Nov 1 (Reuters) – Johnson & Johnson (JNJ.N) said on Tuesday it had reached an agreement to buy heart pump maker Abiomed Inc (ABMD.O) for $16.6 billion in cash, in a bid to boost the growth of its medical devices unit after the planned spin-off of the consumer healthcare business next year.
J&J agreed to pay $380 per Abiomed share, a 50.7% premium to its closing price of $252.08 on Monday. Shares of Abiomed jumped around 50%, while shares of J&J slipped 0.5%.
J&J’s initial payout is just short of Abiomed’s 52-week high of $381.99 per share.
Abiomed shareholders will also receive rights worth up to $35 per share in cash if certain commercial and clinical milestones are achieved.
The deal, which is expected to close before the end of the first quarter of 2023, will add to adjusted earnings in 2024, the company said.
J&J is focused on its pharmaceutical and medical device business with consumer health benefits expected by November 2023. Chief Executive Joaquin Duato said he will seek to grow the medical device unit through purchases.
“One of my priorities for the new Johnson & Johnson is to ensure that medical technology becomes best-in-class,” Duato, who became CEO in January, said on a conference call. after the deal was announced, adding that it was looking to expand into high-growth markets.
Stifel analyst Rick Wise said J&J’s medical device business is facing pandemic headwinds, a stronger dollar and supply chain issues that have kept its growth in the midrange. to one digit.
“It seems clear that Abiomed will accelerate this growth,” by 1% or more, he said.
Abiomed, which generated $1.03 billion in revenue in its last fiscal year that ended in March, develops medical technology that provides circulatory and oxygenation support. Analysts expect its revenue to hit $1.5 billion a year by 2025, according to data from Refinitiv.
George Congdon, principal analyst at Third Bridge, said J&J can boost sales of Abiomed’s heart pumps by improving the device, seeking regulatory clearance for use in other heart conditions and expanding geographically. .
“So when you think about this kind of trifocal opportunity to increase the size of their own market, the acquisition seems all the more attractive,” Congdon said.
REVIEW OF UNMET PATIENT NEEDS
J&J approached Abiomed after reviewing unmet patient needs in the medtech sector, working internally and with outside advisers before expressing interest in an acquisition, according to people familiar with the matter who were not authorized to speak officially.
After engaging, the talks moved forward fairly quickly, the people added.
J&J doesn’t anticipate any regulatory issues given the limited overlaps with its existing cardiovascular products, the people said.
Abiomed’s Impella heart pumps, the smallest in the world, have been in use in the United States since 2008. The devices generated worldwide revenue of $985 million in fiscal year 2022.
Heart disease is one of the leading causes of death in the United States, accounting for nearly 700,000 deaths in 2020, according to government data.
J&J executives said they believe its existing infrastructure can be used to expand Abiomed’s reach outside of the United States, in addition to driving growth through new products Abiomed is developing. .
Abiomed will operate as a stand-alone business within the healthcare conglomerate’s medical technology division. The company does not expect to make any significant job cuts at Abiomed after the deal closes, noting that the expected synergies from the deal would be “quite modest.”
J&J’s medical technology business includes surgical, orthopedic and miscellaneous devices. The unit generated more than $20 billion in sales in the first nine months of the year.
Reporting by Raghav Maobe and Leroy Leo in Bengaluru; additional reporting by David Carnevali in New York; Editing by Sriraj Kalluvila, Ed Osmond and Bill Berkrot
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