Analyst: Boston Scientific's Acquisition Is 'Strategically Sound'

In a report published Monday, Leerink analysts maintained an Outperform rating on Boston Scientific Corporation BSX, after the company announced its plans to acquire the American Medical Systems (AMS) Men's Health business from Endo International plc ENDP for $1.6B. In the report, Leerink noted, "This acquisition represents a strong strategic fit for BSX, with AMS maintaining a leading position in BPH and Men's Health to complement BSX's already strong Women's Health and Urology portfolio. And BSX sees opportunity to leverage the market-leading positions to drive both product-based and geography-based sales synergies, accelerating the acquired assets' sales growth rate from low-single-digits to more in line with the BSX corporate target of 3%-6%." Now that Boston Scientific has greater financial flexibility after the JNJ (OP) settlement, the analysts are not surprised to "see BSX be increasingly acquisitive in an effort to further diversify away from the slower growth CRM and DES businesses that constitute close to 60% of sales today." "BSX will fund the acquisition through debt, with the intent to almost immediately begin paying down this debt. In order to do so, BSX has temporarily suspended its share repurchase program, with management noting that M&A represents a higher priority for the company from a capital allocation perspective," the analysts said. The acquisition, which is expected to close in 3Q15, would help Boston Scientific build "the foremost Urology portfolio in the market, which is expected to generate close to $1B of the $4B of total Urology market sales," Leerink added.