GIVN Given Imaging Ltd. - Ordinary Shares (MM)

Specialist manufacturer of gastrointestinal products, Given Imaging Ltd. (GIVN) recently announced the acquisition of assets related to the SmartPill GI Monitoring System from The SmartPill Corporation for $6 million.

The acquisition also encloses an earn-out provision, based on SmartPill sales between 2013 and 2016. However, the company does not expect any meaningful earn-out payments.

SmartPill is an ingestible capsule which measures pH level, temperature and pressure in the gastrointestinal tract using sensor technology. The wireless motility capsule can be used for the evaluation of gastroparesis and constipation. SmartPill has U.S. Food and Drug Administration (FDA) and European CE mark approval.

On account of the dominance of Given Imaging in the capsule endoscopy market, the inclusion of SmartPill in its product portfolio will strengthen the company’s position in the market it serves. Given Imaging plans to further expand SmartPill’s market with supportive clinical data, marketing efforts and production optimality for the wireless motility capsule.

The acquisition is slated to be accretive to Given Imaging’s current top-line though the accretion is not expected to be substantial to its fourth quarter 2012 revenues. For 2013, the company expects that SmartPill will contribute revenues in low single-digits. The acquisition is expected to be accretive to the company’s bottom-line by the end of 2014. Acquisition-related costs will be recognized in 2012.

Meanwhile, Given Imaging is seeking regulatory approval in Japan for its second generation visual capsule PillCam Colon 2. PillCam Colon and the company expects to submit the clinical trials for FDA clearance in the fourth quarter.

However, the video capsule received the European CE Mark in September 2009. It is also available in Latin America, Canada and some parts of Asia. Based on market statistics, Given Imaging sees a $4 billion potential market for its PillCam Colon offering.

Given Imaging currently retains a Zacks #4 Rank, which translates into a short-term Sell rating. The company’s product momentum is a material upside. However, it operates in a tough competitive landscape of medical imaging solutions providers such as Olympus Corporations (OCPNY), GE Healthcare, a division of General Electric (GE), and the privately-owned FUJIFILM Holdings Corporation.
 

 
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