Pharma Products Face Uncertain Future In Boston Scientific's 'Logical' £3.3bn Bid For UK's BTG
Executive Summary
Boston Scientific CEO says US group has been tracking UK-based BTG "for more than two years" and that interventional medicine is a key attraction.
Boston Scientific Corp.'s recommended cash offer for BTG PLC is being applauded by analysts as logical - despite a full price tag - for its complementary fit and potential for the US group's international infrastructure to grow the diversified British group's sales outside the US, where it currently generates some 90% of its total revenues. However, the future of BTG's specialty medicines is not yet clear.
The US medical devices manufacturer on Nov. 20 announced it had made a recommended 840p cash per share offer for the diversified UK-based group, implying a valuation of £3.3bn ($4.2bn), representing a 37% premium to BTG's closing price the prior day and a 50% premium to the volume weighted average price stock trading benchmark.
Boston Scientific develops, manufactures and markets medical devices used in a range of interventional medical specialties, and offers its products through seven businesses: interventional cardiology, cardiac rhythm management, endoscopy, peripheral interventions, urology and pelvic health, neuromodulation, and electrophysiology.
BTG has three key franchises: interventional medicine, acute specialty pharmaceutical and product licensing.
The largest revenue generator for BTG is interventional medicine - procedures that deliver targeted treatments to destroy tumor cells without causing damage to healthy tissue - with several peripheral product lines including the TheraSphere Y-90 radiotherapy microspheres and the GALIL cryoablation system used to treat patients with liver, kidney and other cancers. It also includes the EKOS endovascular system, which combines clot-dissolving drugs to break down blood clots in patients with pulmonary emboli, deep vein thrombosis, and peripheral arterial occlusions.
Pharma Segment Questions
BTG’s stable of pharma products are used in hospital emergency rooms and intensive care units.
The products typically address conditions with small patient populations for which there are limited or no existing treatment options.
A BTG source told Scrip that Boston Scientific has yet to formulate its long-term plans with respect to BTG's pharmaceuticals business.
"The pharma thing is a bit in 'left field' given what they treat - heart problems, overdoses, rattlesnake bites - but it comes with the package. It's obviously not a natural fit but it gives them [the merged group] an entry into acute care pharmaceuticals, but they're not sure yet what to do with it, so [Boston Scientific] will probably leave it pretty much alone."
Boston Scientific is thus likely to operate BTG's pharma business in substantially the same manner as it currently is, the source concluded.
Although a British-based company, 90% of BTG's revenue is generated in the US.
Boston Scientific's management said it could use its international footprint to commercialize BTG's products outside the US.
BTG should add more than $400m in revenue to Boston Scientific's Interventional division in 2019, the acquiring group's management told an analysts call when outlining the proposed merger.
Boston Scientific's primary interest in BTG seems to be the UK company's interventional medicine, especially the interventional oncology segment, as that offers a complementary fit. Boston Scientific's activities in cardiovascular disease therapies also make BTG's CV assets attractive to bring under one roof, analysts said.
The proposed purchase of BTG marks Boston Scientific's 10th acquisition in 2018.
Boston Scientific's CEO Michael Mahoney said he and management had been tracking BTG for over two years and that their complementary offerings fit like "hand in glove."
The announced merger offer came one week after BTG presented its financial update for the first-half of 2019 showing overall revenues up 6% on the same year-ago period, reflecting a good performance across the board with notably strong sales from DigiFab [digoxin immune fab], Voraxaze [glucarpidase] and the out-licensing of BTG945 for ovarian cancer to UK-based Carrick Therapeutics Ltd. (Also see "Carrick Targets Ovarian Cancer With BTG Deal, Entices Celgene’s Former Top Deal Maker" - Scrip, 11 Oct, 2018.)
Analysts generally said the deal made strategic sense.
"We view the offer as fair based on Boston Scientific's stated focus on the cancer and pulmonary embolism franchises," analysts at Jefferies said in a note, adding "we see a low likelihood of counter-bids,"