Intuitive Surgical, Inc. (ISRG): Should Johnson & Johnson (JNJ) Be Looking for a Cougar in Devices?

Novadaq Technologies Inc. (NASDAQ:NVDQ) carries a steep multiple today, but is only just beginning to expand beyond the breast reconstruction market (also a strong market for J&J) where it has 15% share . With a potential addressable market of more than $1.5 billion, Novadaq Technologies Inc. (NASDAQ:NVDQ) could be a good thing in a small package for a surgery business like Ethicon.

Cardiovascular
Johnson & Johnson is also frequently tied to St. Jude Medical and Boston Scientific in M&A rumors. While there would certainly be some operating synergies here, I’m not sure the value prospects would be very appealing.

That’s not to say that there aren’t growth opportunities in cardiology, though. Transcatheter heart valve leader Edwards Lifesciences Corp (NYSE:EW) has lost some of its shine, but could still offer a meaningful boost to J&J’s growth rate at a more affordable price today. The company could also turn to either Thoratec or HeartWare International Inc (NASDAQ:HTWR) in the ventricular assist space (a treatment for heart failure) — I prefer HeartWare International Inc (NASDAQ:HTWR), but even down 25% from its 52-week high, it’s not exactly cheap or risk-free.

The bottom line
Johnson & Johnson is not without in-house opportunities to do better — the ortho business has scale almost across the board, Ethicon is doing well, and emerging product opportunities like atrial ablation, renal denervation, and drug-coated balloons for the peripheral vasculature could all boost sales to a meaningful degree. What’s more, it is hardly uncommon for M&A to destroy more value than it creates. Even so, it would seem that Johnson & Johnson does have some worthwhile options for M&A if it chooses to go that way — none of these may be another Cougar in the making, but they’re not house cats, either.

The article Should Johnson & Johnson Be Looking for a Cougar in Devices? originally appeared on Fool.com and is written by Stephen D., Simpson.

Stephen D. Simpson, CFA has no position in any stocks mentioned. The Motley Fool recommends Covidien, Intuitive Surgical, and Johnson & Johnson. The Motley Fool owns shares of Intuitive Surgical, Johnson & Johnson, and Medtronic. 

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