J&J may buy or develop new heart devices, CFO says

Tue Sep 13, 2011 3:28pm EDT

* J&J interested in heart valve, heart pump technologies

* May acquire heart device products or develop internally

* Sees healthcare utilization stabilizing, but no rebound

By Susan Kelly

Sept 13 (Reuters) - Johnson & Johnson (JNJ.N) is interested in adding heart valves and heart pumps to its product lineup as it reshapes its medical device portfolio but won't overpay to acquire the technology, its chief financial officer said.

Three months after J&J announced it would stop selling drug-coated heart stents, once a key product line, CFO Dominic Caruso said the company sees other attractive technologies in the cardiac device market and could enter those markets either by acquiring another company or by developing the products organically.

He pointed to heart valves and left ventricular assist devices, which are pumps implanted in patients with advanced heart failure who are awaiting a transplant, as two promising opportunities in medical technology.

"Both are interesting. We are interested in looking at them," said Caruso, speaking Tuesday on a webcast from an investor conference in New York.

J&J in June said it would stop selling drug-coated heart stents, a technology it pioneered but whose sales slumped in recent years due to safety concerns and fierce competition, ceding the market to Abbott Laboratories Inc (ABT.N), Boston Scientific Corp (BSX.N) and Medtronic Inc (MDT.N).

Caruso said J&J exited the market because stents, which are implanted in clogged arteries to prop them open, had become a "commodity business" subject to pricing wars. Patients are well served with products already available, and the market is not rewarding companies for innovations in this area, he said.

J&J would consider acquiring a maker of heart valves or heart pumps at the right price, Caruso said. "Unfortunately," he added, "they are overvalued today." He did not name specific companies J&J might be interested in.

Heart valve innovator Edwards Lifesciences Corp (EW.N), an often-rumored takeover target, and heart pump makers Thoratec Corp (THOR.O) and Heartware International Inc (HTWR.O) have seen their stocks benefit from anticipation of new products in development.

Caruso said the downturn in healthcare utilization that has hurt medical device sales over the past six quarters is stabilizing, but the industry remains under pressure. Patients continue to delay treatment due to high unemployment and steeper insurance deductibles as employers shift more of the cost of care to their workers.

"We have not seen any rebound in utilization," he said.

Industry procedure volumes will improve as the healthcare reform law brings more patients into the marketplace beginning in 2014, Caruso said.

The industry is unlikely to see a repeal of a planned 2.3 percent tax on device sales, as some have called for, Caruso said.

Caruso also said J&J's planned $21.67 billion purchase of Swiss orthopedic device maker Synthes SYST.VX is likely to close in the first half of 2012. (Reporting by Susan Kelly in Chicago, editing by Dave Zimmerman)

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