SIEMENS to buy Corindus

 

SIEMENS does not want to fall behind the surgical robotics hype, and as it was announced yesterday, it jumpstarts its activities with a major acquisition:   

• Acquisition of Corindus is a strategically significant extension of Siemens Healthineers' Advanced Therapies business
  
• Siemens Healthineers combines its cardiovascular and neuro-interventional therapy systems with Corindus’ innovative technology, driving procedure optimization for image-based minimally invasive therapies
• Under the terms of the agreement, Siemens Healthineers will acquire all fully diluted shares of Corindus for $1.1 billion

"German industrial conglomerate Siemens said Thursday its medical devices arm had agreed to buy US surgical robots maker Corindus for one billion euros ($1.1 billion), in a deal that must still be approved by shareholders and regulators.

"Siemens Healthineers will acquire all fully diluted shares of Corindus for $4.28 per share in cash or $1.1 billion in total," the Munich-based group said in a statement.

Massachusets-based Corindus builds robots to assist surgeons with operations on veins and arteries.

It says its machines help doctors place implants like stents more accurately and without exposure to radiation from the scanners used in the operating theatre.

Healthineers, which Siemens partially floated on Germany's MDax medium-sized businesses index last year, has until now mainly focused on building scanners.

""With this acquisition, we are opening up a new field for our image-guided therapies business," chief executive Bernd Montag said.

The company added that it hopes to seal the deal by the end of 2019.

Shares in Siemens Healthineers fell back slightly early Thursday, shedding almost one percent to trade at 36.09 euros by 09:25 am in Frankfurt (0725 GMT) while Siemens gained 0.4 percent to 89.69 euros, in line with the DAX blue-chip index."

"Siemens Healthineers has made its first major acquisition since becoming independent last March, and it has made quite an outlay to do it. The $1.1bn cash it is paying for Corindus Vascular Robotics comes in at a 77% premium to the company’s share price and is 37x next year's forecast sales. The deal will not be accretive until 2022 or 2023, and even that will happen before Corindus is expected to turn a profit. 

Corindus’s technology allows cardiologists to guide catheters through the vasculature and place implants such as stents using robotic devices that work with the kind of imaging products Healthineers makes. There are obvious synergies, but Healthineers faces a long grind before this deal pays off.

Corindus’s flagship system is the CorPath GRX, which sells for around $480,000. The group sold 50 of these machines last year and is on track to move 100 of them in calendar 2019. Most of its installed base is in the US, so doubtless Healthineers’ sales force can help boost European sales. 

The CorPath GRX is capable of speeding up interventional cardiology procedures by around 20%, which when done manually usually take up to two hours, Healthineers management said on an analyst call today. There is also an ongoing revenue stream in the shape of disposable cassettes which slot into the system to drive the insertion of the wires. These cost around $400-500 per procedure. 

Healthineers plans to create an integrated system that incorporates Corindus’s robot and its own imaging technology, though it was unable to give a timeline for when such a system might be market-ready.

Ambitious sales goals aside, Healthineers’ management is convinced that the Corindus business will reach break-even faster as part of the new owner’s advanced therapies business than it could as an independent company. But this point is still some way off. 

Corindus reported its second-quarter results today, and revealed that its revenues for the period came to $4.6m, up 175% over the prior year period, thanks to the sale of nine CorPath GRXs and 700 single-use cassettes.

Its net loss, though, is widening. This came in at $10.7m in the second quarter, compared to $9.9m in 2019. Jochen Schmitz, Healthineers’ chief financial officer, said on the call that the Corindus was not expected to post a profit before 2023.

There is one last twist to this deal: one of Healthineers’ imaging rivals owns a stake in Corindus. Around 12.5% of the target’s shares are owned by Philips, which used to be the exclusive distributor of CorPath GRX in the US. The distribution agreement has since lapsed, but theoretically Philips could work to derail the acquisition – though this seems unlikely given the return on its investment it could make if the deal closes. Mr Schmitz said he does not expect any interference from Philips, “but you never know”."

Source: RTL, Evaluate, Siemens