Medtronic is buying CoreValve, Inc., of Irvine, Calif. for an initial payment of $700 million plus potential future payments. And it's grabbing the Israeli company Ventor Technologies for $325 million.
Medtronic said the devices these companies make will be a great benefit for some 300,000 patients worldwide who need heart valve replacements, but who are too weak to undergo open heart surgery, which is the current standard of treatment for diseased heart valves.
The two acquired companies are developing technology that works something like this: A cardiologist makes an incision in a patient's leg, and a replacement valve is threaded on a kind of tube called a catheter to the patient's heart. The procedure then presses the diseased valve out of the way and the new one takes over.
Scott Ward, head of Medtronic's cardiovascular division, said Medtronic expects there will be great economic advantages associated with replacing heart valves with this catheter approach -- especially compared to open heart procedures.
"The cost of the device and the procedure for implanting it is probably about half of what the surgical procedure would cost," he said.
And the recovery time would be faster, Ward added.
"For patients who receive open heart surgery, they will spend several days to perhaps as long as a week in an intensive care unit," Ward said. "Patients who receive a transcatheter valve will go home in a day or two."
Ward said the new technology will give Medtronic a leadership position in one of the most promising areas of medical technology.
Aaron Vaughn, a medical technology industry analyst for brokerage Edward Jones, agrees.
"It's one of the faster growing areas of the cardiology market," he said. "So from a top-line perspective for Medtronic, their sales should grow a little faster having this within their diversified portfolio."
Vaughn said the acquisitions won't do much to fuel Medtronic's sales in the near term. But he said Medtronic was wise to make a move now.
"This is a long-term growth opportunity, and they can get in and take two attractive assets off the market that their competitors might have been interested in acquiring as well," Vaughn said.
Scott Ward of Medtronic said the company projects the market for these heart valve replacement technologies will grow to as much as $3.5 billion a year over the next decade.
The technology in question is not yet available for sale in the U.S. Ward said he expects it to get federal approval by 2014.