Medtronic Acquires Sapiens SBS to Boost Neuromodulation Biz

In an effort to strengthen its leading position in neuroscience, Minnesota-based medical device manufacturer Medtronic, Inc. (MDT) acquired Netherlands-based private developer of deep brain stimulation (DBS) – Sapiens Steering Brain Stimulation (Sapiens SBS) – for $200 million cash.

The transaction, however, is not likely to impact Medtronic's fiscal 2015 earnings outlook as it is expected to be accretive only in the long term.

DBS refers to a neurosurgical procedure wherein a neurostimulator device is implanted in a patient's brain to deliver tiny electrical impulses to specific areas of the brain.

Medtronic's neuromodulation business, under which the DBS procedure falls, involves treatment of chronic pain, common movement disorders, spasticity and urologic and gastrointestinal diseases by providing implantable neurostimulation and targeted drug delivery systems. Medtronic's DBS therapy has been successfully provided to over 115,000 patients all over the world. In the last reported quarter, the company achieved double digit growth in new implants in the DBS business.

Medtronic's pioneer Activa PC+S DBS system delivers proven DBS therapy while simultaneously sensing and recording electrical activity in key areas of the brain using sensing technology and an adjustable algorithm. In Europe, Canada and Australia, Medtronic's DBS therapy is authorized for treating refractory epilepsy. Moreover, DBS therapy is sanctioned for treating acute, treatment-resistant obsessive-compulsive disorder in the European Union and Australia, and in the U.S. under a Humanitarian Device Exemption (:HDE).

Located in Eindhoven, The Netherlands, Sapiens SBS aims at improving the therapeutic efficiency of DBS, reducing and simplifying the clinical procedure to upgrade patient comfort. Sapiens SBS manufactures a unique DBS system, which contains an advanced DBS lead with 40 individual stimulation points. This advanced technology ensures more precise stimulation of the targeted parts of the brain, while also reducing procedure time and resulting in fewer stimulation-induced side-effects.

Medtronic's acquisition of Sapiens SBS will allow the former to gain greater traction in the emerging neuro-medicine market, particularly in the space which deals with the modulation of brain function. This buyout is consistent with Medtronic's constant investment in innovation in a bid to emerge as the premier choice for neurosurgeons and neuroscience centers around the world.

Going forward, Sapiens SBS' Eindhoven facility will serve as the global research and development center for Medtronic`s neuromodulation business, complementing its existing R&D operations.

Both Medtronic and Sapiens SBS are bullish on the acquisition. They expect to collaborate for advanced product development and clinical research to incorporate these innovative technologies into an extensive portfolio of DBS products.

Currently, Medtronic carries a Zacks Rank #3 (Hold). Better-ranked stocks in the medical products industry include ICU Medical, Inc. (ICUI), Abaxis, Inc. (ABAX) and Conatus Pharmaceuticals Inc. (CNAT). While ICU Medical sports a Zacks Rank #1 (Strong Buy), Abaxis and Conatus hold a Zacks Rank #2 (Buy) each.

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