Boston Scientific Buys Asthma Device Manufacturer

In an effort to reshape its medical devices portfolio, Boston Scientific Corp. has agreed to purchase closely held Asthmatx Inc. for up to $443.5 million.

Asthmatx designs, manufactures and markets the Alair Bronchial Thermoplasty System, a catheter-based asthma treatment system that uses heat to reduce excess smooth muscle in bronchial airways to limit constriction. The treatment, approved in April by the U.S. Food and Drug Administration, is performed during three outpatient visits. According to Boston Scientific, bronchial thermoplasty was named one of the “top 10 medical innovations for 2007” by the Cleveland Clinic Foundation.

“The benefits we have seen with bronchial thermoplasty are impressive and have included a substantial improvement in patients’ asthma symptoms,” said Mario Castro, a doctor at Washington University in St. Louis, Mo., and principal investigator for the Asthma Intervention Research 2 clinical trial. “Our data demonstrated clinically meaningful improvements in key outcomes including a reduction in severe asthma exacerbations, a reduction in emergency room visits and a trend toward decreased hospitalizations for asthma. Treated patients missed less time from work, school and other daily activities because of their asthma, and they experienced an overall improvement in their quality of life.”

Under terms of the deal, Boston Scientific will pay $193.5 million in cash up front for Sunnyvale, Calif.-based Asthmatx and spend an additional $250 million through 2019 if certain revenue-based milestones are achieved. Executives expect the deal to affect earnings by two cents per dilutive share in both 2011 and 2012 (inclusive of about once cent per share of amortization expense). The thermoplasty system is expected to generate a profit for Boston Scientific beginning in 2014.

“By combining our two organizations we will be able to increase awareness of this technology and expand our reach to patients suffering the effects of severe asthma,” said Glen French, Asthmatx CEO. “We will be able to leverage Boston Scientific’s sales and marketing expertise to introduce the Alair System to a growing number of physicians and provide much needed relief to many patients affected by this disease.”

Ray Elliott, Boston Scientific’s president and chief executive, called the deal an important step in the company’s portfolio-realignment strategy. Earlier this year, executives with the Natick, Mass.-based firm launched a sweeping, two-year restructuring plan that calls for cutting up to 1,300 jobs, reorganizing parts of the business, and possibly selling some businesses and acquiring others. The company’s cardiovascular products—by far its most popular devices—are struggling to grow in the wake of market pressures, increased competition and falling prices.

During an analyst conference last month, Elliott said the company’s acquisition strategy has switched from large-scale mergers to smaller deals that add technology in familiar areas. He also discussed replacing drugs as an area of interest. Analysts called the Asthmatx acquisition “directionally very positive news” that reinforces Boston Scientific’s focus on new medical device markets. They said they expect similar deals in the future as Elliott and his management team reshape the company’s product portfolio.