J&J Rumored to be in Discussions to Acquire Synthes

Brittney Barrett  |

Johnson & Johnson (NYSE:JNJ) is currently in discussions to acquire Synthes (VTX: SYST), a Swiss medical equipment maker, in a deal potentially valued at $20 billion. The deal, which would be among the largest healthcare mergers in recent history, is not yet finalized according to reports from a person briefed on the matter as it was reported in Dealbook.

Synthes is the biggest maker of devices for treatment of bone fractures and trauma. If the deal is completed it will be the most expensive on record for Johnson & Johnson. Synthes would provide J&J with hip screws, plates, surgical power tools and instruments intended for treatment of spinal and soft-tissue injuries. That part of their business brought in $3.69 billion in sales last year and would help supplement and ailing elements of Johnson & Johnson’s own company. J&J is the leading producer of of artificial hip but the fourth-quarter of last year was hard hit after the economy led to lower medical procedures and close to 100,000 hips were recalled.

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The business of hip implants is about to get much bigger, or so it could be assumed as many baby boomers approach an age where such procedures become necessary. The business is not growing alongside demand thus far according to analysts and Johnson & Johnson, already experts in the field could benefit from the additional resources considerably through these years.

Shares in Synthes were higher by 6.2 percent on Friday at 138.70 Swiss francs as buzz circulated about the potential of the transaction.

Synthes is based in West Chester, Pa. despite its Swiss listing while Johnson & Johnson is headquartered in New Brunswick, New Jersey.

There has been no confirmation from either of the companies regarding the deal but provided an agreement is met between the two companies it could be a boon for both of them. According to the source, the completion of the deal remains weeks away and still has the potential to fall through.

Johnson & Johnson may still be a buy regardless of the status of the deal. The company has been the focus of considerable coverage surrounding new hepatitis C drugs  being sold in France for 22,000 euros ($31,271USD). Telaprevir, which is currently being utilized in a French program for gravely ill patients, is a dual product of J&J and Vertex Pharmaceuticals Inc. (NASDAQ: VRTX).  According to early reports telaprevir is so far a more effective treatment than any alternative on the market.

The Hepatitis C market is being pursued by a number of different pharamseutical companies, but J&J’s early release will likely help share prices continue to rise as the drug become more widely used in Europe.


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