St. Jude Medical, a major player in the cardiovascular device space, announced a few days ago that it has reached an agreement to acquire Thoratec, the global leader in the ventricular assist device (VAD) market. St. Jude Medical is the first large multi-national corporation (MNC) to enter this space. My first thought when I heard this news – What took so long?!
VADs provide mechanical circulatory support for patients in the most advanced stages of heart failure whose own ventricles can no longer perform adequately. The rising prevalence of cardiovascular disease worldwide means that heart failure rates are also increasing and while there are new drugs coming out, such Novartis’ Entresto, which very recently received FDA approval, ventricular assist devices remain one of the few options for patients who no longer respond to drug treatment. In terms of the VAD market, its global value is approaching $1 billion and is expected to grow rapidly over the coming years and, to date has consisted of companies that focus solely on these technologies and generally fit the bill as acquisition targets. So I really am surprised that an acquisition didn’t happen sooner. What I’m not surprised about, however, is that Thoratec was the first company to get snatched up.
Thoratec is the only company in the VAD market that offers both durable VADs (for long-term used in patients) and temporary VADs (for short-term use in patients). Furthermore, the company recently got CE mark approval for its temporary percutaneous VAD, a device that can be placed using a minimally invasive technique (versus surgery), making it the only company with products in all three VAD segments. It was the clear winner for companies looking to expand into this lucrative space. St. Jude Medical will be able to complement its existing portfolio of cardiac rhythm management (CRM) devices, which are used in less severe cases of heart failure, with the Thoratec’s VAD technologies. Furthermore, St, Jude Medical’s recently launched its novel heart failure monitoring system, CardioMEMS, was mentioned several times as a complementary technology to Thoratec’s VADs during St. Jude Medical’s conference call. The exact nature of the integration between the two devices was obviously kept confidential but the small size of the CardioMEMS as well as the monitoring technology itself are attractive additions for patients with VADs.
St. Jude Medical’s acquisition of Thoratec is likely only the first. Medtronic is the global leader in the CRM devices market, with Boston Scientific rounding out the top three. Both companies must be considering similar moves in order to stay competitive in the heart failure device space. The question is: which VAD manufacturer will be the next to be acquired? There are a few possibilities. One is HeartWare, which is the main competitor for Thoratec in the durable VAD space. The issue with HeartWare is that it is currently only active in the durable VAD segment, with no temporary devices in its portfolio. On the flip side, Abiomed has devices in both the open surgery and percutaneous temporary VAD segments and has done quite well. In my opinion, this latter company will be the more favorable acquisition target. Both Medtonic and Boston Scientific are highly focused on minimally invasive device treatment for cardiovascular disease and the percutaneous VAD would be a complementary addition to cardiovascular businesses. A third company that could be in the mix is ReliantHeart which already has developed a remote monitoring system for its VAD and which will likely be the first company to introduce a fully implantable VAD (current VADs have driver lines that exit the abdomen to connect the VAD to a power source). The quality of life implications with use of the fully implantable device will make it an extremely attractive alternative for patients. Ultimately, it’s just a matter of time before the next acquisition announcement.
The one interesting note to St. Jude’s acquisition announcement is that Thoratec has a 30-day “go-shop” period during which it can attempt to woo a competing offer to that of St. Jude Medical. Whether another MNC will swoop in and lay claim to Thoratec will be something to watch for and would be an interesting development indeed. Needless to say, a market that has historically consisted of smaller companies, focusing on a few niche products, is being shaken up by a large MNC. This will up the competition in the heart failure device market and the future of this space will an interesting one to keep an eye on.