Abbott entered into a definitive agreement to acquire St. Jude Medical for $25 billion in cash and stock. In a joint press release, the companies said the deal would create a “premier medical device leader with top positions in high-growth cardiovascular markets, including atrial fibrillation, structural heart and heart failure as well as a leading position in the high-growth neuromodulation market.”
Abbott will have combined annual sales of $8.7 billion in a $30 billion cardiovascular device market.
The deal has been approved by the boards of both companies and is subject to shareholder and customary regulatory approvals.
Abbott is also in the process of acquiring Alere Inc., a point-of-care diagnostics company. Last week Abbott offered to pay $30 million to $50 million to terminate the deal, raising concerns about the accuracy of certain representations and warranties in the agreement. Alere reportedly rejected the offer, saying it was confident that “there is no basis for termination of the agreement” and that expects the agreement to be executed according to its terms.
AbbVie Inc. agreed to acquire Stemcentrx Inc. for $5.8 billion. South San Francisco-based Stemcentrx has five cancer drugs in development. AbbVie highlighted rovalpituzumab tesirine (Rova-T), a leading candidate for small-cell lung cancer, as a key driver of the acquisition.
“We have dedicated ourselves to oncology and we view it as our second major growth platform,” Abbive CEO Rick Gonzalez told Bloomberg. “Stemcentrx in particular fits well as a major platform play for us in solid tumors.”
Subject to customary approvals, the deal is expected to close in the second quarter of 2016.
Sanofi has offered $9.3 billion to acquire San Francisco-based Medivation. The deal was made public Thursday after Medivation reportedly rejected the cash offer, calling the bid “opportunistic” and “not in the best interests of its shareholders,” The New York Times reported. “Our board strongly believes that Medivation’s business plan will deliver value to our stockholders that is far superior to Sanofi’s offer and unanimously rejects your proposal,” the company said.
In response Friday, Sanofi said in a statement: “While to date Medivation has chosen not to enter into discussions regarding this value-creating transaction, Sanofi remains committed to the combination and looks forward to engaging directly with Medivation shareholders with regard to our proposal.”
Our Take: Collectively, these three deals represent $40 billion in acquisitions that were announced Thursday and according to Thomson Reuters, a $60 billion week overall in health care transactions. While that isn’t a record, it’s worth noting that manufacturers continue to consolidate in the wake of the effects of the Affordable Care Act and the need to prepare for changing reimbursement models.
It makes good business sense. If bundled payments and value-based contracts are underway—driving costs down and quality up—hospitals and payers will want to align with the largest firms, assuming that scale is synonymous with value.
That’s a big assumption. But it’s the gamble that these companies are willing to take.