J&J enlivens the medtech merger scene

Buying Abiomed for $17bn sharpens the group’s focus, somewhat unexpectedly, on cardiovascular tech.

Is the lull over? The second multibillion-dollar medtech merger in two days appears to signal that medtech has regained its appetite for dealmaking. 

And today’s is a big one. Johnson & Johnson is taking over the heart pump maker Abiomed for $16.6bn – the seventh-biggest deal in the sector’s history. This is also a step towards realising the plan laid out by J&J’s chief executive, Joaquin Duato, of doing more medtech acquisitions before the spin-out of J&J’s consumer care business next year. 

Abiomed makes the Impella range of tiny, temporary heart pumps. These are used to treat patients with severe coronary artery disease undergoing high-risk percutaneous coronary intervention as well as those who have had a heart attack, or who have heart failure or cardiogenic shock, among other disorders.

The pumps are mounted on catheters, and are threaded through patients’ veins from an incision in the groin. Once in place in the heart, most of the models are positioned across the aortic valve and aid in pumping blood from the left ventricle into the ascending aorta. 

The exception is the Impella RP, which works on the other side of the heart, aiding blood flow from the right ventricle to the pulmonary artery. The pumps and the catheters can remain in place for up to two weeks. 


J&J’s current presence in the cardiovascular space comes via its interventional solutions segment, made up of the electrophysiology business Biosense Webster and the much smaller neurovascular unit Cerenovus.

On a webcast today management said Biosense Webster and Abiomed would be highly complementary. Abiomed should slot in fairly easily; it had sales of $1bn last year – up 22% on the year before – whereas J&J’s interventional solutions unit brought in $4bn. 

Stifel analysts wrote that Impella’s technology had market potential in excess of $35bn, and highlighted several ongoing clinical trials that could expand the pumps’ indications. These include the Protect IV and Recover IV trials in high-risk PCI and STEMI with cardiogenic shock respectively, and DTU-STEMI in patients who have had a STEMI but without cardiogenic shock. The latter could allow the Impella devices to reach a further 200,000 patients in the US alone, the analysts wrote.

At $380 per share in cash, the deal comes in at a 50% premium to Abiomed’s closing price yesterday. Like many groups, though, Abiomed has had a rough time of late; a year ago it was trading at around $350. 

On top of the up-front payment J&J has also promised a non-tradeable contingent value right entitling Abiomed’s investors to up to a further $35 per share in cash. $17.50 of this is payable if net sales for Abiomed products exceed $3.7bn between J&J’s fiscal 2027 second quarter and 2028 first quarter. If this threshold is not met during this period but is hit during any rolling four-quarter period up to the end of J&J’s fiscal first quarter of 2029, $8.75 per share will be paid out. 

The rest of the CVR is contingent on clinical milestones. $7.50 is payable if the FDA approves Impella products in STEMI patients without cardiogenic shock by January 1, 2028. $10 will be paid if a Class I recommendation is made for the use of Impella products in high-risk PCI or STEMI, with or without cardiogenic shock, within four years of their respective clinical endpoint publication dates, but in all cases no later than December 31, 2029.

Growing and shrinking

J&J is not shy of buying or selling device businesses. In the past decade it has bought 17 medtech companies or business units, including Auris Health for $5.7bn and Abbott Medical Optics for $4.3bn. In that time it has also divested six medtech business units in deals worth a total of $12bn. 

This is the company’s second-largest device acquisition, after the $19.7bn purchase of the orthopaedics group Synthes just over a decade ago. With several medtech mega deals having turned out to be disappointments J&J might have to tread carefully with Abiomed. 

J&J's billion-dollar divestments
Date closed Target Acquirer Value ($bn) Focus Evaluate Vantage coverage
Apr 1, 2019 Advanced sterilisation Fortive 2.8 General and plastic surgery Fortive favours the autoclave with J&J deal
Jul 17, 2018 Calibra Medical Cequr Diabetic care
Mar 16, 2018 Lifescan Platinum Equity 2.1 Diabetic care J&J sheds another medtech business
Oct 2, 2017 Codman Neurosurgery Integra Lifesciences 1.0 General and plastic surgery Integra spends $1bn to hit $2bn
Oct 4, 2015 Cordis Cardinal Health 1.9 Cardiology Cardinal-Cordis deal highlights genericisation of medtech
Jun 30, 2014 Ortho-Clinical Diagnostics The Carlyle Group  4.2 In vitro diagnostics  Carlyle's bid for Johnson & Johnson fixer-upper bucks market trends
Source: Evaluate Medtech.  

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