In medtech sectors where it can take decades to get a device to market, companies face the real and ever-present danger that by the time they launch their latest generation product, their technology has already been leap-frogged by competitors, especially small, innovative private companies. Thoratec Corp. was facing exactly that challenge. With 2008 sales of $313 million, Thoratec dominates the market for ventricular assist devices, which are heart pumps that support the failing hearts of patients in late stages of chronic heart failure. Its latest left ventricular assist device (LVAD), the HeartMate II, took off like gangbusters upon its launch in the second quarter of 2008 and was largely responsible for Thoratec’s 34% increase in the year’s revenues. HeartMate II is a small axial flow pump weighing only 12 oz. (281 grams) while previous devices weighed three pounds. It took more than seventeen years for the HeartMate II to wend its way through development to the marketplace success that it is today, and that’s not unusual in the LVAD space. But now, next generation LVADs with advantages are already nipping at Thoratec’s heels. HeartMate II is a second-generation pump, but third-generation products are in early stages of commercialization. Thoratec’s solution: consolidation. On February 13, Thoratec announced that it would acquire publicly-traded Australian LVAD company HeartWare International Inc. for $282 million, half in stock and half in cash. [See Deal]
Thoratec’s HeartMate II was welcomed by the market because it’s much less bulky and, with only one moving part and hydrodynamic bearings, potentially much more durable than previous pumps. Because...
