Shares of AXNX skyrocketed before the market opened today, rising 21.1% to $69.72 apiece. Shares of BSX stayed even.
Marlborough, Massachusetts-based Boston Scientific priced the acquisition at $71 in cash per share. It amounts to an equity value of about $3.7 billion and an enterprise value of approximately $3.4 billion.
Irvine, California-based Axonics develops neuromodulation systems for treating urinary and bowel dysfunction. Its fourth-generation R20 rechargeable sacral neuromodulation (SNM) system received FDA approval around a year ago. Axonics also launched the recharge-free F15 SNM system in mid-2022.
Axonics’ technology delivers mild electrical pulses to the sacral nerve, restoring communication between the brain and the bladder. The company also offers the Bulkamid urethral bulking agent for stress urinary incontinence symptoms.
Boston Scientific expects to complete the transaction in the first half of 2024, subject to customary closing conditions. Axonics projects revenues totaling $366 million in 2023, marking 34$ growth over the previous fiscal year. Boston Scientific projects a highly accretive impact on its urology business in 2024. It expects an immaterial impact to its 2024 adjusted earnings per share, turning accretive thereafter.
“We are excited to add Axonics technologies to the Boston Scientific portfolio, a combination that we expect will further strengthen our ability to serve urologists who are treating patients living with these often-chronic conditions,” said Meghan Scanlon, SVP and president, Urology, Boston Scientific. “This acquisition also enables our entry into sacral neuromodulation, a high-growth adjacency with opportunities to expand access to care for patients.”
Axonics CEO Raymond W Cohen added: “Our team is looking forward to the global impact we can make as part of Boston Scientific as we endeavor to bring these life-changing therapies to more patients than ever before.”
The analysts’ view
BTIG analysts Marie Thibault and Sam Eiber note that the SNM market remains “significantly underpenetrated.” They say SNM holds just 23% of the share of third-line therapy.
They note Medtronic’s current hold on that market, with Axonics claiming a 27% market share. The analysts reiterated their “Buy” rating for Boston Scientific.
“We believe this portfolio will serve as a nice adjacency for [Boston Scientific’s] Urology business, given its high-growth profile in an underpenetrated market and [Boston Scientific’s] sub-segment in pelvic floor disorders,” they wrote. “We do not anticipate competitive bids given the size of the deal, limited adjacencies with other large-cap MedTech peers, and potential overlap with Medtronic’s existing business.”
How this plays into Boston Scientific’s strategy
At Boston Scientific’s Investor Day event in September, the company highlighted the role of M&A in its overarching business plan. The company had just announced the acquisition of Relievant Medsystems, which it completed in November.
The company has made a handful of M&A plays over the past several years, making it one of the more active medtech players on that front. At the end of 2022, the company announced its plan to acquire a majority stake in Acotec, worth around $523 million. In April, the company completed a $615 million acquisition of Apollo Endosurgery.
“M&A continues to be a focus area for us,” CEO Mahoney said in September. “It reinforces category leadership, moving us into faster growth markets, which you hear often is our goal, but it’s actually what we do. We’ve acquired, I think, over 40 companies or so over the past 10 years, most recently signing Relievant. … We’ve had a few that haven’t worked out over the years, but the majority of these tuck-in M&As have really improved our innovation cadence and our weighted average market growth rate.”