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Boston Scientific buys Vessix for blood pressure device

By Debra Sherman

(Reuters) - Boston Scientific Corp said on Thursday it will acquire privately-held Vessix Vascular Inc, a developer of a catheter-based device that treats high blood pressure by deadening nerves near the kidneys.

Boston Scientific, a maker of heart pacemakers, implantable defibrillators and heart stents, joins a growing line-up of medical device makers offering this new treatment.

Under terms of the deal, expected to close at the end of November, Boston Scientific will make an upfront payment of $125 million, plus milestone payments of up to $400 million between 2013 and 2017. The deal is expected to be immaterial to adjusted earnings in 2013 and 2014, and break-even to profitable thereafter.

One in three adults in the United States has high blood pressure, according to the National Institutes of Health.

Health officials say more than one billion people in the world suffer from the ailment, also known as hypertension, which can lead to coronary heart disease, heart failure, stroke, kidney failure, and other health problems.

Normal blood pressure is below 120/80 mmHg (millimeters of mercury). Hypertension is a reading above 140/90 mmHg.

Despite widespread availability of drugs to treat the condition, blood pressure in many patients remains uncontrolled.

Renal denervation is a procedure in which a thin, flexible catheter is threaded through the body to the renal sympathetic nerves near the kidneys. Radiofrequency energy is delivered to disrupt the nerve activity, relieving high blood pressure.

Renal denervation is expected to be a multibillion dollar market by 2020, according to Boston Scientific.

The new therapy is not yet approved in the United States, but several products are available in Europe.

Device makers that have received approval to sell hypertension devices in Europe include front runner Medtronic Inc, St Jude Medical Inc, Covidien Plc, ReCor Medical and Vessix, which also has approval in Australia.

Bernstein Research analyst Derrick Sung said the price Boston Scientific is paying is on the high end compared with the most recent renal denervation deals.

For example, he noted that Medtronic paid $800 million, plus milestone payments equal to the annual growth in sales through 2014 for Ardian, a maker of a renal denervation system. He said Ardian's high price is justified by the fact that the intellectual property gives Medtronic a 2- to 3-year lead in the United States. Covidien recently paid $60 million for Maya Medical, plus up to $170 million in milestone payments.

"It appears that Boston Scientific is valuing Vessix at about an 84 percent premium to the valuation that Covidien put on Maya," he wrote in a research note.

Sung also said he was surprised by the deal because the company had indicated it was moving forward with its internal renal denervation program.

"As recently as two weeks ago... management had indicated to us that they were planning to go first-in-man with their internally developed single-electrode renal denervation system before the end of this year, and were on track to follow closely with their second generation multi-electrode system," Sung wrote.

"Boston Scientific's acquisition of Vessix suggests to us that Boston Scientific's internal program may not have been as far along as management had given us to believe," he added.

Boston Scientific shares were trading at $5.15, down 1 cent, on the New York Stock Exchange.

(Editing by Jeffrey Benkoe and Andrew Hay)

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