Johnson & Johnson's $13B Shockwave Medical Deal Accelerates MedTech Strategy, Analyst Says

Johnson & Johnson JNJ agreed on Friday to acquire Shockwave Medical Inc SWAV for $335 per share in cash, corresponding to an enterprise value of approximately $13.1 billion, including cash acquired. 

The acquisition of Shockwave Medical further extended Johnson & Johnson MedTech’s position in cardiovascular intervention and accelerated its shift into higher-growth markets. 

Assuming the Shockwave deal is completed, Johnson & Johnson would have deployed approximately $30 billion over the past ~18 months in M&A to strengthen its MedTech portfolio, which accounted for around 35% of sales). 

Goldman Sachs wrote that the acquisition of Shockwave signifies a strategic move in its efforts to revamp Johnson & Johnson’s MedTech division, which had been experiencing modest growth rates before the COVID-19 pandemic. 

This transformation involved a combination of internal initiatives, such as launching new products under Biosense Webster and acquisitions. 

These efforts and strong procedure volumes led to a significant percentage of organic growth of 7.7% for Johnson & Johnson’s MedTech business in 2023. 

Goldman Sachs wrote that completed and announced acquisitions and internal reinvestment were elevating the company’s market growth rate and expanding its presence in lucrative sectors.

To counter potential challenges in other business areas, like increasing competition in surgical and orthopedic segments, Johnson & Johnson must continue investing in new growth avenues for its MedTech division, the Goldman Sachs analysts added. 

Excluding the Shockwave acquisition, the projected growth rate for Johnson & Johnson’s MedTech business from 2024 to 2030 is estimated at 5.1%, contributing significantly to the company’s overall growth. 

Shockwave’s acquisition offered the potential for increased sales and market penetration.

SWAV, JNJ Price Action: Shockwave shares were down 0.032% at $326.24, and Johnson & Johnson shares were down 0.24% at $152.05 on the last check Monday.

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