Boston Scientific has entered a $25 billion dollar bid for fellow medical device maker Guidant in a move that could scupper the offer by Guidant’s current suitor Johnson & Johnson.
J&J offered to buy Guidant for $25.4 billion last year, but agreed a lower offer of around $21.5 billion with Guidant last month in the wake of a series of problems at the device maker, most notably a massive recall of defibrillators in the summer. At one point the deal looked to be in jeopardy, but after Guidant threatened to sue J&J to complete the deal, a new agreement was reached.
Boston Scientific’s $72-a-share offer throws the gauntlet down in front of J&J, whose $63.40 bid is 14% lower. Both companies are hoping to get their hands on Guidant’s pacemaker and defibrillator business, which despite the recent problems – most of which seen resolved – represent one of the fastest-growing sectors in medical devices. Guidant is set to launch a range of cardiac rhythm management (CRM) systems, including wireless versions, that are tipped to be potential big sellers in a market currently valued at $10 billion.
J&J’s share dipped fractionally on the announcement, while Guidant rose almost 10% to close the day at $67.98
Now, all eyes are on J&J to see if it wants Guidant enough to put in a counter offer, which would likely hike the price tag up for Guidant up to the level it originally offered.
Guidant had no comment to make on Boston Scientific’s offer, merely saying that it would take a look at the proposal. Analysis published last year by Frost & Sullivan indicated that the CRM market was worth $7.25 billion in 2003 but is estimated to balloon to $17.52 billion in 2008, driven by product improvements and the sheer number of eligible patients worldwide.
If Boston Scientific does succeed in driving a wedge between J&J and Guidant, there will be few options open to J&J in its bid to tap into the CRM sector – thought to be the main driver for the acquisition.
The leading company in the sector, Medtronic, would likely be too expensive for J&J, although it could mount a bid for the third-placed CRM manufacturer St Jude Medical, suggested analysts. The markets agreed, driving St Jude’s share price up nearly 5% by the close of trading yesterday.
Cardiovascular stent business on the block?
Boston Scientific and J&J are already rivals in the drug-eluting cardiovascular stent market with their respective Taxus and Cypher stents, both of which have seen phenomenal growth which is now starting to slow. Whichever company wins Guidant will bolster their franchise with the Xience V everolimus-eluting stent, which has just shown impressive efficacy in the 12-month SPIRIT FIRST trial, presented at the annual American Heart Association conference held last month in Dallas.
Boston Scientific said it would divest Guidant's vascular intervention and endovascular businesses and retain shared rights in its drug-eluting coronary stent program, taking over Guidant's planned launch of its Xience V stent, if its bid was successful.