J&J buys Abiomed for $16.6 billion

U.S. Johnson & Johnson inked a deal Tuesday to buy heart pump company Abiomed Inc for $16.6 billion in cash, according to Reuters, as the company seeks to boost its medical device business following a planned spin-off of its over-the-counter drugs unit next year.

The deal, which will close at the end of the first trimester of 2023, is expected to boost the company's adjusted earnings from 2024, the company said.

Joaquin Duato, the company's CEO, stressed in a conference call after announcing the deal that the priority for the new Johnson & Johnson is to improve medical technology in order to become best-in-class, and added that the company intends to enter high-growth markets.

Abiomed earned $1.03 billion in its most recent fiscal year, ne that closed in March, by developing medical technology that supports circulation and oxygenation. According to Refinitiv, analysts expect the company's revenue to grow to $1.5 billion a year by 2025.

George Congdon, a senior analyst at Third Bridge, believes J&J can stimulate sales of Abiomed heart pumps by enhancing the device, getting regulatory approval for its use in other heart conditions and further expanding its geographic footprint.

Congdon says that if you think about this opportunity to increase its own market presence, the acquisition seems even more lucrative.