Sometimes, early interest may not be a precursor to a quick acquisition.
This is the case when Medtronic recently announced the acquisition of Intersect for US$1.1 billion.
According to John Jordan, Director of External Communications of Medtronic’s Minimally Invasive Therapy Group, Medtronic actually invested in the company as early as 2010.
“For more than ten years, we have established a close relationship with Intersect,” he said in an interview with Zoom. “We have always admired this technology, but we maintain self-discipline in how and when to pursue the company.”
Intersect ENT in Menlo Park produces steroid-coated stents that can be used in conjunction with sinus surgery (Propel) or in cases of unsuccessful surgery (Sinuva). It is the first company to obtain a license for this type of equipment, which gives it a unique position in the market.
However, the company needs time for doctors to use its products and win insurance from the payer.
“The challenge for Sinuva is that the reimbursement is not in place. Doctors have little motivation,” said Ryan Zimmerman, managing director of BTIG Equity Research. “Then it really started to take off.”
According to its Annual earnings reportDue to the suspension of procedures and appointments in the first few months of the Covid-19 pandemic, Intersect brought in $80.55 million in revenue last year, a decrease of 26% from 2019. Since then, the company noted that Propel’s sales in hospitals and surgery centers quickly recovered, and Propel was placed in the sinuses after surgery. Intersect also touted improved reimbursement and payer coverage for its outpatient facility Sinuva.
Rear Potential acquisition rumors Last year, Medtronic did not realize it, and Intersect found other ways to grow. In October, it acquired Fiagon AG Medical Technologies, which makes surgical navigation products.
It also recently received a $60 million term loan, which caused its stock price to climb. Zimmerman said this may prompt the transaction to cross the finish line.
Zimmerman said in a telephone interview that this financing provides Intersect with “a good runway to become a more diversified ENT participant.” “They started to be down-to-earth; all the parts are in place.”
The deal will complement Medtronic’s current product portfolio, including products for balloon sinus dilation and other surgical equipment. For example, Robbie Marcus, a senior analyst at JPMorgan Chase, wrote in a research report that Intersect’s postoperative implants are used in combination with Medtronic’s balloon sinusplasty products.
In addition, Medtronic can expand Intersect’s footprint, including selling its equipment outside the United States
“In the final analysis, we are very focused on assisting surgeons in the treatment of ENT patients. This is just an additional technology in our product portfolio that can help surgeons help patients,” Jordan said.
The board of directors of both companies approved the transaction, but it still needs to be approved by Intersect investors.If it fails, Intersect will face a termination fee of US$29.25 million, according to Power of attorney submitted by Medtronic.
Photo credit: maddiva, Getty Images
