Cardiovascular Device Sector Ignites as 2024's Largest MedTech M&A Deals Unfold

This year, the hottest track may have been determined in advance.

At the beginning of 2024, Mindray, known as the "leading domestic medical device company" in China, announced the acquisition of 21.12% of APT Medical's equity for 6.652 billion yuan of its own funds. With this acquisition, Mindray becomes the largest shareholder and controlling shareholder of APT Medical.

In early April, Johnson & Johnson, a multinational giant, announced an agreement with Shockwave Medical, a company in the field of cardiovascular intervention, to acquire all outstanding shares of Shockwave Medical at a price of $335 per share.The total value of the transaction is approximately US$13.1 billion.. This transaction has been approved by the boards of both parties.

Based on past experience, a 6.652 billion yuan M&A deal is sufficient to secure the largest domestic medical device M&A in China for 2024; a transaction amount of 13.1 billion US dollars is also enough to secure a top three spot, or even the largest medical device M&A globally for 2024.

Coincidentally, both M&A targets are companies in the cardiovascular sector. APT Medical is a leading enterprise in the field of electrophysiology and vascular intervention consumables in China, having launched the first domestically produced electrophysiological electrode catheter, controllable radiofrequency ablation catheter, and floating temporary pacemaker electrode catheter.

Shockwave is a well-known innovative company in the global cardiovascular field. Its product, Intravascular Lithotripsy (abbreviated as IVL), is the world's first intravascular shock wave system for coronary arteries, used to address the challenge of coronary artery calcification. Subsequently, Shockwave also launched an intravascular shock wave system for peripheral artery calcification.

Why is the cardiovascular track highly valued by both domestic and international device giants? What are their strategic layouts and forward-looking perspectives in the cardiovascular field? With massive investments pouring in, what changes will the cardiovascular track undergo?

Let's talk about the recent Shockwave acquisition case.

Johnson & Johnson is not the first suitor of Shockwave Medical. In fact, in April 2023, there were rumors that Boston Scientific was considering acquiring Shockwave Medical. However, a month later, media reports indicated that negotiations between Shockwave Medical and Boston Scientific had hit obstacles and stalled. The reason was that both parties failed to reach an agreement on the price.

Since the price could not be agreed upon, Shockwave Medical decided to wait. Meanwhile, during Boston Scientific’s negotiation with Shockwave Medical regarding an acquisition, Shockwave Medical did not halt its development efforts and was also in talks with Neovasc about a potential acquisition. Boston Scientific failed, but Shockwave succeeded: In April 2023, Shockwave Medical announced the acquisition of Neovasc for $147 million. Neovasc is an innovative company in the cardiovascular field, with products including mitral valve devices and interventional treatments for angina.

Amid news of Boston Scientific's negotiations with Shockwave Medical falling through, rumors have surfaced that Medtronic and Johnson & Johnson are interested in acquiring Shockwave. Thus, a high-quality project need not rush; it should wait, as there will be more suitors willing to offer a higher price.

Will the market believe these M&A rumors? The answer is yes. In the United States, some of the acquisition rumors in the healthcare industry over the years have been labeled as mere gossip, but others have become reality. Just like Johnson & Johnson's acquisition of Shockwave Medical, The Wall Street Journal had already disclosed the news 10 days before the official announcement from both parties:Johnson & JohnsonJohnson & Johnson Plans to Enhance Its Influence in the Cardiovascular Device Market by Acquiring Shockwave Medical. If the Negotiations Do Not Break Down, the Deal Between Johnson & Johnson and Shockwave Medical Could Be Completed Within Weeks.

Following the news leak, Shockwave's stock price surged over 11% to $320.46 per share.

At the time, the media also revealed that Shockwave might receive other acquisition offers. According to other media reports, potential acquirers include Medtronic and Boston Scientific.

On April 5, the rumors about Shockwave Medical's acquisition finally came to an end. As previously rumored in the market: Johnson & Johnson and Shockwave Medical jointly announced that Johnson & Johnson would acquire all outstanding shares of Shockwave Medical at a price of $335 per share, which is a 4.7% premium over the previous day's closing price; a 16% premium compared to March 25 before the news leaked. The transaction has been approved by the boards of directors of both companies and is expected to be completed by mid-2024.

This acquisition bid defeated the first suitor, Johnson & Johnson.ShockwaveBoston Scientific, and defeated the only rumored Medtronic. The reason for the defeat is very simple: Johnson & Johnson chose to pay more. However, the underlying meaning is not simple. Why is Johnson & Johnson determined to acquire Shockwave Medical at all costs?

Johnson & Johnson is willing to pay more for the acquisition because Shockwave has the potential to generate greater profits. In its press release, it stated: Shockwave is expected to become the 13th priority platform within Johnson & Johnson's medical technology division.Annual sales of at least US$1 billion。

In addition, according to the merger agreement, after the completion of the transaction, Shockwave will operate as a business unit of Johnson & Johnson Medical Technologies, and its financials will be reported within the cardiovascular product portfolio. In terms of personnel changes, Johnson & Johnson plans to have Michael Bodner, Global Head of Cardiac Rehabilitation at its subsidiary Abiomed, oversee the Shockwave business as well. Isaac Zacharias, the original President and COO of Shockwave, will transition to the role of Global President of Shockwave, reporting to Michael Bodner. Doug Godshall, the former CEO of Shockwave, will provide advisory support throughout the transition process.

In recent years, Johnson & Johnson has been expanding its layout in the cardiovascular field.

In November 2022, Johnson & Johnson acquired Abiomed, the leader in the artificial heart field, for $16.6 billion. This acquisition also represents the largest M&A deal in the global medical device industry in 2022. With the completion of the acquisition, Johnson & Johnson has significantly strengthened its voice in the cardiovascular field, especially in the structural heart sector.However, the acquisition is only the first step in Johnson & Johnson's strategic layout.。

Abiomed is a leader in the artificial heart field, and its Impella series products are mainly used for treating cardiogenic shock and assisting high-risk PCI. In the fiscal year 2022, Abiomed achieved revenue of $1.03 billion, representing a year-on-year increase of 22%. Among this, the revenue from the Impella series products was $985 million, accounting for over 95% of the total revenue. Regionally, more than 80% of Abiomed's revenue comes from the U.S. market.

After the acquisition of Abiomed, on one hand, Johnson & Johnson began to expand the sales scope of the Impella series products and promote Impella in the global market. On the other hand, Johnson & Johnson continued to support Abiomed's innovative technology and accelerated the R&D of new products. With the resource empowerment from Johnson & Johnson, Abiomed achieved a revenue of $1.306 billion in 2023 relying on the Impella series products, representing a year-on-year increase of 32.6%.

Johnson & Johnson stated in its latest annual report: In the fiscal year 2023, the sales of the medical technology department were $30.4 billion, increasing by 10.8% year-on-year. Among them, the sales of surgical business were $10.037 billion, increasing by 3.6% year-on-year; the sales of orthopedic business were $8.942 billion, increasing by 4.1% year-on-year.Interventional Solutions (Cardiovascular Device Business) Sales Reach $6.35 Billion, a Year-on-Year Increase of 47.70%; Vision business sales reached 5.072 billion USD, increasing by 4.6% year-on-year.

Besides, it is aggressively entering the artificial heart细分 market.In November 2023, Johnson & Johnson also acquired Laminar, a left atrial appendage closure device company, for an upfront payment of $400 million.Further strengthen its layout in the field of structural heart disease.According to reports, Johnson & Johnson will also make additional milestone payments based on Laminar's clinical and regulatory performance after the acquisition.

Johnson & Johnson stated, "Laminar's innovative approach will expand our product portfolio in this high-growth market and strengthen our electrophysiology and echocardiography businesses."

Through acquisitions and resource empowerment, Johnson & Johnson's cardiovascular device business revenue reached $6.35 billion in 2023, increasing by 49.8% year-on-year. Notably, in 2023, Johnson & Johnson's cardiovascular device business revenue surpassed Edwards, growing into the world's fourth-largest cardiovascular device giant.

At the same time, among the top five global cardiovascular medical device giants, Johnson & Johnson ranked first in the growth rate of its cardiovascular device business in 2023, leading by a wide margin. Specifically, Johnson & Johnson's growth rate was 47.7%, Boston Scientific's growth rate was 12%, Edwards' growth rate was 12%, Abbott's growth rate was 10%, and Medtronic's growth rate was 1%.

(Data source: financial reports of various companies)

In 2024, Johnson & Johnson continues to strengthen its presence in the cardiovascular field. In April, Johnson & Johnson announced the acquisition of Shockwave Medical. This acquisition expands Johnson & Johnson's cardiovascular product portfolio into the high-growth intravascular calcification market.

In clinical practice, there is a saying: "We fear nothing under the sky, nothing on the ground, but only vascular calcification." This is because vascular calcification is extremely difficult to address. However, Shockwave Medical's innovative Intravascular Lithotripsy (IVL) technology can effectively treat calcification in both coronary and peripheral arteries.

Johnson & Johnson stated: This acquisition will enhance the company's competitiveness in cardiac rehabilitation and electrophysiology, making it a leader in four high-growth markets within the cardiovascular device sector.

The reason why this acquisition will enhance the company's overall competitiveness is that Shockwave will create synergies with other businesses, stimulating growth.Specifically, Shockwave's IVL platform and Abiomed's heart pump platform both play critical roles in complex PCI (percutaneous coronary intervention) procedures. IVL is used in approximately 30% of high-risk PCI cases, and these cases also involve the use of Impella.

For example, not long ago, Professor Zhou Yujie and his team from Beijing Anzhen Hospital, Capital Medical University, performed a PCI surgery under the support of Ventiflow LP, a trans-catheter left ventricular cardiac pump developed by HeartFlow Medical. During the procedure, they repeatedly dilated the vascular lesion with a shockwave balloon (intravascular lithotripsy balloon) and then successfully placed a stent to open the narrowed coronary artery.

In addition, similar to the previous Impella series products, the current IVL penetration rate is also at a relatively low level. After the acquisition, Johnson & Johnson will rapidly promote IVL worldwide through its extensive channel resources and accelerate its application by leveraging the product's performance, advantages, and the Johnson & Johnson brand, thereby increasing revenue and profit.

Johnson & Johnson stated: "This transaction provides the company with access to an underserved and high-growth market, offering highly attractive growth rates and profit margins. The acquisition is expected to accelerate the company’s revenue growth."

From November 2022 to now, Johnson & Johnson has invested approximately $30 billion to strengthen its presence in the cardiovascular field. To date, Johnson & Johnson has established a presence in four high-growth markets within the cardiovascular sector: interventional artificial hearts, electrophysiology, left atrial appendage closure devices, and vascular calcification.According to the press release issued by Johnson & Johnson, it hopes to become a leader in four细分 markets within the cardiovascular field.

If you had $30 billion, what would you do? Johnson & Johnson chooses to invest it all in cardiovascular.

Johnson & Johnson believes that cardiovascular intervention is one of the fastest-growing medical markets globally, with a large number of patients having unmet needs. In response, it continues to increase its investment.Interventional Artificial Heart, Electrophysiology, Left Atrial Appendage Occluder, and Vascular Calcification: Four Key Sub-Segments。

It is worth mentioning that these markets, which Johnson & Johnson has heavily invested in, happen to be the markets that have undergone significant changes in recent years and were previously predicted by VCBeat to be booming markets.

In the field of interventional artificial hearts,Abiomed is no longer the sole standout. Innovative companies in China, such as Tongling Biomimetic, Xinling Medtech, Xinxing Medical, Diyuan Medical, Fengkaili Medical, Xinhengrui Medical, and Hexin Medical, have all entered the field and are making rapid progress.

For example, in December 2023, the interventional ventricular assist device TeleHeart P50, developed by Tongling Biomimetic, initiated clinical research and successfully treated a patient with cardiogenic shock. In the same month, Core Medical announced that its CorVad interventional ventricular assist system had been used in over 30 high-risk PCI auxiliary surgeries. In January 2024, OmniHeart, the percutaneous ventricular assist device under Xin Hengrui Medical, successfully completed its first clinical trial. In March 2024, Huanting Medical's interventional artificial heart product completed multiple animal experiments and has entered the clinical trial stage...

In addition, China-produced interventional artificial hearts are also accelerating their entry into overseas markets. For instance, the NyokAssist interventional artificial heart developed by XinCheng Medical received the "Breakthrough Device" designation from the U.S. FDA in August 2023, becoming the first interventional artificial heart to obtain "dual innovation recognition in both China and the U.S."

In the field of electrophysiology,Pulsed Field Ablation Technology (PFA System) Emerges as a Game-Changing Innovation in the Electrophysiology Market.

Compared with traditional radiofrequency ablation and cryoablation, pulsed electric field ablation, based on tissue selectivity and non-thermal ablation characteristics, does not cause damage to adjacent nerves, blood vessels, smooth muscles, or other tissues. In addition, the pulsed electric field ablation system also has the advantages of lower operational difficulty, ease of use, high ablation efficiency, and time-saving. It is not only easy for doctors to master but also improves treatment efficiency.

Based on the advantages of pulsed electric field ablation technology,Medtronic, Boston Scientific, Johnson & Johnson, Abbott and other giants have all entered the field in advance.In China, companies such as APT Medical,捍宇医疗,微电生理,锦江电子,睿笛生物,德诺电生理,玄宇医疗,艾科脉,洲瓴医疗,睿刀医疗,迈微医疗, and 远山医疗 are also actively making strategic moves.

As of now, the pulsed field ablation systems from Boston Scientific and Medtronic have both obtained FDA approval in the United States and CE certification in the European Union; Johnson & Johnson's pulsed field ablation system received approvals in Japan and the European Union in January 2024 and March 2024, respectively, and it has already submitted an application to the FDA.

In China, the cardiac pulsed field ablation systems developed by Jinjiang Electronics and Denovo Electrophysiology have been approved for marketing by the National Medical Products Administration (NMPA). Meanwhile, the pulsed field ablation products of innovative companies such as Beixin Life, Ruidi Bio, Aikema, Xuanyu Medical, Maiwei Medical, Hongtong Industry, Epredia, and Shangyang Medical have all entered the NMPA’s special review process.

Vascular Calcification MarketIn addition to Shockwave, the shockwave balloon catheters developed by Chinese companies such as Saihe Medical, Lepu Medical, and Puchuang Medical have received NMPA approval and are expected to make a significant market impact. Several other innovative companies, including Zhonghui Medical (a subsidiary of Huihe Medical), Blue Sail Medical, and Beixing, are also researching and developing intravascular shockwave technologies.

In addition to the market-validated coronary and peripheral vascular calcification markets, Peijia Medical has also expanded the application of intravascular shockwave technology to the treatment of calcific stenosis of heart valves. Currently, the shockwave valve treatment system developed by Peijia Medical has completed multiple surgeries, all of which have demonstrated good safety and therapeutic effects.

Despite increased competition, Johnson & Johnson is still expected to achieve high revenue growth in 2024 and has the opportunity to become the world's largest medical device company.

This is because: First, the innovative products or acquired products under Johnson & Johnson have been clinically validated, and the product penetration rate is low, indicating significant growth potential. Second, Johnson & Johnson will leverage its channel advantages to enhance the promotion of innovative products, accelerating their adoption and commercialization.

With the support of products, brands, and channels, both Abiomed, previously acquired by Johnson & Johnson, and Shockwave Medical, recently acquired, are poised for explosive growth.