clinically verified to provide relief and healing to patients suffering from CRS. Combining this innovative technology with Medtronic’s established global presence and sales infrastructure will allow the company to widen its capabilities while expanding access to these valuable therapies.

Industry Prospects

Per a report by EMERGEN RESEARCH, the global chronic rhinosinusitis market size was valued at $2.13 billion in 2019 and is projected to reach $3.51 billion by 2027, at a CAGR of 7.4%. Increasing incidence of inflammation of mucosal linings of the nasal passage and growing prevalence of chronic asthma are the factors driving the market.

Considering the market opportunities, Medtronic’s recent pact targeting the chronic rhinosinusitis market is well thought-off.

Recent Developments in Neuroscience Portfolio

In June 2021, Medtronic announced the receipt of the FDA approval for Vanta -- a high performance recharge-free implantable neurostimulator (INS) with a device life that can be optimized up to 11 years. The extended battery life, broad MRI compatibility and personalized relief through AdaptiveStim technology enable a more hassle-free experience and greater freedom for patients to manage chronic pain.

In the same month, Medtronic announced the receipt of the FDA approval and first implants of the SenSight Directional Lead System used for Deep Brain Stimulation (DBS) therapy in the United States. SenSight is the first-of-its-kind DBS directional lead that combines the benefits of directionality with the power of sensing, allowing physicians to offer precise, patient-specific DBS therapy for the treatment of some symptoms related to movement disorders.

Price Performance

Shares of the company have gained 22.7% in a year’s time compared with the industry’s growth of 9.4%.

Zacks Rank and Key Picks

Currently, the company carries a Zacks Rank #3 (Hold).

A few better-ranked stocks from the broader medical space are Envista Holdings Corporation (NVST - Free Report) and BellRing Brands, Inc. (BRBR - Free Report) , both carrying a Zacks Rank #2 (Buy). You can see the complete list of Zacks #1 Rank (Strong Buy) stocks here.

Envista Holdings has an estimated long-term earnings growth rate of 27%.

BellRing Brands has an estimated long-term earnings growth rate of 25%.

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