Medtronic says it's unlikely to buy valve business

Edwards Lifesciences Corp., the maker of a heart valve implanted without chest-splitting surgery, may be a ripe acquisition target for the world's two biggest device makers, including Medtronic Inc., analysts say.

Medtronic, however, says it isn't interested.

Johnson & Johnson of New Brunswick, N.J., and Medtronic, based in Fridley, announced plans within four days of each other last month to enter the heart market Edwards leads. Edwards has said its $30,000 Sapien valve, sold in Europe, may win U.S. approval by 2011, five years before rivals could emerge.

That head start makes Irvine, Calif.-based Edwards a buyout candidate, said Owen Fitzpatrick, head of equities for Deutsche Bank. Recent device-company deals, among them J&J's February 2007 purchase of Conor Medsystems Inc. at a 32 percent premium, suggest Edwards could fetch as much as $100 a share, 60 percent above yesterday's price, said Jan David Wald, a Stanford Group analyst in Boston.

"Given the length of time it takes to get approved, it just seems like it's more logical to go out and buy your way in," said Fitzpatrick, whose $25 billion portfolio included $49 million in Edwards shares on March 31. "If they truly want to have the leading product out there, they would have to take a peek at Edwards."

Worldwide sales from minimally invasive valves could reach $1.3 billion by 2015, according to a projection by Lawrence Biegelsen, a Wachovia Capital Markets analyst.

J&J, which has acquired 19 businesses in the past five years, is the most likely suitor, said Michael Weinstein, a J.P. Morgan analyst in New York. Medtronic is the world's second-biggest maker of heart valves, after Edwards, and an acquisition might raise antitrust concerns, Weinstein said in a telephone interview.

Medtronic isn't interested in Edwards' valve because doctors can't reposition an improper installation, said Daniel Beach, a Medtronic spokesman.

"We think they've backed the wrong horse," Beach said in a telephone interview June 30. "We believe we're going to be able to leapfrog them, relatively quickly and relatively easily."

J&J doesn't comment on possible acquisitions, said Campbell Rogers, chief technology officer for Cordis, the division that expressed interest in the heart valve market last month.