J&J Adds to Neurovascular Portfolio with Acquisition

Johnson & Johnson bought San Jose, Calif.-based Micrus Endovascular Corpfor about $480 million to expand its portfolio of medical devices that treat and prevent stroke.

Micrus develops, manufactures and markets implantable and disposable medical devices for use in the treatment of cerebral vascular disease. The company had revenue of $91.9 million in the fiscal year ended March 31.

New Brunswick, N.J.-based J&J will pay $23.40 a share, a 5.5 percent premium over Micrus’ closing price on Friday, July 16. Micrus shares have climbed nearly 50 percent this year.

The deal follows the recent purchase of neurovascular device maker ev3 Inc by Covidien for $2.6 billion.

“The neuro space is hot again,” Leerink Swann analyst Rick Wise said in a research note following the deal.

When combined with J&J’s Codman & Shurtleff business, Micrus’ product line will offer “a full range of stroke treatments and the potential to impact the condition in ways that could not be realized by either company alone,” said Michael Mahoney, chairman for J&J’s DePuy family of companies, said in a statement.

Micrus, J&J and ev3 compete against Boston Scientific Corp in the roughly $500 million worldwide market for coils that are threaded into the brain via catheter to prevent an aneurysm from causing a stroke.

The market has been growing at a 15 percent to 20 percent annual rate as physicians convert to using the minimally invasive coil from the traditional surgical treatment, said Jeff Jonas, a portfolio manager for asset management firm Gabelli & Co, which holds shares of both J&J and Micrus.

Analysts said the deal price appears to undervalue Micrus, relative to the premium Covidien paid for ev3, but noted Boston Scientific’s rumored interest in selling its neurovascular business may have influenced the price J&J was willing to offer for Micrus.

Stroke is the third most common cause of death in the United States, according to the National Stroke Association. The majority of victims have an ischemic stroke, which occurs when arteries are blocked by blood clots or other deposits. Others experience a hemorrhagic stroke, which occurs when a brain aneurysm bursts.

According to Wise, Abbott Laboratories and Medtronic also might be looking to acquire neurovascular assets. “It seems clear that the neuro space has become one of the more attractive medtech markets for would-be acquirers,” he wrote. Boston Scientific’s neurovascular business, with $350 million in projected sales, could be worth $1.75 billion, Wise said. J&J likely will stay on the lookout for faster-growth technologies to acquire, he added