Abiomed (ABMD) shares rocketed higher Tuesday after the medical technology group agreed to a $16.6 billion takeover by Johnson & Johnson (JNJ) that expands the group's ambitions to grow its pharmaceutical and medical devices businesses over the coming years.
Johnson & Johnson said it will pay $380 per share in cash for the Danvers, Massachusetts group, which specializes in heart pump and other medical devices linked to the treatment of cardiovascular diseases, as the group continues to shift focus away from its consumer healthcare business, which will be spun off later next year.
Abiomed will continue to operate as a stand-alone group within Johnson & Johnson's medical technology division, the companies, said, with shareholders set to receive rights worth another $35 per share if further clinical milestones are met following the close of the transaction and over the next seven years.
“The addition of Abiomed is an important step in the execution of our strategic priorities and our vision for the new Johnson & Johnson focused on Pharmaceutical and MedTech,” said Johnson & Johnson CEO Joaquin Duato. “We have committed to enhancing our position in MedTech by entering high-growth segments. The addition of Abiomed provides a strategic platform to advance breakthrough treatments in cardiovascular disease and helps more patients around the world while driving value for our shareholders.”
Abiomed shares were marked 510.88% higher in early Tuesday trading immediately following news of the deal to change hands at $380.24 each. Johnson & Johnson, meanwhile, fell 0.2% to $173.72 each.
Stifel healthcare analyst Rick Wise said the Abiomed deal "highlights the importance of growth/innovation for larger companies like Johnson & Johnson, adding that the group's commentary "strongly suggests that clinical innovation/pipeline/market expansion are the key priorities post-close."
"Johnson & Johnson's global strength should help scale Abiomed's international expansion, which are currently just around 20% of sales, "Wise added. "Financially, Johnson & Johnson expects a 1Q23 deal close, and a 'neutral to slightly dilutive' EPS impact in 2023 and a $0.05 benefit in 2024."
Last month, Johnson & Johnson posted stronger-than-expected third quarter earnings of $$2.55 per share, on revenues of $23.8 billion, as solid pharmaceuticals sales offset a slide in its Covid vaccine business.
The company also lifted its 2022 earnings forecast by around 5 cents per share, to between $10.70 and $10.75 per share, with adjusted operational sales growth of between 6.7% and 7.2%, up from last month's forecast of between 6.5% and 7.5%.