What next for Guidant and J&J?
With the announced launch of a criminal investigation into Guidant's marketing practices by the New York State Attorney General's office and an SEC inquiry into product disclosures and Guidant's stock trading coming on the heels of the clearance of the deal by the Federal Trade Commission (FTC), news reports seemed divided on whether the $25.4 billion mega-merger of Guidant Corp. and Johnson & Johnson was actually going to take place. Some industry analysts said the deal was essentially dead; others cited analysts just as certain that the deal would get done in some form or another.
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Is there a hotter sector in medical devices today than neuromodulation/neurostimulation? Just a year after Boston Scientific leapt into the market by paying a huge amount of money--$740 million not counting earn-outs--for Advanced Bionics, St. Jude Medical tops that with its recently announced $1.3 billion deal for neuromodulation leader Advanced Neuromodulation Systems. (ANS). The acquisition offers St. Jude an additional growth platform outside its existing product offerings in cardiac rhythm management (particularly ICDs), atrial fibrillation, and cardiology.
If you want some sense of the magnitude of Johnson & Johnson's recently announced acquisition of Guidant Corp., consider this: the $25.4 billion price tag was more than six times larger than any other deal done in the medical device space over the past six years; Still, if device industry executives were amazed by the deal, they weren't surprised. J&J's play for Guidant had been rumored for years-driven, it was argued, by a logical desire on the part of J&J to build on a valuable cardiovascular device business by accessing a major cardiac rhythm management (CRM) business. But it was the vascular business of both companies that seemed to propel the merger beyond the talking stages, beginning most notably, with the deal J&J and Guidant signed earlier this year to co-promote Cordis' Cypher drug-eluting stent. However, for all of the promise implicit in the merger of these two giants, there are enormous integration issues to be addressed, both before and after the deal closes. And for now, precisely how these challenges are resolved is likely to be fraught with uncertainty.
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