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Medical device company Boston Scientific (BSX) has been on roll, as illustrated by the stock soaring by 34% on a year-to-date basis to all-time highs last week, and now the company is turning to the M&A market to help keep its momentum going. In an effort to bolster its vascular portfolio, BSX announced a definitive agreement to acquire Silk Road Medical (SILK) for $27.50/share in cash, representing an equity value of approximately $1.26 bln.

• The buyout price equates to a premium of 27% versus yesterday's closing price for SILK, which is considerable, but not egregious, in our view. Based on SILK's FY24 revenue guidance of $194-$198 mln, BSX is paying about 6.4x sales to acquire SILK. That seems like a reasonable multiple given that the midpoint of SILK's revenue outlook represents healthy y/y growth of 11% with plenty of runway ahead for SILK's leading product, the TCAR System.
• The TCAR System is the crown jewel of this acquisition. Unlike traditional methods of treating carotid artery disease, such as surgery or stent placement, TCAR uses a minimally invasive procedure that reverses blood flow away from the brain to prevent plaque from breaking loose in the carotid artery and causing a stroke. Since receiving FDA approval in 2015, nearly 100,000 total patients have been treated with TCAR and physician adoption is still on the rise.
• Driven by deepening TCAR adoption among physicians, TCAR procedures increased by 15% to 6,725 in Q1. SILK also credits higher awareness among patients themselves, and expanded Medicare coverage, for the procedure growth. About two years ago, the Centers for Medicare & Medicaid Services announced expanded coverage for TCAR to include standard surgical risk patients within the Vascular Quality Initiative’s TCAR Surveillance Project.

Financially speaking, the addition of SILK won't move the needle too much for BSX in the near-term. In fact, BSX stated that the impact to adjusted EPS is expected to be immaterial in 2024 and 2025, but accretive thereafter. Over time, though, BSX's extensive sales and distribution network should enable the TCAR System to become a more meaningful contributor, augmenting the company's bread-and-butter cardiovascular business, which experienced strong sales growth of nearly 16% in Q1.