Last week, Stryker took steps to expand its neurovascular product offering when it agreed to acquire Surpass Medical, developer of the CE-marked NeuroEndoGraft flow-diverting aneurysm treatment device, for $100 million in cash up front and an extra $35 million provided the device reaches certain milestones. This deal represents a unique snapshot of the importance of the flow-diverter market and Stryker's position in neurovascular interventions as a whole.

A similar deal went down in 2009 when ev3 (now Covidien) acquired Chestnut Medical Technologies for a total of $26 million in cash and about $50 million in ev3 stock up front, with an additional $75 million in a cash/stock mix pending device approval. The technology acquired in that deal was the Pipeline Embolization Device (PED), and  two years later it received PMA approval from the FDA as the only available flow-diverter within the US.

The similarities and differences between the two flow-diverter deals, occurring 3 years apart, provide an interesting look into how the valuation of flow-diverter technology has changed over the past 3 years, and what the companies see in its future. The NeuroEndoGraft is not as close to market as the PED was in 2009; at the time of ev3's acquisition, the PUFS trial had been underway for a year and had already recruited 80 patients. Stryker, on the other hand, will have to initiate an IDE trial post-acquisition in late 2012. Despite being farther away from approval in the US market, Stryker was willing to pay about $25 million more up front, and in cash at that. This behaviour by Stryker suggests confidence in both approval and adoption of the device within the US market, likely due to the recent success experienced by the PED.

Nonetheless, the overall value of the Stryker deal is lower compared to the Chestnut purchase. While the PED has certainly achieved a degree of success and the market is growing rapidly, leading physicians have indicated that there are persistent issues of haemorrhage after device placement that have not been solved and are not well understood. In the end, it looks like the industry sees flow-diversion technology as a safe bet, but perhaps not with the upside it was once thought to have, at least not with current-generation technology.

Stryker isn?t the only company dipping its feet into the flow-diverter market. Microvention has developed its own flow-diverting device, called FRED, which is also CE marked in Europe. Other companies, such as NSVascular, are developing similar technologies and may be positioning themselves for a deal similar to the one between Stryker and Surpass. Codman & Shurtleff, the final big player in the US aneurysm treatment device market, has been quiet on the flow-diverter front so far. As a subsidiary of medtech giant Johnson & Johnson, look for Codman to make some noise within the next year if this technology continues to experience rapid adoption.

For Stryker, the Surpass acquisition represents the second recent acquisition in the neurovascular space. Almost a year ago, Stryker purchased Concentric Medical (interestingly, for nearly exactly the same amount as Surpass Medical), a manufacturer of minimally invasive ischemic stroke treatment devices. The real gem of this purchase was the acquisition of ?stentriever? technology, which is thought to be a huge technological step forward in the treatment of ischemic strokes. Although both of these purchases give Stryker the chance to become a major player in the minimally invasive neurovascular device market, the company will have to compete in both cases with already established devices from Covidien. The competition between Stryker and Covidien will certainly be a story to watch over the next few years.

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