Boston Scientific (BSX) is considering a takeover of Shockwave Medical (SWAV), according to a report Friday that sent SWAV stock soaring.
XShockwave uses electrical impulses to "crack" hardened calcium in the arteries. The process, called intravascular lithotripsy, is gaining steam as an alternative to the traditional approach known as atherectomy. Atherectomy uses a small drill to remove the calcifications.
The potential deal — first reported by Bloomberg — could bolster Boston Scientific's cardiovascular portfolio, Needham analyst Mike Matson said in a note to clients. The total available market for intravascular lithotripsy is worth about $8.5 billion. That implies the market was just 6% penetrated last year.
"We think that Shockwave would be highly complementary to Boston Scientific's cardiovascular business, would likely generate both cost and revenue synergies and would add almost a point to Boston Scientific's organic growth," Matson said.
Representatives of both companies declined to comment to Investor's Business Daily.
On the stock market today, SWAV stock jumped 10.2% to close at 286.46. Shares of Boston Scientific sank 2.9% to close at 51.11.
SWAV Stock: Deal Timing Key
The report comes as deal making in the medical segment heats up. Early this week, Merck (MRK) pledged $10.8 billion to buy Prometheus Bio (RXDX). Shortly after, GSK (GSK) said it would acquire Bellus Health (BLU) for $2 billion.
Those deals followed the announced mashups of Amgen (AMGN) with Horizon Therapeutics (HZNP), and Pfizer (PFE) with Seagen (SGEN).
Shockwave's rumored deal also follows a proposed rule change from the Centers for Medicare and Medicaid Services that could help boost use of intravascular lithotripsy. The rule proposes three new higher-paying codes for the procedure Shockwave's technology provides. SWAV stock surged almost 11% on April 11, the day the Medicare reimbursement news emerged.
Boston Scientific's cardiovascular division is already its biggest moneymaking business. Last year, its cardiovascular products generated $7.8 billion in sales, growing more than 1% on an organic basis. That accounted for more than 61% of the company's total sales.
Needham's Matson says Boston Sci could pay a 20% premium to SWAV stock's closing price Thursday, before the report emerged. At that point, Shockwave's market cap was just below $9.5 billion. On Friday, the company's market surged close to $10.5 billion.
Highly Rated Medical Stock
SWAV stock is highly rated, according to IBD Digital. Shares have a strong Composite Rating of 98 out of a best-possible 99. This puts Shockwave stock in the leading 2% of all stocks in terms of fundamental and technical measures.
Shockwave stock also has a Relative Strength Rating of 94, ranking it in the top 6% of all stocks when it comes to 12-month performance.
The news Friday sent shares closer to a buy point at 320.64 out of a cup base, according to MarketSmith.com.
Follow Allison Gatlin on Twitter at @IBD_AGatlin.
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