Medtronic to Buy HeartWare for $1.1 Billion

Biggest deal since 2015 Covidien acquisition expands Medtronic's cardiac line with LVAD.

Nancy Crotti

HeartWare MVAD
HeartWare's MVAD is one-third the size of its HVAD pump. (Image courtesy of HeartWare)

Medtronic has ramped up its buying spree, agreeing to pay $1.1 billion for LVAD-maker HeartWare International in a bid to reach more heart-failure patients.

Medtronic will pay $58 per share in cash, nearly double HeartWare's Friday closing price of $29.98. HeartWare's stock soared nearly 92% Monday morning on the news to $57.49 while Medtronic's dropped slightly to $81.86.

Both companies' boards of directors have approved the deal, which is expected to close October 28, according to a statement by Medtronic.

The deal also puts Medtronic on more even footing in the minimally invasive ventricular assist device market with St. Jude Medical, which acquired LVAD-maker Thoratec and its HeartMate III technology for $3.3 billion in 2015. HeartMate III won the CE Mark in October, and won FDA approval earlier last year to enlarge the pivotal trial for the next-generation device.

HeartWare has "multiple technologies" in development for even less-invasive devices for patients with end-stage heart failure, according to Medtronic. The medtech giant estimates that the global VAD market at approximately $800 million,  and predicts it will grow by tens of millions of dollars in next couple of years.

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Medtronic will fold HeartWare into its cardiac rhythm and heart failure division. The company said its fiscal 2017 revenue and earnings guidance remain unchanged. It expects the acquisition to be a money-maker in three years.

"The team at HeartWare has established excellent relationships with its hospital customers and built a strong position and reputation in the marketplace," said Mike Coyle, executive vice president and president of Medtronic's cardiac and vascular group. "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."

Medtronic was apparently nonplussed by January's news that HeartWare no longer had a timeline for its next-generation MVAD system. The Framingham, MA-based company halted a trial for the CE mark in October. CEO Doug Godshall said then that the company found "certain algorithms, which appear to increase the potential" for blood clots in the pump, a potentially deadly condition associated with ventricular pumps in general. The company's stock dropped 41% year-to-date through Friday, according to MarketWatch.

Heart failure remains a leading cause of hospitalization and death in the United States, affecting more than five million people in the U.S. alone. Medtronic estimates that figure could exceed 8 million by 2030.

U.S. heart-failure expenditures hover around $39 billion per year, the company said.

Medtronic has been on a billion-dollar buying spree since its $50 billion acquisition of Covidien in 2015. Earlier this year, it announced plans to buy privately-held Bellco (Mirandola, Italy), which it describes as a pioneer in hemodialysis treatment. 

Nancy Crotti is a contributor to Qmed.

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