Boston Scientific Buys Rhythmia, Expands Cardiac Footprint

10/9/12Follow @cathyarnst

Boston Scientific (NYSE: BSX) is expanding its presence in the fast-growing market for electrophysiology treatments for irregular heartbeats with its acquisition, announced Oct. 8, of privately held Rhythmia Medical. The Natick, MA-based medical device giant will make an initial payment of $90 million for the Burlington, MA-based startup, plus another $175 million through 2017 if certain regulatory and sales milestones are met. Boston Scientific expects the acquisition to close by Oct. 12.

Electrophysiology, focused on the diagnosis and treatment of abnormal heart rhythms, is the fastest growing of all cardiovascular specialties, according to the Heart Rhythm Foundation. A study released in June by market researchers Millennium Research Group (a subsidiary of Decision Resources) reported that the U.S. market for electrophysiology devices will grow strongly through 2016, pushed by the aging population and increasing demand for procedures using the newest diagnostic and treatment technologies to treat irregular heartbeats, or arrhythmias. Boston Scientific CEO Hank Kucheman said in a statement that the electrophysiology market is currently $2.5 billion and growing at a double-digit pace.

Rhythmia, founded in 2004 by Leon Amariglio and Doron Harlev, has developed a unique system for mapping hearts during a procedure called cardiac catheter ablation. The device consists of a diagnostic catheter that captures electrical signals from each heartbeat, combined with software that processes the signals to form a 3-D view of the heart and pinpoint the location of the tissue responsible for irregular heartbeats; by destroying this tissue, doctors aim to restore a normal heart rhythm. Rhythmia’s technology has gone through several successful clinical trials but has not yet been approved by any regulatory authority.

Cardiac arrhythmia, a life-threatening condition that can lead to stroke or heart attack, affects some 15 million people worldwide and is usually treated with catheter ablation. The success of this procedure, however, is dependent on very accurate pictures of the interior of the heart. “The acquisition of Rhythmia Medical is a decisive step forward for Boston Scientific in the electrophysiology ablation business, including the high-growth segment of complex ablation,” said Kucheman.

Boston Scientific said that once the Rhythmia system receives marketing approval in the U.S. and Europe, it expects to begin a limited market launch in 2013 and a full market launch in 2014.

Boston Scientific has been on an acquisition tear this year. In March 2012 the company acquired Cameron Health, which makes implantable defibrillators, for an upfront payment of $150 million and additional contingent payments that could bring the value of the deal to $1.4 billion. Then in September the company bought privately-held BridgePoint Medical, a maker of catheter-based systems for the treatment of blocked arteries, for an undisclosed amount. These purchases pale against the company’s $28 billion takeover of Guidant in 2006, an acquisition which resulted in billions of dollars in write downs in subsequent years. But for Rhythmia’s backers—mainly individual doctors and investors who together contributed a total of just $16.5 million to the startup—and for its founders, who met as students at Harvard Business School and the MIT Sloan School of Management, the acquisition represents a big deal indeed.

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