J&J to acquire Shockwave Medical for $13.1B

2024-04-05

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Johnson & Johnson has agreed to acquire Shockwave Medical for approximately $13.1 billion, the companies announced Friday morning. The deal values Shockwave at $335 per share.

J&J said in a statement that Shockwave will expand its “cardiovascular portfolio into two of the highest-growth, innovation-oriented segments of cardiovascular intervention – coronary artery disease and peripheral artery disease.”

Both companies’ boards have approved the transaction, and J&J expects the deal to close in mid-2024.

J&J plans to fund the transaction through cash on hand and debt. J&J expects the deal to be operationally accretive upon closing, but anticipates dilution to adjusted earnings per share of about 10 cents in 2024 and 17 cents in 2025 due to financing costs.

Shockwave makes medical devices that break up calcium deposits in coronary arteries using sound pressure waves, a technique called intravascular lithotripsy.

The company forecast a sales range of from $910 million to $930 million for 2024, and had $990.6 million in cash or cash equivalents as of Dec. 31.

On an investor call Friday morning, an analyst questioned why J&J was confident about closing the deal in mid-2024 given a more challenging regulatory environment. This week, Boston Scientific said its proposed $3.7 billion acquisition of Axonics would be delayed after the Federal Trade Commission requested additional information from both companies.

J&J CEO Joaquin Duato stood by the projected timing.

“Obviously, we need to allow the process to unfold and the authorities to complete their due diligence,” Duato said. “But we are confident that we are well positioned for the timelines that we told you.”

Needham analysts wrote in a note to investors that they “do not expect any antitrust issues due to a lack of product overlap, and think that a higher bid is unlikely.” The analysts wrote that the $13.1 billion agreement is a fair value for Shockwave.

The deal marks J&J’s second major medtech acquisition in the past roughly 15 months after acquiring heart device maker Abiomed in late 2022 for $16.6 billion. In November, J&J also acquired Laminar, another cardiac-focused medtech, for $400 million.

The company said Shockwave’s IVL devices complement the Impella heart pumps acquired in the Abiomed deal, adding that IVL is currently used in about 30% of high-risk percutaneous coronary intervention procedures that also use Impella.

CFO Joe Wolk said on Friday’s call that Shockwave and Abiomed are in “significantly under-penetrated segments, less than 10% today, and we intend to invest for growth.” Wolk added that Shockwave will operate as a business unit within J&J Medtech, similar to the handling of Abiomed

Last week, The Wall Street Journal reported that J&J and Shockwave were discussing a merger, citing people familiar with the matter.

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