More on Synthes/J&J

The deal would help Johnson & Johnson‘s ($JNJ) finances:

Health giant Johnson & Johnson could boost its revenue and profit in the short term by buying Switzerland’s Synthes Inc., while quickly gaining a dominant position in the growing market for orthopedic surgery products.

The Swiss maker of implants and instruments for bone and tissue repair confirmed Monday that it’s in talks about a possible purchase by Johnson & Johnson, one of the world’s biggest manufacturers of medical devices, drugs and consumer health products.

The sale of Synthes could make multibillionaire chairman Dr. Hansjorg Wyss the richest man in Switzerland. He owns 40 percent of the company, and his family’s trust owns an additional 8 percent, according to Synthes’ 2010 annual report.

For Johnson and Johnson, based in New Brunswick, N.J., buying Synthes would make sense on multiple fronts.

“From many different angles, it looks like this deal would be a good deal for Johnson & Johnson, if it’s at the right price,” said analyst Linda Bannister of Edward Jones. “$20 billion seems reasonable.”

That is the rumored purchase price, as reported last Friday by the Wall Street Journal, an amount far bigger than a typical J&J acquisition.

Buying Synthes would double J&J’s market position in spine repair products, Bannister said.

“It would move (J&J) to a dominant position in orthopedics, particularly in trauma,” she said.

Medical devices became the largest of J&J’s three businesses in 2009. Their appeal? They don’t see sales suddenly plunge when generic competition arrives, as drugs do. And they’re far more profitable than commodity over-the-counter drugs such as Motrin and Tylenol.

In addition, those pain relievers are among the dozens of nonprescription J&J products hit by an astounding series of recalls over the past 19 months. The recalls cut 2010 revenue by about $900 million and have severely hurt J&J’s image.

With an aging population around the world and emerging markets spending more on advanced health care, devices and implants to repair fractures in the spine and other bones are in increasing demand. Synthes revenue rose almost 9 percent in 2010 to $3.87 billion, and its net income increased 10 percent, at $908 million.

Posted by on April 18th, 2011 at 5:14 pm


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