It’s not yet clear how Abbott Laboratories’ pending $25 billion buy of St. Jude Medical Inc. will impact the latter’s Orange County operations.
The Abbott Park, Ill.-based diversified device maker announced in late April that it would buy St. Jude for a combination of cash and stock. The deal is expected to close in the fourth quarter.
Spokespeople at Abbott’s headquarters didn’t respond to repeated requests for comment.
The public companies collectively employ about 950, which would make it the fifth largest medical device company based or with major operations in Orange County, provided no local job cuts are made.
St. Jude, based in St. Paul, Minn., has 422 workers in an Irvine operation bordering the San Diego (I-405) Freeway. Its Irvine plant produces catheters used for diagnosing and treating atrial fibrillation, a common type of irregular heartbeat.
It competes in the replacement heart valve market with Irvine-based industry bellwether Edwards Lifesciences Corp. and with Medtronic PLC, which is based in Dublin, operates from suburban Minneapolis, and has 645 employees in its heart valve “center for excellence” in Santa Ana, along with 650 in its Irvine neurovascular unit.
The company received Food and Drug Administration approval last year to resume a clinical trial of its Portico transcatheter aortic valve. St. Jude had stopped a trial in September 2014 following concerns company executives began to have about Portico’s leaflet mobility, and lost its European regulatory clearance for the device.
A later review of Portico didn’t turn up excessive problems related to leaflet mobility, and European regulators reinstated approval of the device in March 2015.
525 Jobs
Abbott’s medical optics unit in Santa Ana employs an estimated 525. The unit makes devices used in cataract and vision correction surgeries, including lasers and replacement intraocular lenses, as well as contact lens care solutions. Abbott picked up the unit when it bought Advanced Medical Optics Inc. in 2009 for $2.8 billion.
Abbott in a Securities and Exchange Commission filing said it sought St. Jude to “advance [its] strategic and competitive positions.”
The combined Abbott-St. Jude cardiovascular business “will create significant value through enhanced global scale and capabilities,” said Chief Executive Miles White on a conference call giving details of the deal.
“Together, we will compete in nearly every area of the cardiovascular device market, with an aggregate market opportunity of approximately $30 billion, growing on average in the mid-single digits,” White said, adding that the combined cardiovascular business would have annual sales of more than $8 billion.
White also mentioned “high-growth areas, such as atrial fibrillation, structural heart and heart failure” when talking about the deal.
Abbott says that getting St. Jude would align it with demographic trends. It cited in an investor presentation statistics projecting that more than 40% of American adults will have cardiovascular disease by 2030.
Analysts noted that St. Jude and Abbott don’t really overlap in terms of their business; Abbott also has diagnostic and diabetes devices in its portfolio.
“We think that the minimal overlap between [Abbott] and [St. Jude] is supportive of the transaction and will help to diversify current growth issues” within Abbott’s vascular business, said Dane Leone, an analyst with San Francisco-based investment bank BTIG, in a report on the deal.
An Abbott-St. Jude combination would allow the company to better compete in today’s healthcare environment, industry observers said.
Price Pressure
“Price pressure has been a way of life for a couple of years, so you have to make it up on volume,” Jeff Jonas, a portfolio manager with Rye, N.Y.-based Gabelli Funds, told Reuters.
A combined Abbott and St. Jude “can compete more effectively” with Medtronic and Natick, Mass.-based Boston Scientific Corp. because the latter two “currently have broader portfolios” than Abbott and St. Jude on their own, said analyst Larry Biegelsen of Wells Fargo Securities in a report about the deal’s announcement.
