When Uroplasty Inc. changed management a year and a half ago, analysts expected the changes would spur the Minnetonka company to broaden its catalog of devices for urology and voiding disorders.
So it was bit of a surprise Monday when Uroplasty announced that it was changing its name to Cogentix Medical and acquiring a New York-based maker of equipment for flexible digestive-tract scopes called Vision Sciences Inc., while remaining based in Minnetonka.
"This deal is very consistent with that idea," said Brooks O'Neil, a senior research analyst with Minneapolis-based Dougherty & Co. "We've been thinking that the changes … would likely lead them to seek to add products to the salesman's kit that would more fully leverage their distribution capability and make a bigger company."
The combined company will almost double Uroplasty's existing market cap. Uroplasty, with annual revenue of $25 million, has a market capitalization of about $53 million, based on share prices Monday. Vision Sciences recorded $14 million in sales last year and is worth about $40 million as a company.
Executives said they expect a larger sales force to help the combined company grow market share for Vision's nonsurgical digestive-tract imaging in physician's offices and ambulatory surgery centers. Combining Vision's 12 U.S. salespeople with Uroplasty's 44 should lead to revenue growth of between 11 percent and 14 percent in a fiscal year that would begin April 1, pending standard regulatory and shareholder approvals of the deal, they said.
Uroplasty shares rose 8 cents, to $2.43, Monday; Vision Sciences stock dropped 15 cents, to $0.86 a share.
Uroplasty executives said in a conference call with investors Monday that they're particularly excited about Vision Sciences' EndoSheath technology, a proprietary microbial barrier that keeps flexible endoscopes sterile.
Vision Sciences has moved more than 5 million EndoSheath units at prices that range between $30 and $40 apiece, executives said. Uroplasty officials said the sheath's ability to prevent cross-contamination between patients makes it applicable to related medical specialties.