Medtronic has announced it will acquire a Framingham, Mass.-based manufacturer specializing in less-invasive devices used to treat heart failure.
The Dublin-based devicemaker said it will buy publicly traded HeartWare International for $58 per share, or roughly $1.1 billion in cash. The deal is expected to close during Medtronic's second quarter ending Oct. 28.
HeartWare makes the HVAD System, a miniaturized pump that supports circulation of blood through the heart for patients with congestive heart failure, a condition in which the heart isn't pumping enough blood. The device is designed to be implanted less-invasively than comparable devices, in a three-step procedure.
The ventricular assist device will allow Medtronic to expand its heart failure business and offer devices that serve patients who have a wider range of needs, said Mike Coyle, executive vice president at Medtronic and president of its cardiac and vascular group. Medtronic already offers several pacemakers.
Medtronic estimates the value of the ventricular assist device market at $800 million, while heart failure affects 5.7 million adults in the U.S., according to the Centers for Disease Control and Prevention. Medtronic believes that number will exceed 8 million by 2030, and points out that the U.S. already spends $39 billion a year on heart failure treatment, one of the largest expenses in the healthcare system.
HeartWare CEO Doug Godshall expressed optimism that an acquisition by Medtronic will allow the company to more quickly develop and introduce other devices. "Combining the unique capabilities of the HeartWare team, which has been entirely focused on mechanical support technologies, with the broad strength of the Medtronic organization provides a unique opportunity to enhance growth in the mechanical circulatory support market," he said in a statement.
Medtronic and the rest of the cardiovascular device industry have looked toward minimally invasive surgery as a way to reduce costs overall but also to offer options to patients for whom implantation by open-heart surgery would be too risky. A number of devices have been approved to replace heart valves in high-risk patients using a catheter.
Medtronic gained Food and Drug Administrationn approval in April for the world's smallest pacemaker. The Micra Transcatheter Pacing System is a 1-inch device implanted directly into the heart's right ventricle chamber through a vein in the groin, but unlike most pacemakers, there's no need to directly insert electrode leads through the heart's veins. Implantation of conventional pacemakers isn't usually a risky procedure, but the electrodes can break, become dislodged or become infected.
Monday's deal should meet Medtronic's long-term financial metrics for acquisitions, the company said, so it does not intend to modify its fiscal 2017 revenue outlook or earnings guidance as a result of the pickup. The acquisition is expected to be accretive three years after closing, and Medtronic expects to report the business as a part of its cardiac rhythm and heart failure segment within the cardiac and vascular group.
Medtronic and HeartWare's stocks rose after opening Monday morning. It's an improvement for HeartWare, which has seen declines over the past year related to poor sales, clinical trial issues and a problematic acquisition that was eventually terminated.