A Medical Device Daily
Thoratec (Pleasonton, California) said it has agreed to acquire HeartWare International (Sydney, Australia), a company that makes miniaturized implantable heart pumps, in a cash-stock deal currently valued at about $282 million.
Thoratec said it would pay about 50% in cash and the other half will be paid in shares of its common stock. Based on a Thoratec common stock price of $26.25 a share, this reflects a current price of 86 cents a share for each HeartWare Chess Depositary Interest (CDI), or AUS$1.32 based on the current US/AUS exchange rate of 1.5265. Upon completion of the transaction, the combined company will offer a broad portfolio of approved devices and will continue to develop emerging technologies for the treatment of heart failure patients, Thoratec said.
Each share of HeartWare common stock (representing 35 CDIs) will be converted into the right to receive $14.30 in cash and 0.6054 of a share of Thoratec common stock, reflecting a current per share price of roughly $30.19 for each share of HeartWare common stock. Prior to the closing of the transaction, the CDIs will be converted into the underlying shares of common stock of HeartWare and exchanged for the merger consideration. In addition, Thoratec will provide HeartWare a convertible loan facility of up to $28 million to fund ongoing operations until the closing of the transaction, which is expected in the second half of 2009. The boards of directors of both companies have approved the deal, which is subject to approval of HeartWare's stockholders and satisfaction of other customary closing conditions, including regulatory clearance.
"This transaction is a positive development for heart failure patients and the clinicians who treat them by combining Thoratec's portfolio of commercially approved devices with HeartWare's innovative technologies," said Gary Burbach, president/CEO of Thoratec. "The use of mechanical circulatory support for the treatment of heart failure is gaining increasing adoption as a result of the positive patient outcomes and clinician enthusiasm realized with the HeartMate II."
He added, "We believe that combining the strengths of the two companies will enable us to build upon each of our strong technology and product platforms, giving more and better options for a large and significantly underserved heart failure patient population. Because of the complementary nature of Thoratec's and HeartWare's products, the combined company intends to aggressively develop and make available to patients both Thoratec's and HeartWare's products using Thoratec's extensive clinical and administrative support network."
The deal also is a "positive outcome" for HeartWare stockholders, according to Doug Godshall, president/CEO of the company.
"We have made great strides with our technology, having recently received the CE mark for the HeartWare Ventricular Assist System and are experiencing strong initial progress in our U.S. BTT trial. In addition, we have realized significant progress with our MVAD, a next generation miniaturized axial flow LVAD [left ventricular assist device]," Godshall said. "Combining our R&D focus with Thoratec's product line, support infrastructure and financial strength will facilitate and accelerate the commercial rollout of the HVAD pump, as well as the development of future products."
Thoratec said it expects the transaction will be dilutive to earnings on both a GAAP and non-GAAP basis into 2011. The company said it would provide additional details on the financial impact of this deal as the process moves forward, including its effect on 2009 guidance, and related expenses.
Thoratec expects non-recurring charges associated with the transaction of about $15 million to $20 million will be recorded through the balance of 2009, but will be excluded from non-GAAP earnings.
"We are excited about the long-term benefits of the transaction to Thoratec. The structure of the transaction leverages the strength of Thoratec's balance sheet while preserving capital for our future operational needs and strategic opportunities," Burbach said.
Thoratec's product line includes several commercially approved cardiac assist devices including the HeartMate II LVAS (Left Ventricular Assist System), which received U.S. approval for bridge-to-transplantation (BTT) in April 2008 and is in clinical trials in the U.S. for destination therapy or the long-term support of heart failure patients not eligible for transplantation.
HeartWare's HVAD, part of the HeartWare Ventricular Assist System, is a full-output pump designed to be implanted next to the heart. It recently received CE-mark approval to begin commercial sales of the device in Europe and has enrolled about 10 patients in a 150-patient U.S. BTT clinical trial.
After the deal closes, HeartWare's operations will be integrated into Thoratec's cardiovascular division.
Banc of America Securities was financial advisor, and Latham & Watkins legal counsel to Thoratec. J.P. Morgan was financial advisor and Shearman & Sterling legal counsel to HeartWare.
In other dealmaking activity:
• Emageon (Birmingham, Alabama) said it has received the $9 million that had been placed in escrow with the Bank of New York Mellon by Health Systems Solutions (New York) in connection with the companies' merger transaction. The escrowed funds became payable to Emageon when the merger was not consummated before the close of business on Wednesday.
Emageon provides information technology systems for hospitals, healthcare networks and imaging facilities.
• Acacia Research (Newport Beach, California) said its Cardio Access subsidiary has entered into a license agreement with Edwards Lifesciences (Irvine, California) covering a patent relating to certain medical devices. The technology generally relates to devices known as cannulae having multiple access port legs and at least one hemostatic valve, which are adapted for insertion of various catheters into the body, the company noted. The agreement resolves litigation pending in the U.S. District Court for the Eastern District of Texas with respect to certain Edwards products.