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Will Johnson & Johnson buy Boston Scientific?

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Johnson & Johnson Boston ScientificNeedham & Co. analyst Mike Matson today upgraded his rating of Boston Scientific (NYSE:BSX) shares to Buy, partly because he thinks it’s an acquisition target for Johnson & Johnson (NYSE:JNJ).

Said Matson: “If JNJ decides to acquire a large medtech company, we believe that BSX could be a good fit.”

BSX shares were up more than 2% to $41.19 apiece by midday trading today, while JNJ shares were down slightly. MassDevice‘s MedTech 100 Index, which includes stocks of the world’s largest medical device companies, was up slightly.

Boston Scientific spokesperson Kate Haranis said the company doesn’t comment on speculation and rumors, and J&J spokesperson Ryan Carbain had nothing to add.

Johnson & Johnson remains on track to spin off its consumer health business in 2023, fueling conjecture that it may want to buy a medical device company to make the size of its MedTech business more on par in revenue size with pharmaceuticals.

Executives at J&J acknowledged during the company’s Q1 earnings call in April that they’re eager to acquire companies with technologies that could enhance their MedTech business. CFO Joe Wolk added: “I would not get overly locked into size.”

Matson in his report today listed reasons why Boston Scientific would be an attractive company for Johnson & Johnson to buy: “There are any number of potential acquisitions that JNJ could pursue, but assuming that it wants to acquire a large medtech company, we believe that BSX would be a good alternative in terms of its size, business mix and revenue growth. While JNJ’s Med Tech portfolio includes cardiovascular, orthopedics, surgery, and vision care products, its cardiovascular business is limited to electrophysiology and neurovascular, areas where BSX’s business is either very small (electrophysiology is just ~4% of its sales) or non-existent (neurovascular).”

Boston Scientific CEO Mike Mahoney is also a J&J veteran; he was even chair of J&J’s medical device business for nearly two years. When he left J&J in 2011 to take over the corner office at Boston Scientific, the companies were friendly enough over Mahoney’s move that it fueled speculation at the time that a potential merger was in the works.

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