Abbott Denies Plans to Purchase St. Jude Medical

Is St. Jude Medical Inc. on the market?
 
According to its leadership, it’s not. Officials with the Abbott Park, Ill..-based Abbott Laboratories Inc. their Thursday morning early—not with coffee but with denials. A story in the Financial Times cited anonymous sources that claimed Abbott was preparing a $25 billion buyout of St. Jude Medical. The company is preparing an offer but has not yet put it forward, the newspaper reported.
 
If true, the deal would follow recent medtech blockbuster industry-shaking mergers such as Medtronic-Covidien and Zimmer-Biomet. Last month, St. Jude Medical agreed to buy heart pump maker Thoratec Corp. for $3.5 billion.
 
St Jude’s shares, which jumped 15 percent in premarket trading following the report, were up 3.4 percent at $71.72 in early trading on Thursday, Aug. 27.
 
“I can tell you that we are not pursuing an offer for St. Jude,” Abbott spokesman Scott Stoffel told Reuters.
 
Miles White, Abbott’s CEO, said last month that he was interested in acquisitions, but the company would proceed cautiously.

“We’ve got a lot of opportunities, I think, to support our branded generic pharma business, and we’ve got a lot of opportunities in the device space. And that’s where a lot of our interest is right now. We’ll make a lot of progress there. It will become more apparent by the end of the third quarter, I feel confident,” White said during a recent conference call about second-quarter 2015 earnings. “Apparent doesn’t mean there’s some great blockbuster coming here. Those things tend to take time, and I don’t know that I can predict time right now. I’ve been on this call and said there’s not that much out there. Frankly, there’s a lot. But it’s all very highly valued and nothing’s easy in the deal world. There’s a lot of activity these days, in fact, a lot more activity than we’ve seen in a long time over the last 18 months. So I’m not sitting here holding back for anything. I think we’re moving along as best we can.

“I think the one thing that holds anybody back is the fear of overpaying or paying too much, and – or making a poor deal. And I think we’ve always tried to be disciplined about our deals. I always find that we’re criticized for paying too much until a couple of years later, when everybody says, ‘hey, great buy.’ We try to make intelligent deals. I don’t think you can ever expect not to pay full value for something, but we’re always careful about what we think we can do with a given business and whether we can add value to it and so forth. And trying to find that sweet spot where everybody’s happy is sometimes a little slower than we might like.”

Abbott, however, seems clearly focused on expanding its cardiovascular holdings.

In late July, Abbott entered into an agreement to purchase Tendyne Holdings Inc., a private medical device company focused on developing minimally invasive mitral valve replacement therapies. Under the terms of the agreement, Abbott will acquire the equity of Tendyne that it does not already own for $225 million upfront, resulting in a total transaction value of $250 million, plus potential future payments tied to regulatory milestones.

Tendyne’s Bioprosthetic Mitral Valve System is an investigational device and not currently available for sale. The U.S. Food and Drug Administration has provided approval for a feasibility clinical trial to provide data about the device’s safety and effectiveness. The trial has begun enrolling patients, and there are plans to begin enrollment next year in a clinical trial to support CE mark in Europe.

In a separate transaction announced last month, Abbott provided capital and secured an option to purchase Cephea Valve Technologies. Cephea Valve Technologies, a private company, is developing a catheter-based mitral valve replacement therapy. Financial terms were not disclosed.

These buys are in keeping with analysts predictions that Abbott would focus on midsize acquisitions rather than blockbuster deals.