Back to top

Image: Bigstock

MMSI Stock Likely to Gain From Cook Medical's Product Portfolio Buyout

Read MoreHide Full Article

Merit Medical Systems, Inc. (MMSI - Free Report) , on Tuesday, signed a definitive asset purchase agreement to purchase Cook Medical’s lead management portfolio for a total cash consideration of approximately $210 million. The acquisition is consistent with MMSI’s Continued Growth Initiatives and should position the company to offer clinicians an increasingly comprehensive set of solutions to support cardiac intervention patients, ranging from diagnosis to post-procedure care.

The closing of the proposed transaction is expected to occur during the fourth quarter of 2024, subject to customary closing conditions.

Likely Trend of MMSI Stock Following the News

Following the announcement on Sept. 17, 2024, shares of the company moved nearly 0.2% north to $98.71 at yesterday’s close. Historically, the company has gained a high level of synergies from its various buyouts and product launches. We expect market sentiment on the stock to continue to remain positive around this announcement, too.

Meanwhile, Merit Medical currently has a market capitalization of $5.75 billion. It has a return on equity of 15.3%, higher than the industry’s 10.5%. In the last reported quarter, MMSI delivered an earnings surprise of 4.6%.

More on Merit Medical’s Cook Medical Deal

Cook Medical’s lead management business provides a comprehensive end-to-end product portfolio of medical devices and accessories used in lead management procedures for patients who need a pacemaker or an implantable cardioverter-defibrillator lead removed or replaced.

Under the terms of the announced agreement, the asset acquisition of Cook Medical’s end-to-end lead management product portfolio is expected to strengthen Merit Medical’s existing electrophysiology and cardiac rhythm management (CRM) business.

Strategic Implications of MMSI's Latest Purchase

Merit Medical believes that the assets it plans to acquire from Cook Medical generated approximately $37 million in revenues over the 12-month period that ended on Dec. 31, 2023. Sales to customers in the United States, Europe, the Middle East and Africa (EMEA), Asia–Pacific (APAC) and the Rest of World represented approximately 41%, 42%, 11% and 6%, respectively.

If the proposed transaction is consummated, the assets Merit Medical proposes to acquire from Cook Medical are projected to contribute revenues (from a projected closing date of Oct. 31, 2024, through Dec. 31, 2024) in the range of $4 million-$6 million. The transaction is also projected to dilute MMSI’s previously forecasted adjusted operating margin, adjusted net income and adjusted earnings per share (EPS) during the same period.

The acquisition is projected to be accretive to adjusted gross and operating margins in 2025 and accretive to adjusted net income and adjusted EPS from 2026. The acquisition, if completed, is projected to be dilutive to Merit Medical’s GAAP net income and GAAP EPS in the first full year post-close, neutral in the second full year post-close and accretive thereafter.

Merit Medical’s management expects the transaction to strengthen its fast-growing, high-margin electrophysiology and CRM business with the addition of differentiated products and an established commercial infrastructure.

Industry Prospects in Favor of Merit Medical

Per the company’s estimates, the cardiac intervention market represents an annual addressable opportunity of more than $900 million in the United States, EMEA and APAC regions. Management believes the transaction will enhance its position in this huge cardiac intervention market. Additionally, per the company’s estimates, beginning in 2025, the addition of Cook Medical’s lead management business will likely position MMSI to represent more than $100 million in combined annualized electrophysiology and CRM revenues by serving the global cardiac intervention market.

Per a Grand View Research report, the primary factors influencing the surge in the global interventional cardiology devices market include technological advancements, the launch of new products and increasing incidence rates of heart valve diseases.

Given the market potential, the deal is expected to benefit Merit Medical’s strategy for continuous growth through portfolio expansion.

Guidance Revision by MMSI

MMSI updated its revenue and earnings guidance for 2024, reflecting the potential impact of the acquisition of Cook Medical’s lead management business. The company expects the acquired business to be accretive to MMSI’s Cardiovascular segment during the fourth quarter from the projected closing of Oct. 31. Total revenues are now estimated to be in the range of $1.339 billion-$1.351 billion (previously $1.335 billion-$1.345 billion).

Cardiovascular segment’s revenues are now estimated to be in the range of $1.285 billion-$1.295 billion (up 1.281 billion-$1.289 billion).

Adjusted EPS for 2024 is now projected to be in the range of $3.25-$3.34 (down from the earlier projection of $3.27-$3.35). The Zacks Consensus Estimate for the top and bottom lines is pegged at $1.34 billion and $3.31 per share, respectively.

Merit Medical’s Growth Through Acquisition

In July, the company executed an asset purchase agreement with EndoGastric Solutions, Inc. The asset acquisition expands Merit Medical’s endoscopy portfolio with a minimally invasive solution — EsophyX Z+ device — for patients suffering from chronic gastroesophageal reflux disease. 

MMSI’s Share Price Performance

Shares of the company have gained 44.1% in the past year compared with the industry’s 0.2% rise and the S&P 500's 27.2% growth.

Zacks Investment Research
Image Source: Zacks Investment Research

Merit Medical’s Zacks Rank & Key Picks

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

Some better-ranked stocks in the broader medical space are DaVita Inc. (DVA - Free Report) , Baxter International Inc. (BAX - Free Report) and Boston Scientific Corporation (BSX - Free Report) .

DaVita, flaunting a Zacks Rank #1 (Strong Buy) at present, has an estimated long-term growth rate of 17.5%. DVA’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 24.2%. You can see the complete list of today’s Zacks #1 Rank stocks here.

DaVita’s shares have gained 57.9% compared with the industry’s 29% rise in the past year.

Baxter, carrying a Zacks Rank of 2 (Buy) at present, has an estimated long-term growth rate of 10%. BAX’s earnings surpassed estimates in each of the trailing four quarters, with the average being 3.7%.

Baxter has gained 2.3% compared with the industry’s 19% rise in the past year.

Boston Scientific, carrying a Zacks Rank of 2 at present, has an estimated long-term growth rate of 12.6%. BSX’s earnings surpassed estimates in each of the trailing four quarters, with the average surprise being 7.2%.

Boston Scientific’s shares have rallied 52.6% compared with the industry’s 19% rise in the past year.

Published in