According to a report by The Wall Street Journal yesterday,Johnson & Johnson is in talks to acquire medical device maker Shockwave Medical as the healthcare giant may look to expand its presence in the cardiovascular device space.Shockwave, a company that produces devices for treating heart disease, has a market value of approximately $11 billion.

The report cited sources as saying that if the negotiations go smoothly, the deal could be finalized in the coming weeks, but another competitor may also emerge. However, the exact value of the deal has yet to be confirmed. As of yesterday afternoon's trading, the report by The Wall Street Journal caused SWAV shares to rise over 10%, reaching $316.07 per share. Yesterday, its market value was $11.82 billion, equivalent to 85.816 billion yuan.

Shockwave Medical, Inc. is a manufacturer of ultrasonic catheters, established in California in 2009 and listed on NASDAQ in April 2019, focusing on treating calcified lesions in the cardiovascular system.

The highlight of this company is that it pioneered the application of the concept of ultrasonic lithotripsy in urology to the treatment of vascular calcification. This technology is called "Intravascular Lithotripsy" (abbreviated as "Shockwave IVL").

And applied it to the development of its Shockwave C2 device. Relying on this core product, Shockwave Medical’s market value increased more than 10 times and ranked 99th in the 2022 Global Top 100 Medical Device Companies list with a revenue of $237 million.

Shockwave IVL

Previously, vascular calcification was a significant challenge and problem for surgeons during interventional procedures. The advent of Shockwave IVL represents a disruptive innovation breakthrough in the field of interventional therapy.

This technology can loosen calcification through the acoustic pressure waves generated by pulses within the shockwave balloon, without affecting the integrity of the vascular intima, achieving the effect of modifying calcified plaques. The blood vessel can be safely dilated at low pressure, providing sufficient conditions for subsequent stent placement and full expansion, while reducing the risk of perforation and distal embolism.

IVL not only works on superficial calcification but is also the only technology that has a therapeutic effect on deep calcification. It addresses some of the shortcomings of current pre-treatment techniques for severe calcified lesions, achieving true vascular dilation without injury.

Since its commercialization in 2018, this product and technology have received high clinical evaluations abroad, and doctors in China also generally approve and accept it. In the 2021 edition of the "Chinese Expert Consensus on the Diagnosis and Treatment of Coronary Artery Calcification," it was referred to as the "terminator" for coronary artery calcification lesions and is also the only intravascular lithotripsy product approved for marketing internationally.

Acquisitions in 2023

Notably, just in early April last year, Shockwave completed the acquisition of valve company Neovasc for $147 million (992 million RMB).

At that time, Shockwave planned to merge Neovasc's angina stent with the company's cardiac device business to advance its entry into the refractory angina market.

Regarding this rumor, a spokesperson for Shockwave Medical stated that the company's policy is to not comment on any speculation.

This is not the first time Shockwave has been the subject of potential acquisition reports. There were also media reports in April and May last year.WeighJohnson & Johnson, Medtronic, and Boston Scientific are potential acquirers.

Boston Scientific Acquisition Rumors

On April 22, 2023, according to Bloomberg, Boston Scientific Corporation may acquire ShockWave Medical, a cardiovascular medical device company, to expand its cardiac business portfolio. Following the news, the stock price of ShockWave Medical (SWAV.US) surged sharply, rising over 14% at one point. By the end of the morning session that day, the increase stood at 10.22%, with a market value reaching $10.454 billion (approximately RMB 72.048 billion).

If the deal goes through, it will become the largest acquisition in Boston Scientific's recent history. Analysts at BTIG said that this acquisition could be Boston Scientific’s “response” to Abbott’s previous acquisition of a cardiovascular company; as the cost of taking action, Boston Scientific will face opposition from antitrust regulators.

Upon closer inspection, the思路becomes clear. Boston Scientific and Abbott are both leading players in the global cardiovascular stent market, with a long-standing competitive relationship. In February 2023, Abbott announced plans to acquire Cardiovascular Systems, Inc. (CSI), a publicly listed company specializing in cardiovascular devices, for $890 million (approximately RMB 6.037 billion), thereby expanding its cardiovascular device product portfolio.

ShockWave Medical's product is the only intravascular lithotripsy device approved for marketing worldwide. Thus, Boston Scientific's acquisition of ShockWave Medical is seen in the industry as a "counterattack" to Abbott's purchase of Cardiovascular Systems Inc. (CSI).

In fact, as a global cardiovascular giant, Boston Scientific Corporation has a comprehensive product layout in the field of cardiac interventional therapy, covering the entire process of coronary artery intervention. Meanwhile, Shockwave Medical's products are highly complementary to Boston Scientific’s offerings, making this a perfect combination for the medical market.

However, according to Bloomberg, the acquisition talks between Boston Scientific and Shockwave Medical have failed. The reason for the failure of the negotiations between Boston Scientific and Shockwave Medical was that they could not reach an agreement on the price. According to The Wall Street Journal, Shockwave Medical had previously sought an offer of around $300, while the current market price is $289.

It is reported that Boston Scientific offered a price of $275 per share, half in cash and half in stock; the transaction was terminated due to the price discrepancy.

The Possibility of Johnson & Johnson and Medtronic's Acquisition

On May 10, 2023, Shockwave Medical's stock rose by 1.36%, leading to speculation that the company would face more acquisition options. According to an unnamed industry insider cited by The Wall Street Journal, Shockwave Medical is expected to face acquisition interest from Johnson & Johnson and Medtronic.

In the field of vascular calcification, multiple medical device companies are also involved in development. Among them, Medtronic, as the leader in the cardiac field, mainly achieves its layout in vascular calcification through its EUPHORA SEMICOMPLIANT Balloon Dilatation Catheter and NC EUPHORA NONCOMPLIANT Balloon Dilatation Catheter. These two products are devices used to treat vascular stenosis and calcification and can help restore the natural patency of blood vessels. If Medtronic could acquire Shockwave Medical, it should provide significant support.

Johnson & Johnson said in 2023 that it is looking for opportunities to merge with or acquire companies that can add value to its cardiovascular product portfolio, and added that many of the future deals may be small "complementary" acquisitions. In 2022, the company acquired Abiomed, a heart pump manufacturer, for $16.6 billion.

Abiomed owns the Impella® series of heart pumps, including different models such as Impella RP and Impella CP, which are used for patients with severe coronary artery disease requiring high-risk PCI (percutaneous coronary intervention), AMI (acute myocardial infarction) cardiogenic shock, or right heart failure. This expands Johnson & Johnson's presence in the cardiovascular field.

Although both Medtronic and Johnson & Johnson are powerful and highly motivated acquirers, the rumors of these acquisitions did not materialize in the second half of 2023.

Will Shockwave Medical become part of the Johnson & Johnson family? If the acquisition is successful, what profound impact will it have on the industry and market landscape? In the coming weeks, DeviceHome will be closely monitoring.

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