In a bid to boost its interventional cardiology division, Boston Scientific (NYSE:BSX) is acquiring BridgePoint Medical, a developer of a catheter-based system used in restoring blood flow in a coronary artery.^[1] While the financial details of the acquisition were not disclosed, the acquisition will certainly strengthen and expand the company’s interventional cardiology business.

The stock price is hovering around our $6 price estimate presently, and we recently discussed the company’s business model (read here) to see what factors could lead upside to the Trefis price estimate.

See our complete analysis of Boston Scientific

Interventional cardiology involves the use of catheters to remove clogging from arteries and helps in restoring blood flow in the body. Boston Scientific enjoys a market leadership position in this division primarily because of its self-manufactured coronary stent systems, which are small tubes used to treat coronary artery diseases. However, its market share has been shrinking (from 33% in 2008 to 23% in 2011) as revenues declined (from $2.9 billion in 2008 to $2.5 billion in 2011) due to significant competition while the overall market size increased (from $8.5 billion in 2008 to $10.5 billion in 2011). In the last quarter also, revenues from this business declined 13% y-o-y to $550 million, excluding the currency impact.

However, the acquisition of BridgePoint Medical could help the company counter this decline. The innovation and launch of new products are key for a medical devices company to survive. BridgePoint Medical makes a proprietary catheter-based system to treat coronary chronic total occlusion (CTO), an obstruction of a coronary artery. The product has both the FDA and European CE approvals and is currently the only crossing and re-entry system cleared in the U.S. for use in coronary CTOs.

The acquisition will help Boston Scientific utilize its brand name with the product’s first mover advantage to establish market presence. And, to the extent that the product is effective, it could add to the company’s revenues and help fend defend its market share.

The interventional cardiology segment is the largest revenue contributor and constitutes more than 25% of our price estimate, so even a small out-performance with respect to our expectations will have a huge impact on the company’s valuation.

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