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Boston Scientific Bids on a Medtronic Foe
Boston Scientific agreed to buy Axonics, a longtime adversary to Medtronic in the sacral neuromodulation space.
January 8, 2024
4 Min Read
Image by Nature / iStock via Getty Images
At a Glance
- The equity value of the deal is about $3.7B and the enterprise value is about $3.4B.
- The Axonics products are designed to treat urinary and bowel dysfunction.
- Boston Scientific expects to complete the deal in the first half of 2024.
Boston Scientific kicked off one of the most important healthcare conferences of the year (J.P. Morgan) with a $3.7 billion deal to bolster its urology portfolio.
The Marlborough, MA-based company has agreed to acquire Axonics, a longtime adversary of Medtronic in the sacral neuromodulation space, for $71 a share in cash. This price reflects an equity value of about $3.7 billion and an enterprise value of about $3.4 billion.
Mike Matson, a medtech analyst at Needham & Co., has long considered Axonics to be among the 25 Most Attractive Medtech M&A Targets, and has even previously called out Boston Scientific as a potential suitor.
"We have long thought that [Boston Scientific] was the most logical acquirer of [Axonics] and we believe that the acquisition is complementary to both [Boston Scientific's] urology and neuromodulation businesses," Matson wrote in a note Monday morning.
The M&A announcement comes about a year after FDA approved the fourth-generation Axonics R20 neurostimulator, a rechargeable sacral neuromodulation (SNM) device with an expected battery life of 20 years or longer. The portfolio also includes the Axonics F15 recharge-free SNM system for the treatment of overactive bladder and fecal incontinence, and the Bulkamid Urethral Bulking System for the treatment of female stress urinary incontinence.
The SNM devices are designed to deliver mild electrical pulses to the sacral nerve to restore communication between the brain and the bladder. In clinical studies, Axonics Therapy has demonstrated meaningful improvement in patients' quality of life in follow-up out to two years, with no serious device-related adverse events reported.
"We are excited to add Axonics technologies to the Boston Scientific portfolio, a combination that we expect will further strengthen our ability to serve urologists who are treating patients living with these often-chronic conditions," said Meghan Scanlon, president of Boston Scientific's urology business. "This acquisition also enables our entry into sacral neuromodulation, a high-growth adjacency with opportunities to expand access to care for patients."
Boston Scientific expects to complete the transaction in the first half of 2024. Axonics expects to deliver net revenue of about$366 million in 2023, representing 34% growth over the prior fiscal year. Axonics' revenue growth profile is anticipated to be highly accretive to Boston Scientific's urology business in 2024.
“The success of Axonics is a testament to our mission-driven employees and their commitment to innovation, quality and teamwork," said Axonics CEO Raymond Cohen. "Our team is looking forward to the global impact we can make as part of Boston Scientific as we endeavor to bring these life-changing therapies to more patients than ever before."
A medtech feud for the ages
Medtronic held a monopoloy in the sacral neuromodulation market prior to Axonics winning its first FDA approval in 2019. That approval set the proverbial fire to an already-smoldering turf war between Medtronic and the smaller competitor.
Here are the key points to know about the contentious history between Medtronic and Axonics.
Medtronic pioneered the SNM market more than 20 years ago with its InterStim device, used to treat various bladder and bowel conditions.
Along came Axonics Modulation Technologies with FDA approval in 2019 for a rechargeable version of a similar device.
The market incumbent almost immediately filed a lawsuit against Axonics, alleging infringement on certain claims in seven patents related to Medtronic's SNM lead placement procedure and implant recharging technologies.
Axonics filed seven petitions with the U.S. Patent and Trademark Office requesting an inter partes review of each of the Medtronic patents in question.
Medtronic catches up with the market challenger by winning FDA approval of its own rechargeable SNM device.
In September 2020, the Patent Trial and Review Board (PTAB) decided to review the validity of six of the seven Medtronic patents in question. However, the PTAB decided not to institute a review of one of the patents — (U.S. Patent No. 9,463,324 ('324 patent) — because there is not a reasonable likelihood that any of the claims in that particular patent would be found to be invalid. According to Medtronic, the '324 patent protects key technology related to implant recharging and temperature control and is central to the infringement case against Axonics.
In September 2021, the PTAB upheld three of the patents Axonics challenged.
In February 2022, FDA approved InterStim X, the next generation of Medtronic's recharge-free device.
In March 2022, FDA approved Axonics' recharge-free sacral neuromodulation implantable neurostimulator, called F15.
In January 2023, FDA approved the latest version of the Axonics R20 SNM system.
The plot twist came in August 2023 when a federal judge ruled that the PTAB had errored in Medtronic's favor by refusing to consider new arguments from Axonics after the board adopted an interpretation of the patents' terms that Medtronic submitted. The court also reopened Axonics' challenges to two other Medtronic patents at a U.S. Patent and Trademark Office tribunal in July 2023.
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