What's Next for the LVAD Market?What's Next for the LVAD Market?

Today, Medtronic announced an approximately $1.1 billion acquisition of HeartWare, one of two major makers of left ventricular assist devices (LVADs) in the United States. In 2015, LVAD maker Thoratec was scooped up by St. Jude Medical, which is slated to become part of Abbott following the close of its $25 billion purchase by the healthcare giant. These purchases mark a turning point for the LVAD industry as it transforms from a field dominated by two standalone companies--HeartWare and Thoratec--to a market directed by the biggest cardiovascular companies--Medtronic and Abbott.

Where does LVAD technology go from here?

The acquisitions are expected to expand the technology's reach and perhaps boost its evolution, too. Medtronic already works with the key targets for LVADs, including cardiologists, interventional cardiologists, and cardiac surgeons, so having its backing should increase LVAD awareness and use. What's more, the large company's financial strength and research and development resources should be a boon to the technology.

As Sean Lavin, analyst at BTIG, wrote in a June 27 research note, "MDT ownership should help HTWR better access the cardiologist channel and access to capital (i.e. investment in newer technology like MVAD and transcutaneous energy)."

HeartWare's next-generation LVAD, the MVAD, was the subject of a CE Mark trial that was halted last fall. The device is in the development process and a new study is expected eventually. LVAD makers have also been working to develop wireless power via transcutaneous energy transfer (TET).

"Medtronic is the worldwide leader in cardiovascular device technologies. Its expansive expertise in the development of implantable systems and battery technologies, patient monitoring, manufacturing, global regulatory policy and commercialization should help accelerate the development and introduction of our innovative pipeline products, and will expand access to our therapies and offerings to the sizeable heart failure population," Doug Godshall, HeartWare president and CEO, said in a press release.

The two LVAD purchases by Medtronic and Abbott should also mean increased visibility and competition between the device offerings. Rick Wise, analyst at Stifel, pointed out in a research note Monday, "The MDT/HTWR acquisition clearly validates the LVAD end-market and could, over time--with the increased marketing muscle of two large players (ABT/MDT)--further drive LVAD awareness, adoption, and market penetration."

Medtronic agreed to buy HeartWare for $58.00 cash per share, almost double the closing price of $29.98 Friday. The transaction is expected to close during the quarter ending October 28 and should be accretive to Medtronic's earnings in three years, according to the company release. In its announcement, Medtronic stated it expects the approximately $800 million VAD market to grow in the mid-to-high single digits in 2016 and 2017 and to grow faster, in the high-single to low-double digits after 2017.

"This transaction, once closed, will be a further, important step toward Medtronic offering a complete suite of solutions to address patient needs across the heart failure care continuum," Mike Coyle, executive vice president and president of Medtronic's Cardiac and Vascular Group, said in the release.

[Image courtesy of HEARTWARE, INC.]