Marlborough, Massachusetts-based Boston Scientific Corporation has announced its agreement to acquire Carlsbad, California-based Vertiflex Inc., a privately held company that makes minimally invasive vertebrae spacers to treat lumbar stenosis.
The deal includes $465 million cash payment at closing plus a commitment to make additional payments based on certain milestones over the next three years.
Vertiflex is the creator of the Superion® Indirect Decompression System, a minimally invasive device used to improve physical function and reduce pain in patients with lumbar spinal stenosis (LSS). The Superion System was approved by the U.S. Food and Drug Administration in 2015 for patients with moderate degenerative LSS.
Vertiflex estimates that as many as six million people in the U.S. may be suffering from lumbar stenosis, which is the painful narrowing of the open spaces within the lower spinal column. Lumbar stenosis can pinch nearby nerves and cause lower back and leg pain, numbness and trouble walking.
The Superion System works by creating space between the spinous processes of the vertebrae. The creation of this space reduces pressure on the nerves, which can improve patient mobility and relieve pain, numbness and cramping in the legs.
This procedure provides an additional treatment option for patients who have not responded positively to therapies such as oral pain medication and steroid injections, but do not have severe enough symptoms to require spinal fusion or laminectomy.
Earl Fender, president and CEO of Vertiflex, explained, “Five-year clinical data and real-world experience with the Superion System demonstrate that this minimally invasive and reversable procedure—done without destabilizing the spine—can offer patients safe, long-term pain relief with a relatively rapid recovery time…We are proud of the clinical and commercial successes we’ve been able to achieve and look forward to continued adoption of the therapy with the global resources and clinical expertise of the Boston Scientific pain management franchise.”
Maulik Nanavaty, president, Neuromodulation, Boston Scientific, said, “The acquisition of Vertiflex and the Superion System will further our category leadership strategy by expanding the breadth of our pain management product offerings.” He continued, “The addition of this differentiated technology, along with our leading spinal cord stimulation and radiofrequency ablation technologies, will provide physicians with the widest variety of solutions available to manage the growing number of patients suffering from chronic pain.”
Vertiflex expects to reach at least $60 million in sales this year for its Superion Indirect Decompression System.
The transaction is expected to be immaterial to adjusted earnings per share in 2019 and 2020, and accretive thereafter. The acquisition is projected to close late in the second quarter of 2019, subject to customary closing conditions.
Following the announcement, Larry Biegelsen, senior analyst for Wells Fargo Securities Equity Research, sent a note to his clients entitled “BSX: Vertiflex Acquisition Seems Like A Good Fit.” In the note, Biegelsen and his associates noted that they spoke with a thought-leading physician regarding the announcement and that the physician “believes Superion will continue to see strong adoption by the pain specialist community in part because it gives them another treatment modality before referring patients out to their surgeon counterparts.”
The analysts also noted that the Superion product has several advantages over Medtronic’s discontinued X-Stop spacer, including the ability to be implanted in the outpatient setting, with a limited need for anesthesia, minimal-to-no blood loss, and smaller incisions. Medtronic acquired the X-Stop system through its acquisition of Kyphon in 2007, but the product was discontinued in 2015.
