Let The Countdown Begin: Abbott-St. Jude Deal Draws To A Close

Posted in Medical Device Business by amanda.pedersen on January 3, 2017

With regulatory hurdles cleared, Abbott is expected to finalize its $25 billion acquisition of St. Jude Medical this week.

Amanda Pedersen

Abbott's headquarters in Abbott Park, IL

 

The countdown is officially on for Abbott Laboratories and St. Jude Medical Inc. Abbott said it has secured all necessary regulatory clearances and plans to close the deal Wednesday.

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Miles White, chairman and CEO of the Abbott Park, IL-based company, reiterated the strategic fit of the purchase, which he said “creates one of the broadest medical device portfolios in the world, and provides a steady stream of new technologies and therapies for years to come.”

The combined company’s cardiovascular and neuromodulation portfolio is expected to draw annual sales of nearly $8.7 billion.

The deal places Abbott in nearly every corner of the $30 billion cardiovascular market and gives the company the first or second market position across several high-growth cardiovascular device sectors.

“Customers today want partners who offer breakthrough technologies along with a broad portfolio of solutions to help them better care for their patients,” White said, noting that the combined Abbott-St. Jude product portfolio will help the company be that partner for its customers.

Abbott has had its eye on several St. Jude devices in particular, including the EnSite Precision cardiac mapping system, which FDA cleared earlier this month.

Other key St. Jude products Abbott will gain through the acquisition are the ConfirmRx implantable cardiac monitor; Heartmate 3; Portico transcatheter aortic heart valves; and the Proclaim Dorsal Root Ganglion system for chronic pain relief.

On the flip side, Abbott will also be inheriting some of St. Jude’s recent problems in the cardiac rhythm management (CRM) business, which saw a 17% drop in sales during the third quarter. St. Jude has fallen short in the area of MRI-safe implantable heart devices, but that product gap should be addressed in the first half of this year with the anticipated approval of an MRI-compatible pacemaker.

Concerns about premature battery failure problems in St. Jude’s defibrillators could continue to impact sales well into the year though, according to Morning Star Equity Research’s Debbie Wang. Doctors may hold off on implanting St. Jude devices until “they are sufficiently reassured” that problems have been addressed, Wang said.

Still, the analyst said, “Abbott needs St. Jude’s product portfolio in order to avoid becoming peripheral among medical technology competitors.”

The St. Jude acquisition is expected to be accretive to Abbott’s adjusted earnings per share in the first full year, with about 21 cents of accretion in 2017 and roughly 29 cents in 2018. Abbott said it also anticipates annual pre-tax synergies of $500 million by 2020, including both sales and operational benefits.

Amanda Pedersen is Qmed's news editor. Reach her at amanda.pedersen@ubm.com.

 

[Image credit: Abbott Laboratories]