Covidien plc (COV) revealed that it has acquired Morrisville, NC-based developer of venous disease treatments, Sapheon, Inc., for an undisclosed amount. The acquisition of this privately-held company, including its VenaSeal system, will boost Covidien’s flat Vascular business sales by providing treatments to patients suffering from chronic and life threatening chronic venous insufficiency (CVI) disease.

The acquisition is expected to be slightly dilutive to Covidien’s adjusted earnings, but will not materially impact its results. The company will report the Sapheon business as part of its Peripheral Vascular product line in the Medical Devices segment.

A Brief Note about Vena Seal System

VenaSeal system uses a specially formulated medical adhesive to close the great saphenous vein in patients with varicose veins and CVI problem. The treatment is performed using a minimally invasive catheter technique under ultrasound guidance in an office or outpatient setting.

The VenaSeal treatment has helped patients resume normal activity. Thankfully, the procedure doesn’t require tumescent anesthesia – a technique that requires multiple injections to deliver local anesthesia – and often results in less bruising than traditional thermal energy procedures.

The VenaSeal system is currently approved in Canada, Europe and Hong Kong. More than 2,000 patients have been treated with the system.

Sapheon has also completed enrollment and follow-up of its VeCLOSE randomized pivotal clinical trial in the U.S. and submitted documentation to the U.S. Food and Drug Administration (:FDA) in support of a Premarket Approval. Currently, the VenaSeal system is limited to investigational use in the U.S.

Our Take

The acquisition will significantly boost Covidien’s Peripheral Vascular business. It is completely in line with the company’s long-time efforts of investing in educational campaigns to encourage CVI patients to learn about their condition and seek treatment options from physicians.

In the recently reported fiscal 2014-third quarter, revenues from Covidien’s Vascular Therapies business were flat at $417 million, driven by flat Peripheral Vascular and Neurovascular sales.

Sales were flat in Peripheral Vascular business because increases in sales of chronic venous insufficiency and procedural support products were offset by decreases in sales of compression and dialysis products and by the impact of the company’s exit from the renal denervation market.

Covidien currently carries a Zacks Rank #3 (Hold). In early June, the medical technology giant, Medtronic Inc. (MDT) announced its plans to acquire Covidien for $42.9 billion. Subject to certain customary conditions, the acquisition is expected to close in the fourth quarter of 2014 or early 2015.

Some better-ranked stocks in the medical products industry include ICU Medical, Inc. (ICUI) and Symmetry Medical, Inc. (SMA). ICU Medical sports a Zacks Rank #1 (Strong Buy), while Symmetry Medical carry a Zacks Rank #2 (Buy).

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