Boston Scientific Acquires More Companies Through Venture Arm to Fuel Growth

Since Boston Scientific established its venture arm a decade ago, it has spent approximately $1 billion buying stakes in about 50 companies globally. Boston Scientific—which sells products focused on urology, cardiology and other medical fields—is one of many companies that invest in startups to find new technology.

In 2021—a record year for startup fundraising—the value of U.S. venture capital deals involving corporate investors jumped 88% from 2020 to $144.7 billion, according to financial data provider PitchBook Data Inc.

Those deals included Boston Scientific’s acquisition of Preventice Solutions Inc., completed last March for $925 million in cash and an additional $300 million if the cardiovascular services company hits certain commercial milestones.

Five months later, Boston Scientific closed on Farapulse Inc., another cardiovascular technology company, for $450 million, plus up to another $125 million for meeting certain goals.

Then, in November, Boston Scientific closed on Devoro Medical Inc., which makes products to extract blood clots, for $320 million, plus a milestone payment of up to $80 million.

“It’s a great drumbeat now, where on average two, three, four companies a year are going to kind of be ready for harvesting—ready for exiting—and we’re right at the table,” said Chief Financial Officer

Dan Brennan.

Boston Scientific leaned more heavily on its venture arm last year for deals because the companies it invested in years earlier had grown into prime acquisition targets, Mr. Brennan said.

Boston Scientific typically looks for acquisition targets in medical fields it understands well and that are closely aligned with its existing businesses, he added, declining to say how many deals the company could announce this year.

Expanding through acquisitions is Boston Scientific’s priority for its cash on hand in 2022, Mr. Brennan said. The company had $1.9 billion in cash on hand as of Dec. 31, up around 10% from a year earlier.

Boston Scientific’s revenue growth has varied over the past year as some consumers deferred medical care and hospitals faced constraints such as bed availability and staff shortages. During the three months ended Dec. 31, however, net sales rose 15% from a year earlier, to $3.1 billion. Profit fell by more than half over the same period, to $80 million.

Mergers and acquisitions globally and across industries hit record values last year, in part because companies tried to put some of their stockpiled cash to work. Cash and equivalents at companies in the S&P 500 rose to about $3.78 trillion in the third quarter of 2021, up 11% from the same period a year earlier, according to data provider S&P Global Market Intelligence.

Boston Scientific’s decision to source more deals in its venture portfolio could be a sign of strong competition and high valuations in the medical technology market, said Marie Thibault, a managing director at investment firm BTIG LLC.

Still, investing in startups gives Boston Scientific access to cutting-edge technology. “We’re a really, I think, advantaged buyer at the table,” Mr. Brennan said.

The company often takes a board seat at the startups that it invests in and sometimes negotiates provisions for a first right of negotiation or refusal on an acquisition offer, he added.

That usually is a longer and less stressful evaluation process, compared with traditional M&A processes, Mr. Brennan said.

“We play that game as well, but it’s so much different when you’ve known the company for seven years,” he said.

Write to Kristin Broughton at Kristin.Broughton@wsj.com