SOUTH JORDAN, Utah - Merit Medical Systems , Inc. (NASDAQ: NASDAQ:MMSI), a healthcare technology firm, announced the signing of a definitive agreement to acquire Cook Medical's lead management product portfolio. The transaction, valued at approximately $210 million in cash, is expected to close in the fourth quarter of 2024, pending regulatory approvals and customary closing conditions.
The acquisition is projected to add roughly $40 million to Merit's annual revenue beginning in fiscal year 2025, contributing to its electrophysiology and cardiac rhythm management (CRM) business growth. Cook Medical's lead management business, with a 34-year history, offers a suite of products for pacemaker or implantable cardioverter-defibrillator (ICD) lead management procedures.
Fred P. Lampropoulos, Chairman and CEO of Merit, stated that this move aligns with their Continued Growth Initiatives (CGI) and will enhance their position in the cardiac intervention market. The market opportunity in the US, EMEA, and APAC regions is estimated at over $900 million annually. Post-acquisition, Merit anticipates representing more than $100 million in combined annualized electrophysiology and CRM revenue.
Merit has updated its full-year 2024 financial guidance to include the anticipated impact of this acquisition from October 31, 2024, to December 31, 2024, while reaffirming the guidance previously issued on August 1, 2024. The company expects the transaction to be modestly dilutive to its 2024 non-GAAP profitability due to the partial-year contribution. However, the acquisition is forecasted to be accretive to non-GAAP gross margin and operating margin in the first full year post-close and to non-GAAP net income and earnings per share in the second full year.
The guidance now reflects net sales of $1.339 to $1.351 billion for the year ending December 31, 2024, with non-GAAP earnings per share projected at $3.25 to $3.34. The transaction is expected to generate revenue of $4 to $6 million from the projected closing date through the end of 2024, with a dilutive effect on non-GAAP operating margin, net income, and earnings per share, excluding certain non-cash and non-recurring expenses.
Wells Fargo (NYSE:WFC) served as financial advisor to Merit, while Bank of America (NYSE:BAC) Securities advised Cook Medical. Legal advisory was provided by Parr Brown Gee & Loveless for Merit and Ice Miller for Cook Medical.
This announcement is based on a press release statement and provides an overview of the proposed acquisition's financial implications. The transaction's completion and its subsequent financial impact involve risks and uncertainties, including regulatory approvals and the integration of acquired assets and operations.
In other recent news, Merit Medical Systems has been in the spotlight due to favorable clinical trial results, financial performance, and analyst upgrades. The company's WRAPSODY endovascular stent graft showed significant improvement in the WAVE pivotal trial, leading to maintained Overweight and Buy ratings from Piper Sandler and Needham respectively. Wells Fargo and BofA Securities also increased their price targets for Merit Medical, reflecting the potential of the WRAPSODY device.
Merit Medical reported a total revenue of $338 million in the second quarter of 2024, a 5.6% increase year-over-year. This growth was driven by organic growth and the acquisition of EndoGastric Solutions for $105 million. The company's updated financial guidance for 2024 projects a net revenue increase of 6-7% and non-GAAP diluted EPS growth of 15-17%.
The WAVE pivotal trial for the WRAPSODY endovascular stent graft demonstrated a target lesion primary patency (TLPP) rate of 89.8% at six months, significantly outperforming the percutaneous transluminal angioplasty (PTA), which had a TLPP of 62.8%. The WRAPSODY stent also reported fewer device and procedure-related events compared to PTA at the 30-day mark. These recent developments have led to a positive outlook for Merit Medical, as suggested by analysts from Piper Sandler, Wells Fargo, and BofA Securities.
InvestingPro Insights
Merit Medical Systems, Inc.'s (NASDAQ: MMSI) definitive agreement to acquire Cook Medical's lead management product portfolio is a strategic move that is expected to bolster the company's annual revenue. With a current market capitalization of approximately $5.8 billion, Merit Medical Systems is trading at a high earnings multiple, with a P/E ratio of 49.02, reflecting investor confidence in the company's future earnings potential. This valuation is slightly above the adjusted P/E ratio for the last twelve months as of Q2 2024, which stands at 49.29.
The company's revenue growth has been steady, with an 8.6% increase over the last twelve months as of Q2 2024, and a quarterly revenue growth of 5.61% for Q2 2024. This growth trajectory is expected to continue with the integration of Cook Medical's lead management product portfolio, which aligns with Merit's CGI and is projected to add significant value to its electrophysiology and CRM business.
InvestingPro Tips indicate that Merit Medical Systems operates with a moderate level of debt and its liquid assets exceed short-term obligations, suggesting a stable financial position to undertake such an acquisition. Furthermore, the company has experienced a strong return over the last three months, with a 19.14% price total return, and an even more impressive six-month price total return of 33.82%.
Investors interested in the detailed analysis of Merit Medical Systems' financials and future outlook can find additional InvestingPro Tips by visiting https://www.investing.com/pro/MMSI. There are currently 15 additional tips available on InvestingPro that provide deeper insights into the company's performance and valuation metrics. These tips can help investors make more informed decisions in light of the company's latest strategic acquisition and its potential impact on the market.
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