Finger On The Pulse

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What's going on?

Healthcare giant Johnson & Johnson (J&J) announced on Tuesday that it’s buying heart device maker Abiomed.

What does this mean?

J&J announced plans to spin off its consumer goods division at the end of last year, going all-in on its other business areas instead. And now that it’s buying Abiomed in a deal worth around $17 billion, it seems to be putting its money where its mouth is. This deal – set to be J&J’s biggest in nearly six years – will cost a pretty penny: the healthcare titan’s shelling out 51% more than Abiomed’s shares were worth before the deal was announced. For J&J, it seems to be a case of “you get what you pay for”: this deal will let it get its mitts on Abiomed’s renowned Impella heart pumps for patients with severe heart disease, famed for being the smallest in the world, and inject its medical device segment with the tidy $1 billion a year that Abiomed currently brings in.

Why should I care?

For markets: Heart’s in the right place.
2022’s been a slow year for mergers and acquisitions, but this bumper deal bucks the trend. After all, J&J’s flush with cash from vaccine sales right now, so it can afford to snap up firms while valuations are low. And this isn’t just a smart short-term grab: heart disease is already one of the world’s leading causes of death, and with a growing population, demand for Abiomed’s devices is only likely to increase.

The bigger picture: Viva diversification.
J&J’s scouting out new opportunities as Covid slips away, and there are signs competitors are following suit. Rival medical goliath Pfizer reported impressive results on Tuesday, but with vaccine demand slowing outside the US, it’s certainly not putting all its eggs in one basket: it just announced plans to launch 19 new products over the next 18 months.

Originally posted as part of the Finimize daily email.

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