M&A Bonanza Continues as Johnson & Johnson Pays $4.325 Billion for Abbott's Eye Surgery Biz
September 19, 2016
By Mark Terry, BioSpace.com Breaking News Staff
Johnson & Johnson , headquartered in New Brunswick, New Jersey, announced it will acquire Abbott Medical Optics (AMO) for $4.325 billion. The deal is expected to close in the first quarter of 2017.
The acquisition, which is all cash, will give J&J the second largest business in cataract surgeries, which according to The Wall Street Journal is an $8 billion global market. Its growth is approximately 5 percent annually.
Abbott Laboratories acquired AMO, which was then called Advanced Medical Optics, in 2009 for $2.8 billion. The acquisition by J&J includes ophthalmic products in three different but related business units, cataract surgery, laser refractive surgery, and consumer eye health.
“Eye health is one of the largest, fastest growing and most underserved segments in health care today,” said Ashley McEvoy, company group chairman, who oversees J&J’s Vision Care Companies, in a statement. “With the acquisition of Abbott Medical Optics’ strong and differentiated surgical ophthalmic portfolio, coupled with our world-leading ACUVUE contact lens business, we will become a more broad-based leader in vision care. Importantly, with this acquisition we will enter cataract surgery—one of the most commonly performed surgeries and the number one cause of preventable blindness.”
AMO also offers advanced laser vision (LASIK) technology. The consumer eye health products include over-the-counter eyes drops to treat dry eye, multipurpose solutions and hydrogen peroxide cleaning products used by contact lens wearers.
Abbott is unloading AMO due to slow sales, and focusing on deals in faster-growing medical device markets. “We’ve been actively and strategically shaping our portfolio,” said Miles White, Abbott’s chief executive officer, in a statement, “which has recently focused on developing leadership positions in cardiovascular devices and expanding diagnostics.” Examples include its $25 billion deal to acquire St. Jude Medical , which develops and markets heart valves, pacemakers and other cardiovascular-related technology and devices.
Abbott is also buying Alere for approximately $5 billion. Alere is a diagnostics company that manufactures and markets diagnostic tests for HIV, tuberculosis, malaria and dengue fever. The St. Jude Medical deal caused some doubts about the Alere deal. Abbott Laboratories asked to terminate the Alere deal, arguing that it had “serious concerns” about Alere’s financial reporting.
In August, Alere filed a lawsuit that forced Abbott to complete the deal.
In addition, St. Jude has been trying to defend itself from accusations that its pacemakers and defibrillators have cyber security problems that can be exploited by hackers. The allegations were raised by short-selling company Muddy Waters and cyber security firm MedSec Holdings Inc. St. Jude has filed lawsuits against both companies.
For its part, J&J has been pushing harder into medical technologies in order to bolster the growth in that unit. It acquired Synthes Inc. in 2012. Synthes manufactures devices that are used to treat traumatic injuries and bone fractures. That deal was for approximately $20 billion.
J&J’s eye care unit is best known for its Acuvue contact lens division, which is part of the company’s $7 billion eye care segment. The acquisition of AMO will provide J&J with more eye care products to sell through its distribution network.
In 2015, J&J racked up $25.1 billion in medical-device sales. Abbott’s 2015 total revenue was $20.4 billion.