Abbott Laboratories must divest two cardiac device businesses in order to continue with its proposed $25 billion purchase of St. Jude Medical. Abbott is counting on the deal to help it expand its product lines and retain hospitals looking to streamline their suppliers.
The businesses in question produce vascular closure devices, or VCDs, used to close holes in arteries following the insertion of catheters; and steerable sheaths, used to guide catheters for treating heart arrhythmias.
The Federal Trade Commission Tuesday approved the deal on the condition that North Chicago, Ill.,-based Abbott gives up all rights to products made by Tokyo-based Terumo Corp.
The FTC determined that without divestiture, Abbott would control more than 70% of the market for VCDs. Federal regulators, in a statement, also noted that for more than a decade, St. Jude had held “a near monopoly” in the sale of steerable sheaths, with Abbott only recently entering that market. A union of the two companies “would eliminate any competition between them” in this niche.
Abbott planned to sell some of its medical device business to Terumo for about $1.12 billion as a step toward completing the St. Jude deal.
Terumo hasn't previously sold either VCDs or steerable sheaths, but has sold “related products” in the U.S. market for 30 years, the FTC statement said. Terumo “possesses the industry experience and reputation necessary to replace competition,” it said.
In late April, Abbott announced its intention to buy St. Jude, based near St. Paul, Minn., in a deal with a total value of $25 billion, including the assumption of about $5.7 billion of St. Jude's debt.
By 2030, more than 40% of adults are expected to have some form of cardiovascular disease, according to an Abbott statement about the St. Jude deal. With its focus on medical devices for patients with heart failure, arrhythmias, vascular disease, structural heart and chronic pain, St. Jude's product mix gives Abbott “leading positions” in multiple areas of cardiovascular and neurological care, the statement said.
Abbott, meanwhile, is attempting to extricate itself from its $5.8 billion offer made in February to buy device maker Alere, of Waltham, Mass. Early last month Abbott asked a Delaware court to void its purchase offer, citing multiple problems, including “a systemic failure of internal controls” and a “lack of transparency,” according to company spokesman Scott Stoffel. Alere also sued in an effort to close the deal.
The St. Jude deal has also faced hurdles. The Food and Drug Administration currently is investigating claims that St. Jude Medical's heart devices are vulnerable to hacks that could be life-threatening to patients. The allegations, made by short-selling investment firm Muddy Waters and cybersecurity company MedSec Holdings, claim St. Jude's devices "lack even the most basic forms of security.” Abbott said the allegations didn't affect its interest in purchasing the $22.6 billion company. Stocks for St. Jude, however, dropped following the claims.