Abiomed acquired by Johnson & Johnson: fairness opinion by Goldman Sachs
Deal terms
CVR: One non-tradeable CVR per Share providing contingent cash payments of up to $35.00 per Share: $17.50 if worldwide Net Sales of the Products exceed $3.7 billion during the 2028 Measurement Period (reduced to $8.75 if achieved later during the 2028-29 Measurement Period); $7.50 upon FDA approval of a PMA or PMA supplement for use of an Impella Product Family device in STEMI/Anterior STEMI patients without cardiogenic shock on or prior to January 1, 2028; and $10.00 upon the earliest of the STEMI Recommendation Milestone, HRPCI Milestone or Cardiogenic Shock Milestone (Class I recommendation in the ACC/AHA Clinical Practice Guideline).
$380.00 in cash per Share plus one non-tradeable CVR worth up to $35.00; Goldman Sachs calculated the NPV of one CVR at $16.96, for a Consideration NPV of $396.96 per Share.
Implied value per share by method vs. $380.00 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of Goldman Sachs to the target board
Discounted cash flow assumptions
Implied perpetuity growth rates of 7.4% to 9.6%; net cash as of September 30, 2022 added; fully diluted shares as of October 28, 2022 (treasury stock method).
Selected public companies (12)
Edwards Lifesciences Corporation · Omnicell, Inc. · DexCom, Inc. · Insulet Corporation · Intuitive Surgical, Inc. · Align Technology, Inc. · Masimo Corporation · Penumbra, Inc. · STERIS plc · ResMed Inc. · Stryker Corporation · Globus Medical, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| Last 1-Month Average EV/NTM Revenue (High Growth MedTech Selected Companies average; Company 8.6x) | — | 7.8x | — | — | — |
| Last 6-Month Average EV/NTM Revenue (High Growth MedTech Selected Companies average; Company 9.1x) | — | 7.7x | — | — | — |
| Last 1-Year Average EV/NTM Revenue (High Growth MedTech Selected Companies average; Company 10.5x) | — | 9.3x | — | — | — |
| Last 5-Year Average EV/NTM Revenue (High Growth MedTech Selected Companies average; Company 12.7x) | — | 9.4x | — | — | — |
| Last 1-Month Average EV/NTM EBITDA (Profitable MedTech Selected Companies average) | — | 16.0x | — | — | — |
| Last 6-Month Average EV/NTM EBITDA (Profitable MedTech Selected Companies average) | — | 17.2x | — | — | — |
| Last 1-Year Average EV/NTM EBITDA (Profitable MedTech Selected Companies average) | — | 20.9x | — | — | — |
Selected precedent transactions (16)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| 2022-01-06 | Vocera Communications, Inc. | Stryker Corporation | 13.2x EV/LTM Revenue |
| 2021-09-13 | Itamar Medical Ltd. | ZOLL Medical Corporation | 9.9x EV/LTM Revenue |
| 2021-08-06 | Intersect ENT, Inc. | Medtronic Public Limited Company | 10.7x EV/LTM Revenue |
| 2021-07-29 | Misonix, Inc. | Bioventus Inc. | 7.0x EV/LTM Revenue |
| 2021-01-21 | Preventice Solutions, Inc. | Boston Scientific Corporation | 7.8x EV/LTM Revenue |
| 2021-01-20 | Cardiva Medical, Inc. | Haemonetics Corporation | 7.3x EV/LTM Revenue |
| 2020-12-18 | BioTelemetry, Inc. | Koninklijke Philips N.V. | 6.4x EV/LTM Revenue |
| 2020-10-28 | Z-Medica, LLC | Teleflex Incorporated | 8.1x EV/LTM Revenue |
| 2019-08-07 | Avedro, Inc. | Glaukos Corporation | 15.4x EV/LTM Revenue |
| 2018-09-20 | Mazor Robotics Ltd | Medtronic Public Limited Company | 25.2x EV/LTM Revenue |
| 2017-12-07 | Entellus Medical, Inc. | Stryker Corporation | 7.7x EV/LTM Revenue |
| 2017-09-05 | NeoTract, Inc. | Teleflex Incorporated | 13.3x EV/LTM Revenue |
| 2017-06-28 | The Spectranetics Corporation | Koninklijke Philips N.V. | 7.5x EV/LTM Revenue |
| 2017-06-19 | NOVADAQ Technologies Inc. | Stryker Corporation | 7.7x EV/LTM Revenue |
| 2017-02-13 | ZELTIQ Aesthetics, Inc. | Allergan plc | 6.8x EV/LTM Revenue |
| 2016-02-01 | Sage Products, LLC | Stryker Corporation | 6.5x EV/LTM Revenue |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| EV / LTM Revenue | 6.4x | 7.8x | 25.2x | 7.2x–11.3x | $189.00–$285.00 |
Other analyses
| Analysis | Summary | Implied per share |
|---|---|---|
| Implied Premia Analysis | Compared $380.00 Cash Amount, $396.96 Consideration NPV and $415.00 (cash plus nominal CVR value) to: 10/28/22 closing price of $258.06 (47%/54%/61%), 30-Day VWAP of $255.50 (49%/55%/62%), 60-Day VWAP of $257.73 (47%/54%/61%), Median Analyst Price Target of $305.00 (25%/30%/36%) and 52-Week High of $371.35 (2%/7%/12%). | — |
| Illustrative Present Value of Future Share Price Analysis | Applied NTM EV/Revenue multiples of 8.7x to 12.7x to FY2024E, FY2025E and FY2026E revenue in the Company Management Projections to derive future equity values per Share as of March 31, 2023, 2024 and 2025, discounted back to September 30, 2022 at an 11.8% cost of equity. | $259.00–$498.00 |
| Premia Paid Analysis | Reviewed 72 all-cash transactions announced since January 1, 2016 involving U.S. public healthcare targets with transaction value between $1 billion and $20 billion; median premium 35%, 25th percentile 16%, 75th percentile 73%. Applied 16%-73% to the $258.06 closing price on October 28, 2022. | $299.00–$446.00 |
| CVR Net Present Value | Discounted the estimated Milestone Payments (per the CVR Estimates) to present value as of September 30, 2022 at an 11.8% cost of equity (CAPM), deriving an NPV of one CVR of $16.96 and a Consideration NPV of $396.96 per Share. | $16.96 |
Aggregate fee estimated at approximately $105 million, all contingent upon consummation of the Transactions, which includes a fee of up to approximately $9 million contingent upon achievement of the Milestones (assuming the maximum potential Milestone Payments is achieved). Engagement letter dated October 28, 2022.
Management projections
| Projection year | Year 1 | Year 2 | Year 3 | Year 4 | Year 5 | CAGR |
|---|---|---|---|---|---|---|
| Revenue | $1.6B | $2.3B | $2.9B | $3.5B | $4.0B | 25.3% |
| Revenue growth | 23.3% | 37.6% | 30.3% | 19.5% | 15.0% | |
| EBITDA | $460M | $724M | $1.0B | $1.3B | $1.5B | 34.8% |
| EBITDA growth | 50.3% | 57.4% | 40.6% | 27.8% | 16.6% | |
| EBITDA margin | 28% | 32% | 35% | 37% | 37% | |
| Implied EV / EBITDA | 37.2x | 23.6x | 16.8x | 13.1x | 11.3x |
Year-1 growth is against LTM at announcement ($1.3B revenue, $306M EBITDA); later years are year over year.
Abiomed management prepared non-public, risk-adjusted Company Management Projections for fiscal years 2023 through 2032 (fiscal year ends March 31), provided to the Board, to Goldman Sachs and (FY2023-FY2028 only) to Johnson & Johnson for diligence. Revenue grows from $602 million for Q3-Q4 FY2023E and $1,333 million in FY2024E to $5,337 million in FY2032E; Adjusted EBITDA grows from $158 million (Q3-Q4 FY2023E) / $306 million (FY2024E) to $2,081 million in FY2032E, with unlevered free cash flow rising from $76 million to $1,273 million. The projections also included CVR Estimates as to the timing of achievement of the Milestones, and assume completion of the STEMI DTU and PROTECT IV studies in FY2025 and the RECOVER IV study in FY2026.
Process notes
Other Medical Devices and Supplies fairness opinions
- SeaSpine Holdings / Orthofix Medical 2022
- Apollo Endosurgery / Boston Scientific 2022
- Intersect ENT / Medtronic 2022
- Intricon / Altaris 2022 · 16.8x EV/EBITDA
- NuVasive / Globus Medical 2023 · 10.6x EV/EBITDA
- Cardiovascular Systems / Abbott 2023
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