Arterial Device-Focused Inari Medical Likely Acquisition Target, Shares Are Attractively Valued: Analyst

Needham initiated coverage on Inari Medical Inc NARI, noting it as a leader in the very large and underpenetrated market for venous thrombectomy. 

Inari Medical projects an annual patient population of 280,000 with pulmonary embolism (PE) in the U.S., equating to a total available market (TAM) of $2.8 billion for its FlowTriever product. 

Additionally, the company estimates a yearly count of 430,000 patients with deep vein thrombosis (DVT), resulting in a $3.0 billion TAM for its ClotTriever product. The penetration rates for the PE and DVT markets are approximately 20% and 15%, respectively.

Needham initiates with a Buy rating and a price target of $72.

In late 2023, Inari Medical acquired LimFlow SA for $250 million in cash at closing and is eligible to receive up to $165 million in additional payments based on certain commercial and reimbursement milestones, for a total potential transaction value of up to $415 million. 

The analyst writes that Inari Medical presents a compelling acquisition opportunity. 

The company aligns with the criteria sought by major medical technology firms, boasting a robust gross margin of approximately 88%, anticipated double-digit revenue growth (projected at around 19% CAGR from 2023 to 2026), and a revenue size approaching $500 million in 2023. 

Furthermore, Inari Medical holds a prominent position in the high-growth venous thrombectomy segment. 

Needham identifies potential suitors for acquisition, including Abbott Laboratories Inc ABT, Becton, Dickinson And Co BDX, Boston Scientific Corporation BSX, Medtronic Plc MDT, Koninklijke Philips N.V. PHG, Stryker Corp SYK, Teleflex Inc TFX, and Terumo Corp TRUMF TRUMY.

Needham writes that Inari Medical shares are attractively valued, trading at 5.1x its estimated sales for 2024, showing a 21% premium compared to similar small/mid-cap growth companies with a median estimated EV/S multiple of 4.2x. 

Additionally, Inari Medical shares exhibit a 9% premium compared to small/mid-cap companies in the cardiovascular and neuromodulation sector, with a median estimated EV/S multiple of 4.7x. 

Price Action: NARI shares are down 0.27% at $57.40 on the last check Tuesday.