Actually, the company can thank the weak IPO market for the opportunity to buy CoreValve and Ventor Technologies. The companies, which both make systems to replace heart valves, are private venture-backed companies that decided to be acquired rather than go public in an iffy environment. Besides Bristol-Myers Squibb's
Medtronic is paying a little over $1 billion for the pair, although the price tag for CoreValve could go higher if the company reaches "agreed milestones." CoreValve's system allows doctors to replace heart valves by entering an artery in the groin, while Ventor's transcatheter heart-valve technology allows valve changes in patients who are too frail to undergo standard open-heart surgery. Cool stuff, to say the least.
The problem for investors is that, because the companies are private, it's very hard to determine if Medtronic got a good deal or not. Medtronic did hedge its bet by including two $75 million milestone payments to CoreValve's former owners. One is tied to the FDA signing off on the product and the other to reaching $150 million in sales by the end of next year.
Still, combining the two purchases should help Medtronic compete with heart-valve specialist Edwards Lifesciences