St. Jude Medical to buy Thoratec for $3.4bn

Jul 22, 2015, 4:21 PM EDT
A surgeon enters in the operating room at the Cardiology Hospital in Lille, northern France, on April 2, 2013. AFP PHOTO PHILIPPE HUGUEN

St. Jude Medical will buy Thoratec for $3.4 billion. St. Jude’s offer of $63.50 a share is a 10% premium to Thoratec’s closing price on Tuesday and a 35.4% premium to its closing price on Friday, before the deal talks were reported, writes the Wall Street Journal. St. Jude’s bid is a bold bet Thoratec can maintain its dominant position in a relatively immature market where new, superior technologies could emerge in the coming years, analysts said. St. Jude, based in St. Paul, Minn., has historically shied away from large acquisitions. If completed, the Thoratec deal would easily be St. Jude’s largest ever, surpassing its $1.25 billion purchase of Advanced Neuromodulation Systems Inc. in 2005, according to Dealogic.

St. Jude is aiming to expand its portfolio of devices for the treatment of heart failure, a condition affecting some six million people in the U.S. St. Jude has made heart failure an increasingly important part of its growth strategy, and its current products include a remote patient monitoring system and a special type of pacemaker to improve the heart’s pumping function.

Medical device makers are consolidating to offset pricing pressure in the United States as hospitals cut costs with patients reducing doctor visits due to rising out-of-pocket costs for care, notes Reuters. "This acquisition helps accelerate development of our heart failure franchise, led by the upside on CardioMEMS," St. Jude Chief Executive Daniel Starks said on a conference call. St. Jude's CardioMEMS heart failure (HF) monitor, the only FDA-approved heart failure monitor, is used to treat slightly less sick, or class III, patients. 

Thoratec's devices, including HeartMate Left Ventricular Assist Systems and Thoratec VAD, are used for mechanical circulatory support to treat heart failure. HeartMate II is approved for use in patients with the highest risk of heart failure. St. Jude also said the deal helps enter markets totaling more than $1 billion that are expected to grow about 10 percent annually. The company, which also makes neurological products, said it expects the deal to add to adjusted earnings in 2016. The deal, expected to close in the fourth quarter, is net of cash, the companies said.