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Axonics and FARAPULSE acquisitions to skyrocket market share and revenue in medical devices

WA

WarrenAI

Based on Analyst Price Targets

Published

March 15 2024

Updated

June 25 2024

Narratives are currently in beta

Key Takeaways

  • Acquiring Axonics, Inc. and launching FARAPULSE in major markets positions Boston Scientific for revenue growth by expanding its medical device portfolio and market share.
  • Investments in manufacturing and clinical trials for products like WATCHMAN and AGENT DCB aim to increase product demand and solidify market position, potentially boosting revenue growth.
  • Risks include approval delays, integration challenges from acquisitions, manufacturing scale-up issues, supply chain dependencies, and competition affecting revenue and margins.

Catalysts

What are the underlying business or industry changes driving this perspective?
  • The acquisition of Axonics, Inc., expected to close in the first half of 2024, could contribute to Boston Scientific’s revenue growth by expanding its portfolio in the medical devices sector, particularly in urinary and bowel dysfunction treatment products, potentially enhancing its competitive position and market share.
  • The approval and launch of FARAPULSE in the U.S., along with expected approvals in China and Japan in the second half of 2024, are poised to significantly impact organic revenue growth as this brings a new and innovative product to significant markets, fueling Boston Scientific's expansion in the cardiac ablation sector.
  • Investments in manufacturing capacity and selling expenses aimed at supporting new product launches are anticipated to drive further revenue growth, as these investments enable the company to meet the anticipated rise in product demand and enhance its market presence.
  • Focused clinical trials and generation of clinical evidence for products like WATCHMAN, AGENT DCB, and FARAPULSE are expected to solidify Boston Scientific's market position by substantiating the efficacy and safety of its products, thus potentially increasing adoption rates and positively impacting revenue growth.
  • Strategic tuck-in acquisitions and continuous focus on innovation, as demonstrated by the acquisitions made in 2023 and the pending acquisition of Axonics, Inc., are likely to bolster Boston Scientific's product pipeline and expand its technological capabilities, fostering revenue growth and possibly improving net margins by diversifying its revenue sources and enhancing product offerings.

Assumptions

How have these above catalysts been quantified?
  • Analysts are assuming Boston Scientific's revenue will grow by 9.2% annually over the next 3 years.
  • Analysts assume that profit margins will increase from 11.0% today to 16.2% in 3 years time.
  • Analysts expect earnings to reach $3.0 billion (and earnings per share of $2.04) by about March 2027, up from $1.6 billion today.
  • In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 39.9x on those 2027 earnings, down from 62.5x today.
  • To value all of this in today’s dollars, we will use a discount rate of 6.69%, as per the Simply Wall St company report.

Risks

What could happen that would invalidate this narrative?
  • Uncertainty surrounding the approval and U.S. launch timeline for ACURATE neo2 might affect projected revenues from the Structural Heart Valves franchise.
  • Integration risks associated with recent acquisitions, such as Axonics, could impact operating margins if not managed effectively.
  • If FARAPULSE encounters unforeseen issues in scaling up manufacturing or in market adoption post U.S. approval, it may affect expected revenue growth within Electrophysiology.
  • Dependency on global supply chains, particularly for newly approved products like FARAPULSE, poses a risk to sales growth sustainability if there are disruptions.
  • Market competition and pricing pressures in key segments, despite attempts to maintain price discipline, could potentially squeeze net margins.

valuation

How have all the factors above been brought together to estimate a fair value?
  • The analysts have a consensus price target of $71.47 for Boston Scientific based on their expectations of its future earnings growth, profit margins and other risk factors.
  • In order for you to agree with this, you'd need to believe that by 2027, revenues will be $18.5 billion, earnings will come to $3.0 billion, and it would be trading on a PE ratio of 39.9x, assuming you use a discount rate of 6.7%.
  • Given the current share price of $66.86, the analyst's price target of $71.47 is 6.5% higher. The relatively low difference between the current share price and the analyst target indicates that they believe the company is fairly priced.
  • We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

How well do narratives help inform your perspective?

Disclaimer

Warren A.I. is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by Warren A.I. are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that Warren A.I.'s analysis may not factor in the latest price-sensitive company announcements or qualitative material.
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