- Johnson & Johnson on Tuesday said it has agreed to acquire Abiomed, a Danvers, Mass.-based maker of heart pumps, for $16.6 billion.
- Per deal terms, J&J will pay $380 per Abiomed share, a nearly 51% premium to the company’s share price at market close Monday. J&J also pledged up to an additional $35 per share through a contingent value right that’s payable if certain “commercial and clinical” milestones are met.
- The boards of directors of both companies have approved the acquisition, which is expected to close before the end of the first quarter next year. The deal is the biggest by J&J since its $30 billion buyout of Actelion in 2017, and comes as the company works to spin off its consumer health business from its pharmaceutical and medical device arms.
J&J has been hunting for companies to buy. At the start of the year, the company’s new CEO Joaquin Duato said J&J would take a more “aggressive” approach to dealmaking, although he and other executives had indicated a preference toward small- and mid-sized acquisitions of medical technology and biotechnology companies.
Analysts had previously speculated that J&J could acquire a cardiology firm such as Boston Scientific.
In a statement, Duato said in the acquisition of Abiomed is “an important step in the execution of our strategic priorities” as the company focuses on its pharma and medtech businesses.
“We have committed to enhancing our position in medtech by entering high-growth segments,” he added. “The addition of Abiomed provides a strategic platform to advance breakthrough treatments in cardiovascular disease and helps more patients around the world while driving value for our shareholders.”
Valued at $16.6 billion, the deal is the largest medtech transaction of 2022, and also surpasses in value all biotech company acquisitions signed this year. J&J plans to fund the purchase with cash on hand and short-term financing.
J&J said the acquisition is expected to be slightly dilutive to earnings per share in the first year, then adding $0.05 per share in 2024 and increasingly accretive thereafter.
Acquiring Abiomed will expand J&J’s cardiovascular devices business and complement other electrophysiology products it sells, wrote Marie Thibault, an analyst at BTIG, in a Tuesday note to clients.
“The size and the target of this deal catches us off guard,” Thibault added. “However, we do think [Abiomed] is a high-quality target and fits [J&J]’s businesses and company culture well.”
She added Abiomed likely won’t face other potential acquirers given the premium offered and the limited number of companies that could make a purchase of this size.
“Reading through to the rest of MedTech, we’re inclined to see this deal as positive,” Rick Wise, an analyst at Stifel, wrote in a research note. “[Abiomed] highlights the importance of growth/innovation for larger companies like [J&J].”
While both companies’ board of directors have approved the transaction, they will still need regulatory approval. The deal is also conditioned on the tendering of a majority of the outstanding shares of Abiomed’s common stock.
Abiomed would operate as a standalone business under J&J. Abiomed CEO and Chairman Michael Minogue has established a succession plan, and current Chief Commercial Officer Andrew Greenfield will become the company’s president. Michael Bodner, who is worldwide president of Biosense Webster Electrophysiology, will help lead the integration under the leadership of Ashley McEvoy, J&J’s worldwide chairman of medtech.
Abiomed shareholders could receive as much as an additional $35 per share if the companies reach certain commercial and clinical milestones, including $17.50 per share if net sales for Abiomed products surpass $3.7 billion between the second quarter of 2027 and the first quarter of 2028. In the quarter ending June 30, Abiomed reported revenue of $277.15 million.
The sales target is “doable, but not a certainly,” Thibault wrote, as it represents a 23% compound annual growth rate from current levels.
Shares in J&J fell by about 2% on Tuesday.
Correction: In a previous version of this article, Abiomed’s revenue in the quarter ended June 30 was misstated. It was $277.15 million.