12.1 billion, Johnson & Johnson announced a major acquisition

On August 20th, Johnson & Johnson announced a definitive acquisition agreement with V-Wave. According to the agreement, Johnson & Johnson will acquire V-Wave for an upfront payment of $600 million (approximately 4.3 billion RMB), subject to customary adjustments, and potentially receive additional regulatory and commercial milestone payments of up to about $1.1 billion.

Thus, the total transaction value of this acquisition is approximately $1.7 billion (approximately 12.1 billion RMB). It is reported that the transaction is expected to be completed by the end of 2024, subject to applicable regulatory approvals and other customary closing conditions.

Information shows that V-Wave, established in 2009, focuses on developing percutaneous implant technologies for patients with chronic failure. Its core product, the Ventura Interatrial Shunt, can alleviate symptoms for heart failure patients and improve their quality of life.

In the past two years, Johnson & Johnson has been continuously increasing its investment in the cardiovascular field. Previously, Johnson & Johnson had acquired Abiomed, a leader in artificial hearts, and Shockwave, a company in the field of cardiovascular intervention, with a total transaction value of nearly $30 billion. So, why is Johnson & Johnson acquiring V-Wave this time?Johnson & Johnson to Acquire

Atrial Shunt Technology Company

It is understood that the acquisition of V-Wave will expand Johnson & Johnson's position as an innovative leader in addressing cardiovascular diseases and further accelerate the transformation towards high-growth and high-opportunity markets, while deepening relationships with structural interventional cardiologists and heart failure experts.

Johnson & Johnson anticipates that this transaction will dilute adjusted earnings per share (EPS) by approximately 24 cents in 2024 and by 6 cents in 2025. The company plans to provide updated information on the full-year outlook when it reports third-quarter results on October 15, 2024.

Upon completion of the acquisition, Johnson & Johnson intends to integrate V-Wave into its medical technology division and include financial reporting as part of its cardiovascular portfolio. Additionally, Michael Bodner, President of Johnson & Johnson's Cardiac Rhythm Management and Endovascular Lithotripsy business, will become the head of V-Wave.

Regarding this acquisition, Tim Schmid, Executive Vice President of Johnson & Johnson, stated: "We are delighted to welcome V-Wave to Johnson & Johnson and take another significant step towards changing the standard of care for cardiovascular diseases. We recognize the importance of identifying more diverse and effective heart failure treatment methods, and our recent performance record demonstrates our focus on accelerating impact on the most urgent and pressing unmet needs."Tim Schmid stated that Johnson & Johnson's relationship with V-Wave dates back to 2016, when Johnson & Johnson made an investment in V-Wave. "We have a deep understanding of the technology and science, as well as V-Wave's commitment to patients, and look forward to collaborating with them during this critical phase of the V-Wave team's development, to help patients with V-Wave's Ventura Shunt atrial shunt technology."

02

V-Wave Atrial Shunt Device

Filling the Treatment Gap in the Industry

Heart failure, as a common cardiovascular disease, severely affects the quality of life of patients. Despite significant advancements in medical and device treatments over the past few decades, the incidence and mortality rates of left heart failure remain high. In patients with chronic heart failure, the elevation of left atrial pressure leading to pulmonary congestion is a common mechanism that leads to the worsening of symptoms and acute decompensation.In recent years, atrial shunt technology, as an emerging heart failure therapy, has begun to attract industry attention. It is understood that atrial shunt surgery can achieve decompression through diversion, alleviate excessive left atrial volume, improve symptoms caused by heart failure, and enhance the quality of life for patients, making it an emerging minimally invasive interventional treatment.

It should be noted that there has been significant controversy surrounding atrial shunt technology, with many believing that it does not have substantial clinical effects. Currently, several innovative medical device companies around the world are developing various types of atrial shunt technologies, with Corvia Medical, supported by Edwards, and V-Wave, supported by Johnson & Johnson, making the fastest progress. Edwards and Johnson & Johnson have invested in the aforementioned companies many years ago.

It should be pointed out that no atrial shunt device has yet received FDA approval. Johnson & Johnson believes that the Ventura Interatrial Shunt is expected to become the first atrial shunt device approved by the FDA, filling a treatment gap in the industry. The product was granted the FDA Breakthrough Device designation in 2019 and received CE certification in 2020.

The Ventura Interatrial Shunt is a novel hourglass-shaped implant with a small opening in the middle that allows blood to flow from the left atrium to the right atrium. Its hourglass design aims to create a Venturi effect (a tube that narrows before expanding again) from the high-pressure atrium to the low-pressure atrium, increasing the efficiency of blood transfer and allowing for a smaller shunt.

Ventura Interatrial Shunt Atrial Shunt SurgeryAdditionally, the nickel-titanium nitinol hourglass frame design of the Ventura Interatrial Shunt is intended to securely anchor the shunt to the fossa ovalis, preventing the displacement or embolization of the shunt device; its biocompatible ePTFE encapsulation is designed to limit tissue growth and maintain the patency of the device.

03

Johnson & Johnson Continues to Increase Its Stake in the Cardiovascular Field Through Mergers and Acquisitions

The field of cardiovascular intervention is currently one of the fastest-growing medical technology markets globally, with a significant unmet patient demand. According to the "China Cardiovascular Medical Device Industry Innovation White Paper (2021)," the global market size for cardiovascular interventional devices is $48.3 billion (3510.44 billion RMB), and it is projected that the global market size for cardiovascular medical devices will reach $82.2 billion (5974.30 billion RMB) by 2026.Johnson & Johnson, as one of the top ten global cardiovascular companies, has been increasing its investment in the cardiovascular field over the past two years, with two significant acquisitions worth billions of dollars both pointing towards the field of cardiovascular interventional medical devices.

In April of this year, Johnson & Johnson acquired Shockwave, a star player in the cardiovascular intervention field, at a premium price of $13.1 billion. Shockwave's product, Intravascular lithotripsy, is the world's first intracoronary shockwave system, capable of addressing the challenge of coronary artery calcification.

In November 2022, Johnson & Johnson made a high-value acquisition of Abiomed, a leader in the artificial heart field, for $16.6 billion. This transaction also became the largest merger and acquisition deal in the global medical device industry in 2022. It is reported that Abiomed possesses a product pipeline including the Abiomed Breethe OXY-1 System (ECMO) & ECPella, preCARDIA, and Impella product portfolio, covering clinical indications such as high-risk PCI, cardiogenic shock, right heart failure, and severe pulmonary failure.

In terms of performance, Johnson & Johnson's acquisition strategy in the cardiovascular field has begun to show results. The latest financial report from Johnson & Johnson shows that in the first half of 2024, Johnson & Johnson Medical Technology achieved revenue of $15.778 billion, a year-on-year increase of 3.3%. Among them, the cardiovascular business achieved revenue of $3.679 billion, a year-on-year increase of 17.8%, becoming the business segment with the highest revenue growth in Johnson & Johnson Medical Technology.

Johnson & Johnson stated: "Johnson & Johnson is aggressively entering the cardiovascular device business, and in such a field with significant unmet needs, we have a huge opportunity to gain a premium for differentiated innovation."In fact, as early as the beginning of 2023, Johnson & Johnson had indicated that the company planned to focus on transactions that add value to its cardiovascular product portfolio, and it did not rule out the possibility of seeing the company invest more in cardiovascular medical device equipment in the future; in December 2023, Johnson & Johnson reiterated that it would "continue to expand its business into high-growth areas such as interventional cardiology."

Now it seems that Johnson & Johnson is truly implementing its strategic plan to increase its focus on cardiovascular. From November 2022 to the present, Johnson & Johnson has completed four acquisitions in the cardiovascular field, successively acquiring Abiomed ($16.6 billion), Laminar ($400 million), Shockwave ($13.1 billion), and V-Wave (approximately $1.7 billion), with a total acquisition amount of $31.8 billion.

It is worth mentioning that Johnson & Johnson was once a leader in the cardiovascular field, but its industry status declined after selling its core cardiovascular business, Cordis, in 2015. In 2023, Johnson & Johnson returned to the top 4 in cardiovascular. So, with continuous mergers and acquisitions to expand its cardiovascular product portfolio in the past two years, can Johnson & Johnson return to the position of industry leader in the future? After this acquisition is completed, how will Johnson & Johnson work with V-Wave to bring good news to heart failure patients?