$1bn Corindus deal gets Healthineers off the acquisition blocks

Vascular robotics is growing fast and Corindus is the leader here, but Healthineers will need an aggressive sales plan.

Siemens Healthineers has made its first major acquisition since becoming independent last March, and it has made quite an outlay to do it. The $1.1bn cash it is paying for Corindus Vascular Robotics comes in at a 77% premium to the company’s share price and is 37x next year’s forecast sales. The deal will not be accretive until 2022 or 2023, and even that will happen before Corindus is expected to turn a profit.

Corindus’s technology allows cardiologists to guide catheters through the vasculature and place implants such as stents using robotic devices that work with the kind of imaging products Healthineers makes. There are obvious synergies, but Healthineers faces a long grind before this deal pays off.

20% faster

Corindus’s flagship system is the CorPath GRX, which sells for around $480,000. The group sold 50 of these machines last year and is on track to move 100 of them in calendar 2019. Most of its installed base is in the US, so doubtless Healthineers’ sales force can help boost European sales.

The CorPath GRX is capable of speeding up interventional cardiology procedures by around 20%, which when done manually usually take up to two hours, Healthineers management said on an analyst call today. There is also an ongoing revenue stream in the shape of disposable cassettes which slot into the system to drive the insertion of the wires. These cost around $400-500 per procedure.

Healthineers plans to create an integrated system that incorporates Corindus’s robot and its own imaging technology, though it was unable to give a timeline for when such a system might be market-ready.

CORINDUS VASCULAR ROBOTICS
		Annual sales ($m)
Segment	EvaluateMedTech classification	2018	2020e	2022e	2024e	CAGR
Corpath systems	Interventional catheters & guidewires	9	18	36	56	+35%
Cassette/disposable	Other interventional cardiology	1	5	11	17	+60%
Services	Unclassified	0.5	7	15	24	+91%
	Total company revenues	11	30	62	96	+44%
Source: EvaluateMedTech.

Healthineers is adamant that there is little in the way of competitive threat.

“This is only for physicians who are doing endovascular procedures,” said Michel Therin, head of Healthineers’ advanced therapies group. “It is not a surgical robot like the type of products you may be familiar with.”

Healthineers reckons it can make the most of this first-mover advantage, and says its ultimate goal is for 15% of vascular interventions to be done robotically. Around a million angioplasties are carried out each year in the US, so the German firm will have to place many more CorPath GRXs in hospitals.

Break-even

Ambitious sales goals aside, Healthineers’ management is convinced that the Corindus business will reach break-even faster as part of the new owner’s advanced therapies business than it could as an independent company. But this point is still some way off.

Corindus reported its second-quarter results today, and revealed that its revenues for the period came to $4.6m, up 175% over the prior year period, thanks to the sale of nine CorPath GRXs and 700 single-use cassettes.

Its net loss, though, is widening. This came in at $10.7m in the second quarter, compared to $9.9m in 2019. Jochen Schmitz, Healthineers’ chief financial officer, said on the call that the Corindus was not expected to post a profit before 2023.

There is one last twist to this deal: one of Healthineers’ imaging rivals owns a stake in Corindus. Around 12.5% of the target’s shares are owned by Philips, which used to be the exclusive distributor of CorPath GRX in the US. The distribution agreement has since lapsed, but theoretically Philips could work to derail the acquisition – though this seems unlikely given the return on its investment it could make if the deal closes. Mr Schmitz said he does not expect any interference from Philips, “but you never know”.

https://www.evaluate.com/vantage/articles/news/deals/1bn-corindus-deal-gets-healthineers-acquisition-blocks