Boston Scientific Corp. is adding debt to an already tight balance sheet to acquire a Minnetonka-based medical device company and create a billion-dollar urology business.
Boston Scientific, which already employs about 5,000 people in the Twin Cities, announced plans to acquire the men's health division of American Medical Systems for $1.65 billion. AMS offices have long been in Minnetonka, though the company was acquired in 2011 by the Ireland-based drug company now known as Endo International PLC.
About 500 of Endo's 1,000 AMS employees are in Minnesota, and of those, about 275 work for the division that Boston Scientific is acquiring. The deal is expected to close in the fall, pending customary approvals. AMS workers in Minnesota not affected by the deal will continue to work in the company's litigation-racked women's health division, which Marlborough, Mass.-based Boston Scientific is not buying.
The strategy behind Boston Scientific's acquisition of devices to treat men's urinary incontinence and erectile dysfunction from a drug company reflects a trend among global health care companies to sell off assets in diverse fields and build depth in discrete niches in response to cost-cutting pressures in the industry. On Monday, health care's largest and most diverse company, Johnson & Johnson, announced plans to sell off its line of Cordis stents for $1.9 billion and complete its exit from the business of interventional cardiology.
"In the past, a lot of these companies were sort of everything to everyone," said Venkat Rajan, a health care analyst with consulting firm Frost and Sullivan. "Whereas now, devices are becoming more commoditized and reimbursement is going down. Companies are more focused on owning a greater stake of a disease state."
Boston Scientific executives said Monday their goal is to create a market-leading urology division that will generate nearly $1 billion in revenue.
Boston Scientific is buying AMS' laser-therapy systems to treat benign prostatic hyperplasia, a form of prostate enlargement that affects 90 million men, plus devices for male stress urinary incontinence and erectile dysfunction. Those devices will roughly double the size of Boston Scientific's $535 million urology and women's health business, which includes technologies to treat kidney stones, pelvic organ prolapse, and female stress urinary incontinence and abnormal uterine bleeding.
"It's really about creating category leadership in a strong market," Boston Scientific Urology and Women's Health President Karen Prange said in an interview.
