CMD Cantel Medical Corp

AngioDynamics Inc. (ANGO), a provider of therapeutic and diagnostic devices for the treatment of peripheral vascular and other non-coronary diseases, completed its previously announced acquisition of certain assets of Mircosulis Medical Ltd. for $15 million.

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

About Microsulis

Denmead, England-based Microsulis specializes in minimally invasive, microwave ablation technology for the coagulation of soft tissues. The medical device company has successfully installed its systems in over 80 hospitals across the globe.

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

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

Financial Impact

AngioDynamics made an upfront payment of $10 million. The company will utilize the cash on hand to pay the remaining $5 million on Dec 31, 2013. It will also assume up to $1 million of liabilities of Microsulis. Further, stakeholders at Microsulis might be entitled to earn-out payments based on its performance over the next 9 years.

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.

Our Take

We view the acquisition in a positive light based on AngioDynamics’ successful partnership with Micrusulis. The company’s thermal ablation business has been stagnant for the past three years. In fiscal 2012, revenues from this franchise stood at $23 million. The company expects significant revenue synergies from the latest deal, which is reflected in its annual growth forecast of 20% over the next 3 years.

Moreover, the buyout is in line with the company’s strategy to grow on the back of acquisitions and strategic alliances. AngioDyanmics’ aggressive acquisition strategy targets high-growth areas. In Oct 2012, the company acquired Vortex Medical and its coveted Food and Drug Administration (FDA)-approved Angiovac technology to boost the peripheral vascular product portfolio.

The company’s current focus on the promising 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), Cantel Medical (CMN) and Cyberonics (CYBX) with Zacks Rank #1 (Strong Buy) are worth considering.
 

 
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