FTC moves to block Thoratec's buyout of HeartWare

July 30, 2009 by MassDevice staff

The U.S. Federal Trade Commission plans to file a lawsuit to spike the cardiovascular device makers' proposed $282 million merger on anti-trust grounds.

The U.S. Federal Trade Commission plans to file a lawsuit seeking to block the proposed $282 million merger of Thoratec Corp. and HeartWare International Inc.

Saying it believes the merger "would substantially reduce competition in the U.S. market for left ventricular devices," the commission alleged that Thoratec already enjoys a monopoly on the sale of LVADs in the U.S. and would only increase its hegemony if the merger is consummated.

"Thoratec seeks to maintain its monopoly by acquiring HeartWare, thus eliminating the only significant threat to Thoratec’s continued dominance of the LVAD market," the commission said, according to a press release.

Pleasanton, Calif.-based Thoratec and Framingham, Mass.-based HeartWare both make small, implantable heart pumps designed to assume the left ventricle's primary role in pumping blood throughout the body.

Thoratec's HeartMate line are the only two LVADs approved for sale by the Food & Drug Administration. HeartWare's HVAD device is undergoing clinical trials and is in line to be the next LVAD approved by the FDA, likely in 2012.

In addition to the lawsuit FTC plans to file in U.S. District Court, an administrative hearing on stopping the deal is set for Dec. 28.

Rick Wise, an analyst at Leerink Swann, wrote in a note to clients that the news represents an opportunity to snap up Thoratec shares at a favorable price.

"[Thoratec] shares have come under pressure recently as investors become increasingly anxious about the likelihood of a successful acquisition, and we suspect some of the news may already be reflected in the stock at current levels," Wise wrote. "We view any weakness as a buying opportunity for two key reasons: 1) We believe [Thoratec] can maintain its leadership position in LVADs and deliver sustainable double-digit top- and bottom-line growth over the next few years, even without HeartWare; and 2) Acquisition resolution — positive or negative — removes an overhang on [Thoratec] shares."

Wise predicted that the companies will call off the deal to avoid a costly, lengthy legal battle.