Boston Scientific Corp. will acquire Symetis SA for $435 million in cash in an effort to broaden its transcatheter aortic valve replacement (TAVR) portfolio. The Ecublens, Switzerland-based company had been expected to list publicly at the end of this month on the Euronext Paris market in an offering slated to raise €55.8 million (US$59.9 million).

Instead, the Marlborough, Mass., cardiovascular giant has scooped up Symetis, which has two EU marketed TAVRs with a next-gen iteration in the clinic. Wall Street evinced some concern that the addition of Symetis' Acurate platform to Boston Scientific's existing Lotus TAVR platform signals continued problems for the latter.

Last fall, during an initial European launch, Boston Scientific had to pull its latest TAVR, Lotus Edge, due to a problem with the deployment pin that later was found to be a larger manufacturing issue also affecting other Lotus products. The company, however, reiterated that it remains on track with resolving the manufacturing issue and that Lotus Edge is still slated to both re-enter the EU market and to have a PMA submission in the fourth quarter. A U.S. launch is targeted for mid-2018.

DOING IT ALL IN TAVR

"Our cornerstone Lotus valve combined with Symetis' Acurate platform are highly differentiated from competitors and highly complementary, addressing a broader range of patient pathologies and anatomies as well as physician preferences," said Boston Scientific chairman and CEO Mike Mahoney on a conference call about the deal, which is expected to close in the second quarter. He noted that TAVR is a higher growth segment with an overall market that's expected to exceed $4 billion by 2020.

"This is an attractive asset in the fast-growing TAVR space, with Symetis having made significant strides in the last two years with their Acurate TAVR platform," he added. Mahoney highlighted that the company's revenue growth rate has exceeded 50 percent in each of the last two fiscal years, and that it has a "very attractive" gross margins in the mid-60 percent range.

Symetis markets its Acurate TA and Acurate neo/TF systems in Europe to treat high-risk patients with severe and symptomatic aortic valve stenosis. Acurate TA is for transapical use, while Acurate Neo/TF is for transfemoral. Its next-gen Acurate neo/AS is currently in a clinical trial that's intended to be the basis for another CE mark.

Symetis had CHF38 million in 2016 sales, up from CHF25 million in 2015, which is roughly equivalent to the same amounts in U.S. dollars. Germany, Austria and Switzerland account for 70 percent of Symetis sales; during the fourth quarter it achieved a 13 percent market share in Germany and an 8 percent market share in Europe overall.

"We'll be able to uniquely offer customers both supra-annular and intra-annular valves, help expanding and mechanically expanding valves as well as transapical and transfemoral access routes, plus other accessory products," explained Mahoney, adding that the Symetis acquisition "builds on" certain recently acquired Neovasc assets.

That suggests that biologic tissue based on those Neovasc capabilities may be a coming attraction in Boston Scientific's TAVR program. In December, Boston Scientific bought Neovasc's advanced biologic tissue capabilities and certain manufacturing assets for $75 million and made a 15 percent equity investment.

CAUTIOUS WALL STREET OPTIMISM

Initial response on Wall Street to the Symetis acquisition was muted at best, with Boston Scientific shares edging down 1 percent in early trading on the news. Analysts evinced some concern that the addition of a second TAVR platform called into doubt continued progress on the existing Lotus platform, which has been troubled.

"According to BSX, the acquisition of Symetis is about having a broader product offering and not a hedge on Lotus," noted Wells Fargo analyst Larry Biegelsen in a note. He went on to observe, as did Boston Scientific on its call, that having more than one TAVR platform technology is hardly unique and cited Edwards Lifesciences as an example with its dual TAVR platform approach, including balloon-expanding Sapien 3 and its self-expanding Centera.

Symetis' devices are self-expanding nitinol devices, like Medtronic's Corevalve and Abbott's Portico, while Lotus has a nitinol frame and is mechanically expanding, pointed out Biegelsen. He was upbeat about the potential for Symetis' products, including their potential in the U.S., projecting 2017 Symetis sales of roughly $50 million to $60 million.

"Symetis' devices have relatively low pacemaker rates for self-­expanding TAVR devices and are known for their ease of use. Symetis has not yet started a pivotal US trial, however, they recently started the SCOPE I trial which is a head-to-head comparison of its Acurate Neo/TF vs. EW's Sapien 3. The company also plans a second trial, SCOPE II, as well as a mitral program," outlined Wells Fargo's Biegelsen.

Stifel's Rick Wise was even more upbeat on the company's Lotus reassurances and Symetis' potential, citing the latter's "innovative X-shaped" device structure, very low paravalvular leak rates as well as a low pacemaker rate.

FORWARD MOVEMENT

Mahoney offered extensive reassurance on the Lotus recall and the resolution of related manufacturing issues. "It's the one single issue that first presented with Edge; you'll recall last fall we found it, this early pin release, which we founded on the classic Lotus and Lotus with Depth Guard platforms in February."

"So it's the same single issue. It has to do with excessive pin tension and the root cause is well understood by our teams in Ireland. We are in implementation mode, in terms of revalidations and such and it remains, as we said before, a combination of relatively minor process and then specification changes, along with a final inspection step that we think will be very robust," he concluded.

Boston Scientific expects a return on invested capital (ROIC) from the Symetis deal of 10 percent at year three. It anticipates the deal will be accretive to earnings in 2018 and beyond.

Summed up Mahoney on the deal rationale, it "helps us continue to build upon and execute our category leadership strategy in structural heart, in addition to our leading Watchman Left Atrial Appendage closure device. We're excited to offer both Lotus Valve and the complementary Symetis Acurate platform and TAVR to physicians. Given our proven track record of providing broad and compelling product innovation, supported by commercial and clinical excellence, we believe we can drive synergistic growth by offering all three platforms."