On April 5, 2024, Johnson & Johnson NYSE: JNJ introduced its intent to amass Shockwave Medical Inc. NASDAQ: SWAV for $13.1 billion. Below the terms of the proposed deal, JNJ pays $335 per share, which is a 4.75% premium in comparison with Shockwave’s closing worth on April 4, 2024. As of mid-day buying and selling on April 8, 2024, JNJ inventory is flat, and SWAV inventory is up roughly 1.8%. 

The deal, which the corporate says can be financed with money and debt, enhances JNJ’s place within the quickly rising cardiovascular intervention market. The $13.1 billion acquisition is simply about 3.5% of the corporate’s market cap. That permits buyers to give attention to the upside, of which there seems to be a lot for buyers to think about.

One of many prizes for Shockwave Medical is its first-to-market intravascular lithotripsy technology. Lithotripsy know-how is usually used to interrupt up kidney stones, that are fashioned by calcium buildup. Shockwave’s method is “a catheter-based therapy for calcified arterial lesions, which may scale back blood stream and trigger ache or coronary heart assaults.”  

The deal will improve Johson & Johnson’s management place within the MedTech sector. Johnson & Johnson CEO Joaquin Duato remarked, “With our give attention to Revolutionary Medication and MedTech, Johnson & Johnson has an extended historical past of tackling heart problems – the main reason behind demise globally. The acquisition of Shockwave and its main IVL know-how gives a singular alternative to speed up our affect in cardiovascular intervention and drive better worth for sufferers, shareholders and well being programs.” 

Will This Deal Be the Jolt JNJ Inventory Wants? 

For those who have a look at the JNJ inventory worth over any size of time, you see a constant transfer greater. The corporate is thought for delivering long-term value for shareholders by over 60 consecutive years of dividend progress and returning over 60% of its free money stream to shareholders within the final 5 years.  

Nonetheless, within the final 5 years, the inventory is up simply 11.87%. That is over 10% decrease than the S&P 500 average of 14.3% per year over the identical interval.  

And, since August 2023, the inventory has been in a steady downtrend. JNJ inventory is down 7.88% within the final 12 months and a pair of.93% by the primary three months of 2024. Each numbers are far under the typical of pharmaceutical shares.  

Throughout this time, Johnson & Johnson has been embroiled in a number of lawsuits. And in 2023, the pharmaceutical firm spun off Kenvue Inc. NYSE: KVUE. Initially, JNJ inventory obtained a lift from the spinoff however has since been buying and selling in a spread.  

Nonetheless, The weak efficiency might say much less about Johnson & Johnson and extra about corporations like Novo Nordisk A/S NYSE: NVO and Eli Lilly & Co. NYSE: LLY, drawing investor consideration resulting from their GLP-1 weight reduction therapies. Different corporations are making robust inroads into the oncology market.  

As buyers know, the pharmaceutical trade is a what-have-you-done-for-me-lately enterprise. The acquisition of Shockwave, if permitted by Shockwave shareholders, will give buyers extra worth for his or her shares. Traders ought to anticipate extra data when Johnson & Johnson stories earnings on April 16, 2024.  

Earlier than you think about Johnson & Johnson, you will wish to hear this.