Merit Medical (MMSI) to Acquire Cianna Medical, Shares Up

Merit Medical Systems, Inc. MMSI recently announced that it has signed a definitive merger agreement to acquire Aliso Viejo, CA-based Cianna Medical, Inc.  The transaction is expected to close during the fourth quarter of 2018.

Share prices of the company increased 6.4% to close at $65.94 following the news release. The stock has a Zacks Rank #3 (Hold).

Financial Terms

The deal has an upfront payment of $135 million along with a $15-million payment for securing supply chain metrics.

The proposed transaction will be accretive to Merit Medical’s earnings per share on an adjusted basis in the range of 8-13 cents per common share.

The company expects adjusted gross margins in the range of 70-75% on Cianna Medical products.  It projects revenue growth in the band of $50-$56 million.

How is Merit Medical Poised to Benefit?

Cianna Medical is a leading player in breast cancer treatments, especially in wire-free breast localization. Its flagship SCOUT and SAVI Brachy technologies are FDA-cleared and make radiation therapy easy. Per management, the platforms are complementary to Merit Medical’s strategic biopsy initiatives.

Post the closure of the deal, Merit Medical is likely to market Cianna Medical’s SAVI BRACHY, which uses thin tubes to deliver radiation to lumpectomy sites. Further, the company plans to retain the entire commercial and R&D teams of Cianna Medical.

Bright Prospects in Breast Lesion Localization Markets

Per Grand View Research, the global breast lesion localization methods market size had a worth of $507.7 million in 2016 and is estimated to reach $1,577.6 million by 2025, at a CAGR of 13.3%.

Considering the solid prospects, we expect Merit Medical to gain strong traction in the niche space.

Favorable Stock Performance

Merit Medical outperformed its industry in a year's time.

The company’s shares have surged almost 45.3% compared with the industry's rise of 14.8%. The current level is also higher than the S&P 500’s increase of 15.2%. Merit Medical has been leveraging on bolt-on buyouts, which are driving inorganic growth. The company gains from favorable tidings on the regulatory front as well.

 

Key Picks

A few better-ranked stocks in the broader medical space are Surmodics, Inc SRDX, Masimo Corporation MASI and Veeva Systems VEEV.

Surmodics has a long-term expected earnings growth rate of 10%. The stock sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Masimo’s long-term earnings growth rate is projected at 14.8%. The stock carries a Zacks Rank #2.

Veeva Systems’ long-term earnings growth rate is estimated at 19.3%. The stock sports a Zacks Rank #1.

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