J&J readies to rid itself of Cordis--for as much as $2B to Cardinal Health

A deal that was rumored this summer now looks like it's ready to come to pass. Johnson & Johnson ($JNJ) is ready to sell off its Cordis business to Cardinal Health for as much as $2 billion, according to report by Bloomberg. Cordis has elicited multiple offers from bidders, some of whom may still be in the running.

The Cordis division focuses on coronary and peripheral vascular disease. This includes diagnostic and interventional products such as catheters, balloons, stents, wires and vascular closure.

J&J has seen massive revenue growth on the biopharma side and is working to bring medical devices up to par. In 2014, worldwide medical device sales for J&J were $27.5 billion, a decrease of 3.4% from the prior year. Excluding the net impact of M&A activity, including the June divestiture of Ortho Clinical Diagnostics, J&J's medical device business had underlying operational growth of 1.5%. By contrast, its pharma sales were up an impressive 14.9% to $32.3 billion in 2014.

The company said its best device performers were its orthopedic, electrophysiology and biosurgicals products.

Alex Gorsky

When queried about the rumors of a potential Cordis sale on its January earnings call, J&J chairman and CEO Alex Gorsky responded that the company is interested in remaining in cardiovascular devices, but that it's focusing its strategy.

"We think can really make a difference for patients, where we think the markets are promising for the future in terms of reaching more patients, expanding share, volume growth, some pricing stability," he said. "And so, we're going to continue to evaluate our portfolio to make sure that we're consistent with our strategy and as it relates to cardiovascular."

Biosense Webster is J&J's electrophysiology business, which has been fueling its cardiac device growth. "Cardiovascular growth was driven by a 16% worldwide increase in our BioSense Webster business due to strong growth of the ThermoCool SmartTouch Catheter," Gorsky said on the January earnings call.

Without Cordis, the conglomerate would still have 11 businesses devoted to medical devices and diagnostics including BioSense Webster, as well as the troubled orthopedic and neurological focused DePuy Synthes, Janssen Diagnostics and advanced surgical care units Ethicon and Ethicon Endo-Surgery.

If a Cordis divestiture occurs, it wouldn't stand alone as a recent med tech departure for J&J. Last June, J&J sold Ortho Clinical Diagnostics to private equity firm The Carlyle Group for $4.2 billion.

J&J acquired Cordis for $1.8 billion in 1996. But after acquiring the company, it was unable to keep up the pace of innovation and slipped in the race to create the stent market.

- here is the Bloomberg story

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