Potential bidders decline to challenge St. Jude's $3.4B bid for Thoratec

Thoratec's HeartMate II left ventricular assist device--Courtesy of Thoratec

The 30-day "go-shop" period for LVAD maker Thoratec ($THOR) is over. No other bids to acquire the company were made. That means Thoratec is likely to become part of St. Jude Medical ($STJ) in Q4, when the bigwig's $3.4 billion acquisition is expected to close.

If Thoratec had accepted another offer during the go-shop period, it would have owed St. Jude $30 million. Starting today, Thoratec would owe St. Jude $111 million if it terminated the deal in connection with another proposal.

Following the deal's announcement, Leerink analyst Danielle Antalffy wrote that Johnson & Johnson ($JNJ), Abbott ($ABT) and Medtronic ($MDT) were the most likely bidders, while JP Morgan's Michael Weinstein added Edwards Lifesciences ($EW) to the list.

But the consensus on Wall Street was that they would be deterred by the hefty price tag attached to Thoratec. Bloomberg previously pointed out that at 42 times 12-month earnings before interest, taxes, depreciation and amortization, the deal is already the second priciest medical device transaction of the last 5 years, and will barely raise St. Jude's earnings per share.

Following the deal's announcement, St. Jude CEO Daniel Starks told investors that the acquisition "positions St. Jude Medical to enter new markets totaling more than $1 billion that are expected to grow approximately 10% annually." Starks believes his company can benefit from Thoratec's HeartMate left ventricular assist device by synergistically pairing it with St. Jude's CardioMEMS heart failure monitor.

Starks also touted Thoratec's entrance into the $300 million percutaneous heart pump market, thanks to the recent CE mark approval of the HeartMate PHP to keep patients' blood flowing during complex procedures like stent implantation.

Left ventricular assist devices pump the blood of end-stage heart failure patients awaiting a transplanted heart. Thoratec's HeartMate II is also indicated as a destination therapy for end-stage heart patients who won't be receiving a donated organ.

The company said it shipped 3,618 HeartMate II LVADs last year, out of an estimated market of about 6,500 implantations per year.

Meanwhile, rival HeartWare ($HTWR) saw its shares spike in July on speculation that the industry bigwigs would scramble to acquire the only other LVAD maker. Potential bidders are likely awaiting word from the FDA on the status of its destination therapy indication.

HeartWare's bid to secure that indication from the FDA is going to be a contentious one because the company's clinical trial found a high (31%) stroke rate among bridge-to-transplantation patients. But the device did meet its primary endpoint in that trial. An FDA decision could occur next year, following additional trials.

Both companies are designing next-generation LVADs with an emphasis on ease of implantation. Thoratec's LVAD has an edge over HearWare's due to its destination therapy indication in the U.S. (both companies have destination therapy status in Europe), but HeartWare's device is easier for doctors to implant.

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