J&J Arm Buys Megadyne, Boosts Electrosurgical Tools Portfolio

Ethicon Endo-Surgery, Inc. a subsidiary of Johnson & JohnsonJNJ , announced the acquisition of Megadyne Medical Products, Inc., a privately held medical device company, which develops, manufactures and markets electrosurgical tools used in operating rooms.

JNJ's three-month share price movement shows that the stock has outperformed the Zacks classified Large Cap Pharma industry. Specifically, the company gained 0.5%, while the industry lost 2%.

The acquisition brings together the intelligence of Ethicon's advanced energy devices with Megadyne's portfolio of electrosurgical tools, thereby strengthening the J&J's Medical Device segment.

Per the company's press release, electrosurgical devices are used in nearly four out of every five surgeries. Hence, the acquisition of Megadyne is expected to boost Ethicon's presence in the multi-billion dollar global energy market. This would in turn provide significant value to hospital systems and surgeons, and also help out in reaching more patients worldwide.

We note that J&J has always been active in terms of acquisitions, as a part of its expansion strategy. Also, it has struck several deals, which should enable the company to boost its top line. Presently, within the Medical Devices segment, J&J continues to look for bolt-on acquisitions in orthopedics and general surgery. When asked about its acquisition strategy for the Medical Device segment at the third-quarter conference call, management specified certain areas like structural heart to look attractive in the cardiovascular segment.

The company has made regular acquisition and deal in the pharma segment as well. The Cougar Biotechnology acquisition in May 2009, allowed J&J to strengthen its oncology portfolio, especially in the areas of advanced prostate cancer, breast cancer and multiple myeloma. The Aragon acquisition in Aug 2012, led toward adding its lead pipeline candidate, JNJ-927 (apalutamide), to J&J's pipeline. JNJ-927 (apalutamide) is presently in late-stage development for pre-metastatic prostate cancer (CRPC), Additionally, Johnson & Johnson signed a deal with Achillion Pharmaceuticals, Inc. ACHN for the development of hepatitis C virus (HCV) candidates.

In Sep 2016, J&J announced plans to acquire Abbott's vision care business's Abbott Medical Optics for $4.325 billion. The acquisition is expected to close in the first quarter of 2017. Moreover, in Nov 16, J&J had also approached Swiss biotechnology company, Actelion Ltd. ALIOF , with a potential takeover offer. Actelion is a leader in the pulmonary arterial hypertension (PAH) market with key drugs like Opsumit, Tracleer, Ventavis, Veletri and Uptravi.

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Zacks Rank & Key Picks

J&J currently carries a Zacks Rank #3 (Hold). A better-ranked stock in the health care sector is Enzo Biochem, Inc. ENZ , which sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Enzo Biochem's loss estimates narrowed from 17 cents to 16 cents for 2016 over the last 60 days. The company posted a positive earnings surprise in three of the four trailing quarters with an average beat of 22.50%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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