MASSDEVICE ON CALL —Johnson & Johnson (NYSE:JNJ) could be setting its sights on Edwards Lifesciences (NYSE:EW)and St. Jude Medical (NYSE:STJ) as additions to its ailing cardiovascular portfolio – the only segment of its medical device business to shrink over the last 5 years.
New CEO Alex Gorsky told Bloomberg that he wants to grow J&J’s devices business via acquisition last week. An Edwards buyout would give it half of the global market for heart valves, "which analysts say will boost earnings more than any cardiovascular device maker in the next 3 years," according to the news service.
And acquiring St. Jude would add the med-tech industry’s highest-margin business to J&J’s portfolio, according to Bloomberg.
"If J&J is interested in remaining relevant in cardiology, it’s important for them to create another beachhead," Manning & Napier analyst Jeff McCormack told the news service. "[S]ize is going to matter. So it might be a good time for a company like J&J to begin to identify who they envision to be winners."
Edwards and St. Jude declined to comment on whether the world’s largest healthcare company has approached them, or if they’d be receptive to an offer.
"We do not comment on rumors or speculation," Edwards CEO Michael Mussallem wrote in an e-mail to Bloomberg. "We run Edwards for the long-term and we are very excited about what the future holds."
STJ spokeswoman Amy Jo Meyer also declined to comment, according to the news service.
"J&J has been quite public for some time about wanting to get into heart valves, particularly transcatheter heart valves," according to BMO Capital Markets analyst Joanne Wuensch. "To get there, they could buy Edwards. Edwards has the only transcatheter heart valve on the U.S. market at this stage. It’s one of the more interesting medical technologies around right now."
"My view would be, ‘Go big or go home,’" Piper Jaffray analyst Thomas Gunderson told the newswire. "Cardio is a growth area and J&J has done well in the past there. They just need the right horses to ride."
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