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Merit Stays the Course with Brightwater Acquisition

Analyst says Merit Medical Systems' $35 million acquisition of Brightwater Medical is consistent with the company's M&A track record.

Merit Medical Systems has a track record of acquiring single-product assets or a small number of products and integrating them seamlessly, according to Needham & Co.'s Mike Matson. Merit's latest deal appears to be consistent with that strategy.

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Merit Medical Systems said it has acquired Brightwater Medical for a $35 million upfront payment and potential earn-out payments of up to $15 million based on receipt of CE mark approval and achievement of future sales targets.

Brightwater's primary product is the ConvertX, which is a single device used to replace a series of devices and procedures used to treat severe obstructions of the ureter. The system is designed to be implanted once and converted from a nephroureteral catheter to a nephroureteral stent without requiring sedation or local anesthesia. The device is FDA cleared but does not yet have CE mark approval in Europe. Brightwater was founded by Robert Smouse, a professor of radiology and surgery at the University of Illinois College of Medicine in Chicago.

Mike Matson, a medtech analyst for Needham & Co. who covers Merit, said the deal is M&A track record of acquiring single-product assets or a small number of products and seamlessly integrating them. He offered Merit's acquisition of Becton Dickinson's biopsy products in late 2017 as an example. He also noted that Merit has an existing interventional radiology business and a significantly larger sales organization than Brightwater.

South Jordan, UT-based Merit said it will maintain Brightwater's production capabilities in Temecula, CA while duplicating those capabilities in its catheter facility in Pearland, TX, prior to transferring the ConvertX manufacturing operations to the Texas facility.

Merit management said it expects the ConvertX to bring in about $1 million of revenue in 2019 and grow to about $25 million in the fifth full year of sales.

“The ConvertX system is designed to reduce multiple visits to the hospital, saving patients the risk and discomfort of a second interventional procedure while allowing additional utilization of facilities,” said Fred Lampropoulos, chairman and CEO of Merit Medical.  “The ConvertX system complements Merit’s Resolve drainage catheter portfolio and potentially drives pull-through of other Merit products such as InQwire guide wires, Advocate PTA balloons, and other vascular products.”

Brightwater Medical currently has about 40 U.S. accounts serviced by two direct sales representatives and a small number of distributors.

“We believe our ability to align this product with our existing sales force calling on interventional radiologists, as well as growth in markets outside the United States will allow for future growth,” Lampropoulos said.

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