Johnson & Johnson said Tuesday it will pay $16.6 billion for a Danvers medical device firm that makes heart pumps, a deal that sent the Massachusetts company’s stock soaring more than 50 percent.
The health care products conglomerate will pay $380 for each share of Abiomed, a premium of more than 50 percent over the closing price on Monday of $252.08. J&J will also provide another $35 a share if certain commercial and clinical goals are met. J&J expects to close the deal in the first quarter of 2023.
Although shares of Abiomed surged, J&J stock slipped less than 1 percent to close at $173.09.
J&J said the acquisition broadens the New Brunswick, N.J.-based company’s efforts to treat cardiovascular disease and, in particular, heart failure. That condition occurs when the heart muscle doesn’t pump blood as well as it should and is the leading cause of hospitalization in people over 65 years old, according to the Food and Drug Administration. About 650,000 new cases are diagnosed in the United States each year.
Abiomed makes Impella heart pumps, small devices with catheters that are threaded through arteries into the heart to help keep blood moving through the body. The pumps have been used to treat patients in the United States since 2008, according to the company. The firm has shown explosive growth recently, with sales jumping 22 percent to exceed $1 billion in its most recent fiscal year.
Joaquin Duato, who became J&J’s chief executive in January after 33 years at the company, said the acquisition reflected its efforts to create a “new Johnson & Johnson” focusing on pharmaceutical and medical technology products.
“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,” said Duato, a native of Spain who became a US citizen in 2015.
J&J, which has more than 140,000 employees worldwide, said in November that it was splitting its consumer products business from its pharmaceutical and medical device operations, creating two publicly traded companies. The consumer products company will inherit litigation stemming from lawsuits over claims that J&J’s baby powder causes cancer, allegations the company has fiercely denied.
Michael R. Minogue, chairman, president, and chief executive of Abiomed, said J&J’s global scale, commercial strength and clinical expertise will “accelerate our mission of making heart recovery the global standard of care.” Abiomed saidits pumps enable the heart to rest and recover by temporarily assisting in the delivery of blood and oxygen.
Rick Wise, an analyst for Stifel, said in a note to investors that “the transaction highlights CEO Joaquin Duato’s key initiative” to expand his company’s medical technology business and broaden its products portfolio. “We’re inclined to see this deal as positive,” he wrote.
Abiomed was founded in 1981 with the goal of developing the world’s first artificial heart, according to a company history. Under Minogue, who assumed his leadership roles in 2004, the company turned its focus to heart and lung recovery with the acquisition and development of technologies such as Impella and the OXY-1 System, a device that adds oxygen to blood and removes carbon dioxide.
Abiomed employs about 2,200 people in the United States, Germany, and Japan, according to Ryan Carbain, a J&J spokesman. It will operate as a stand-alone business within J&J MedTech.
In 2018, Abiomed agreed to pay $3.1 million to the federal government to settle allegations that sales representatives violated an antikickback statute to get doctors and nurses to use the firm’s heart pumps on Medicare patients between 2012 and 2015.
The alleged kickbacks consisted of lavish meals, with plenty of alcohol, at some of the country’s swankiest restaurants, including Menton in Boston, Spago in Beverly Hills, Nobu in Los Angeles, and Eleven Madison Park in Manhattan, according to federal prosecutors in Massachusetts.
In a filing with the Securities and Exchange Commission at the time, Abiomed said the settlement “contains no admission of liability” and that “resolving this matter was in the best interests of its patients, customers, shareholders and employees.”
Jonathan Saltzman can be reached at firstname.lastname@example.org.