Johnson & Johnson (JNJ, Financial) has announced its acquisition of ShockWave Medical (SWAV, Financial) for approximately $13 billion, at a purchase price of $335 per share in cash. This price is a slight 4.7% premium over the previous day's closing, reflecting the market's anticipation of the deal following a report on March 26. The offer represents about a 17% premium based on the stock price before the acquisition rumors surfaced.
Following the spin-off of its consumer business, Kenvue (KVUE, Financial), in August 2023, JNJ now focuses on two main segments: Innovative Medicine and MedTech, with the latter recently showing robust sales growth of 13% in Q4. This growth has been significantly supported by strategic acquisitions, including the $16.6 billion purchase of Abiomed and the $400 million acquisition of Laminar.
The addition of SWAV to JNJ's portfolio is expected to further enhance MedTech's growth, especially in the cardiovascular sector. SWAV, known for its pioneering intravascular lithotripsy (IVL) technology, has treated around 400,000 patients globally for calcified coronary artery disease (CAD) and peripheral artery disease (PAD). The technology, which uses sonic pressure waves to break up calcium in arteries, is also being explored for other medical conditions.
SWAV has demonstrated impressive growth, with a 49% increase in revenue to $730.2 million in FY23 and an anticipated 26% growth to between $910-$930 million in FY24. The company's gross margin remained strong at 88% in Q4. Despite the expected dilution to JNJ's adjusted EPS by $0.10 in 2024 and $0.17 in 2025 due to financing costs, the acquisition is seen as financially attractive, promising to boost JNJ's and MedTech's operating margins and revenue growth.
The acquisition of SWAV by JNJ is a continuation of its strategy to drive growth through strategic purchases. This move is particularly timely after a subdued Q4 earnings report, with SWAV poised to invigorate JNJ's growth trajectory.
