It’s time for implantable heart pump maker Thoratec Corp. (NSDQ:THOR) to throw in the towel and sell itself off, according to Oracle Investment Management.
Thoratec needs a more seasoned company to help it push past a period of sluggish growth, meaning that putting the cardiac assist device firm up for auction is best for shareholders, according to the activist investor group.
Greenwich, Conn.-based Oracle, which holds a 5.2% stake in the heart pump maker, recommended in a regulatory filing that Thoratec retain an investment bank to explore strategic alternatives including sale to a larger company.
"Although Thoratec management initiated development of the [left ventricular assist device] market, recent market growth has been unsatisfactory and Thoratec has not meaningfully expanded its market share in many of the most promising European markets," Oracle founder Larry Feinberg wrote in a letter to Thoratec’s board of directors earlier this month. "It is now clear that the market clout, deep capital resources, and relevant experience of a larger and more tenured med-tech company is required to accelerate the penetration of this burgeoning market opportunity."
The LVAD market may be one of the fastest-growing and largest markets in med-tech in the next 10 years, expected to go from 4,000 implants in 2010 to 10,000 implants in 2015, according to Feinberg.
"This growth could be even greater if additional resources are devoted to market development and next generation LVAD commercial timelines are accelerated," he wrote. "In our opinion, a well conceived auction process would result in a minimum of 5 large-cap med-tech companies aggressively competing to acquire Thoratec."
Thoratec would be a great fit for implantable defibrillator makers such as Boston Scientific Corp. (NYSE:BSX), Medtronic Inc. (NYSE:MDT) and St. Jude Medical Inc. (NYSE:STJ), and could fetch as much as $60 per share at auction, Feinberg told Bloomberg – which would make the deal worth a whopping $3.6 billion.
The Pleasantville, Calif.-based company may look appealing to technology giant Johnson & Johnson (NYSE:JNJ), which is mulling a move into the LVAD market.
After the June announcement that it was dumping its drug-eluting stent business, J&J CFO Dominic Caruso said the med-tech titan could make a move into the market for heart pumps and heart valves for the right price.
Shares of Thoratec stock were down about 1 percent to $30.19 in mid-morning trading.
