Thoratec abandons $282M purchase of HeartWare after FTC block

Image source: HeartWare International

The Federal Trade Commission (FTC) authorized a lawsuit to block Thoratec's proposed $282 million acquisition of rival medical device maker HeartWare International on July 30, charging that the transaction would substantially reduce U.S. competition for left ventricular assist devices (LVADs). As a result, Thoratec abandoned its proposed acquisition the following day.

The FTC said that Thoratec "currently has a monopoly on the commercial sale of LVADs in the U.S." The commission's administrative complaint alleged that "Thoratec seeks to maintain its monopoly by acquiring HeartWare, thus eliminating the only significant threat to Thoratec's dominance of the LVAD market."

At the time that the commission blocked the merger, the FTC said it would seek a preliminary injunction in federal district court to stop the transaction and limit the harm to competition, pending completion of the administrative trial.

"Now that Thoratec and HeartWare have called off their proposed merger, U.S. consumers who are already facing increasing healthcare costs will reap the benefits of both current and future competition between these two companies," said Richard Feinstein, director of the FTC's Bureau of Competition.

Thoratec is the world's leading supplier of LVADs, according to the FTC. Thoratec's HeartMate II, and its first-generation LVAD, the HeartMate XVE, are the only LVADs currently approved for commercial sale by the FDA. Under a Feb. 12 merger agreement, Thoratec proposed to acquire all of the outstanding voting securities of HeartWare in a transaction valued at about $282 million.

HeartWare is one of a small number of companies developing LVADs, FTC said. HeartWare's device, the HVAD, is being used by patients in clinical trials and is positioned to be the next LVAD approved by the FDA. It offers a new design that could offer superior reliability with fewer surgical complications. The device is poised to gain FDA approval by 2012. The few other companies developing LVADs are significantly behind HeartWare in their clinical trials, and none of the LVADs is likely to reach the market as soon as or be as competitive as the HVAD, the FTC said.

The commission's three-count complaint charged Thoratec with: Substantially lessening competition in violation of Section 7 of the Clayton Act; illegally attempting and conspiring to maintain its monopoly; and engaging in unfair methods of competition in violation of Section 5 of the FTC Act. The FTC votes approving the filing of the administrative and federal district court complaints were 4-0.

"We are disappointed by the Federal Trade Commission's decision to seek to enjoin the transaction," said Gary F. Burbach, president and CEO of the Pleasanton, Calif.-based Thoratec. "Although we continue to believe in the benefits of the transaction, our management and board of directors have determined that it was in the best long-term interests of Thoratec and its shareholders not to pursue what would likely be a protracted, costly and unpredictable litigation process."

"After discussions with Thoratec and our board of directors, we agree that litigation to pursue the acquisition by Thoratec is not in the best interests of our shareholders. While we, too, are disappointed with the decision by the FTC, we are, nonetheless, excited about HeartWare's prospects going forward on a standalone basis and look forward to serving patients and clinicians," said Doug Godshall, president and CEO of the Framingham, Mass.-based HeartWare.