J&J CEO says M&A strategy 'will continue' after medtech megadeals

After setting up more than $30 billion in medtech M&A spending within less than two years, Johnson & Johnson CEO Joaquin Duato said that trajectory will continue as the company looks to latch on to long-term growth.

In cardiovascular therapies alone, J&J's recently proposed $13.1 billion buyout of artery opener Shockwave Medical serves as the sequel to its $16.6 billion deal for heart pump maker Abiomed, inked in late 2022. In between, the company also threw in $400 million late last year for cardiac implant developer Laminar for good measure.

Together, the weight of those outlays could be seen in J&J's first-quarter earnings report, where the division previously referred to as “Interventional Solutions” has been simply renamed “Cardiovascular.” Meanwhile, on the biotech side, the company last month closed on its $2 billion purchase of Ambrx and its antibody-drug conjugates for treating cancer. 

“When we think about M&A, we think in decades—we don't think opportunistically,” Duato said on a call with investors.

“We'll continue to evaluate opportunities agnostic to the sector and size—and in terms of what we are looking for, it's a number of components,” he said. “One, does this technology improve the current standard of care? That's critical for us … No. 2, is it consistent with the capabilities and knowledge we have in-house? We see a correlation between that and the success in the acquisitions.”

“No. 3, does it enable us to enter into higher growth markets—areas that are growing, and which we can continue to develop in that market? And finally, and very important for us, does it continue to deliver a compelling financial result for our shareholders?”

For Abiomed, those results included about 15% growth in the sales of its minimally invasive Impella heart pumps compared to the first quarter of last year, for $371 million in revenue, up from $324 million.

The cardiovascular segment as a whole posted worldwide sales of $1.8 billion, up just over 20% from last year's $1.5 million, with a big boost of about 25% growth from J&J's electrophysiology portfolio. Along with orthopedics, surgery and vision care, J&J MedTech in its entirety brought in $7.82 billion, for 4.5% reported growth.

“It's important for me to underline that, with the strength of our cash flow and balance sheet, we have significant flexibility to consider multiple types of transactions,” including smaller tuck-ins and larger deals, Duato said. “And what we have done so far is a demonstration of that—with Abiomed, Laminar, Ambrx and now the planned acquisition of Shockwave—all of them are good examples of our steady consistency and the principles we have outlined.”

“That is not going to change—our M&A strategy is not going to change.”

Also on the investor call, J&J MedTech Worldwide Chairman Tim Schmid highlighted how the company's acquisitions aim to triple its entries in expanding markets.

“Until recently, we only participated in one high-growth category within cardiovascular and that was electrophysiology … where we have had a 20-year lead,” said Schmid. “With the acquisition of Abiomed, we're now over a year into integrating that business and couldn't be more proud of the progress we've made. We continue to perform ahead of the deal model.”

“Once we close the acquisition of Shockwave, that will be our third thoughtful and deliberate move to only participate in high-growth, high-margin cardiovascular areas—where there is significant unmet need and tremendous opportunity for us to grow,” he added.

And, in electrophysiology, Schmid said the company is looking forward to competing in the growing sector of pulsed-field ablation treatments for atrial fibrillation. J&J’s Biosense Webster division has submitted its Varipulse system for FDA review, after securing regulatory green lights earlier this year in Europe and Japan

The company recently put forward data from a clinical study showing that 75.6% of treated patients displayed no signs of afib recurrence after 12 months as well as no evidence of other atrial arrhythmias such as tachycardia or flutter. Schmid said that J&J expects an FDA approval decision to come by the end of this year or early next.