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Key Factors

  • Johnson & Johnson is buying Shockwave Medical for $13.1 billion.  
  • The deal will give JNJ entry to Shockwave’s first-to-market intravascular lithotripsy expertise (ILT). 
  • The deal could possibly be the jolt that JNJ inventory must reverse its latest downtrend.  
  • 5 shares we like higher than Johnson & Johnson

On April 5, 2024, Johnson & Johnson NYSE: JNJ introduced its intent to accumulate Shockwave Medical Inc. NASDAQ: SWAV for $13.1 billion. Beneath the terms of the proposed deal, JNJ can pay $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 will probably be financed with money and debt, enhances JNJ’s place within the quickly rising cardiovascular intervention market. The $13.1 billion acquisition is just about 3.5% of the corporate’s market cap. That enables buyers to concentrate on the upside, of which there seems to be loads for buyers to contemplate.

One of many prizes for Shockwave Medical is its first-to-market intravascular lithotripsy technology. Lithotripsy expertise 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 cut back blood circulation 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 concentrate on Modern Drugs and MedTech, Johnson & Johnson has a protracted historical past of tackling heart problems – the main reason behind demise globally. The acquisition of Shockwave and its main IVL expertise supplies a singular alternative to speed up our affect in cardiovascular intervention and drive better worth for sufferers, shareholders and well being methods.” 

Will This Deal Be the Jolt JNJ Inventory Wants? 

If you happen to take 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 circulation 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 beneath the common 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 received a lift from the spinoff however has since been buying and selling in a spread.  

Nonetheless, The weak efficiency could say much less about Johnson & Johnson and extra about firms like Novo Nordisk A/S NYSE: NVO and Eli Lilly & Co. NYSE: LLY, drawing investor consideration attributable to their GLP-1 weight reduction therapies. Different firms are making sturdy 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 await extra info when Johnson & Johnson studies earnings on April 16, 2024.  

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