Covidien Buying BARRX Medical for $325 Million

Covidien plc is expanding its presence in the global gastrointestinal market with the purchase of BÂRRX Medical Inc., a Sunnyvale, Calif.-based company that invented a device to treat esophageal disease.

The $325 million merger—expected to close in January— should help Covidien gain significant market share and become a more formidable player in the worldwide gastrointestinal sector, which is forecast to swell to $6.4 billion by 2017, according to Global Industry Analysts Inc., a publisher of market research based in San Jose, Calif. The United States comprises the largest regional market worldwide; Global Industry Analysts estimates the sector will expand 9.7 percent annually over the next six years. Experts claim the demand for gastrointestinal endoscopes is increasing due to widespread device usage among doctors, greater patient conformance due to its less invasive characteristics, the relatively low cost of the device, and higher returns on investments for hospitals.

In addition to the $325 million, Dublin, Ireland-based Covidien could end up making additional payments to BÂRRX if the company achieves certain milestones. Founded in 2000, BÂRRX manufactures the HALO Flex ablation system, a series of ablation catheters and a radiofrequency (RF) generator that delivers RF energy to treat Barrett’s esophagus, a disorder in which the esophagus lining is damaged by stomach acid, changing it to a lining similar to that found in the stomach.

“BÂRRX Medical products and technology complement our current portfolio of energy-based products and will broaden our presence in the global gastrointestinal market,” said Bryan Hanson, Covidien’s group president of Surgical Solutions. “At the same time, patients will benefit from advances in RF technologies that will change the standard of care for esophageal diseases from invasive surgery to therapeutic intervention. We expect to leverage BÂRRX technology and capabilities as a platform to accelerate global expansion.”

BÂRRX will become part of Covidien’s energy product line in its medical devices segment. All 125 BÂRRX employees are expected to join Covidien.

“We are extremely pleased that Covidien has elected to acquire BÂRRX, as this should allow us to accelerate the worldwide adoption of our evidence-based endoscopic therapy for patients with Barrett’s esophagus,” BÂRRX Medical President and CEO Greg Barrett said.

Covidien, whose U.S. headquarters is located in Mansfield, Mass., reported an 11 percent rise in fiscal 2011 sales to $11.6 billion, compared with fiscal 2010 sales of $10.4 billion. President and CEO José Almeida attributed the increase to favorable foreign exchange rates and an extra selling week. The company reportedly is looking for a buyer for its St. Louis, Mo.-based pharmaceutical unit, which could command up to $4 billion.