Merit Medical acquires Brightwater in $50M deal

Merit Medical Systems Inc. has acquired a California-based company that specializes in a catheter-to-stent product.

Merit’s acquisition of Brightwater Medical Inc., of Temecula, California, was announced last week. The transaction consists of a $35 million upfront payment and up to $15 million in potential earn-out payments based on receipt of CE mark approval and reaching future sales targets, South Jordan-based Merit said.{mprestriction ids="1,3"}

Brightwater was founded by Dr. Robert Smouse, professor of radiology and surgery at the University of Illinois College of Medicine. The company’s primary product is the ConvertX, a 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 company recently received FDA clearance for the ConvertX biliary stent system.

“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 P. Lampropoulos, Merit’s chairman and CEO. “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 currently has approximately 40 U.S. accounts serviced by two direct sales representatives and a small number of distributors. Merit said it plans to maintain Brightwater’s production capabilities in Temecula over the next several months while duplicating those capabilities in its catheter facility in Pearland, Texas, prior to transferring the ConvertX manufacturing operations to its Pearland facility.

Merit management estimates that the transaction will be approximately 5 cents decretive to earnings per share for the year ending Dec. 31 on a GAAP basis and approximately 3 cents decretive to earnings per share on a non-GAAP basis due to deal-related expenses, severance, transfer and integration costs, and international regulatory expenses.

Merit management’s current revenue expectations for the ConvertX product for calendar year 2019 are approximately $1 million, with expectations of growth to approximately $25 million in the fifth full year of sales.

“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.

Merit Medical develops, manufactures and distributes proprietary disposable medical devices used in interventional, diagnostic and therapeutic procedures, particularly in cardiology, radiology, oncology, critical care and endoscopy. It employs roughly 6,300 people worldwide in South Jordan; Pearland, Texas; Richmond, Virginia; Malvern, Pennsylvania; Rockland, Massachusetts; and San Jose and Aliso Viejo, California; as well as in The Netherlands, France, Ireland, China, Mexico, Brazil, Canada, Australia, Japan, the United Kingdom, South Africa and Singapore.{/mprestriction}