CORRECTED – UPDATE 2-J&J to buy Micrus Endovascular for $480 mln

(Corrects price of ev3 deal to billion from million in
paragraph 4)

* Deal will expand J&J’s line of stroke treatment devices

* Deal values Micrus at $23.40/share, a 5.5 pct premium

* Micrus shares up 4.5 pct; J&J shares dip
(Adds analyst comments, background, share activity, byline)

By Susan Kelly and Lewis Krauskopf

CHICAGO/NEW YORK, July 12 (BestGrowthStock) – Johnson & Johnson
(JNJ.N: ) will buy Micrus Endovascular Corp (MEND.O: ) for about
$480 million to expand its portfolio of medical devices that
treat and prevent stroke, the companies said on Monday.

J&J will pay $23.40 a share, a 5.5 percent premium over
Micrus’ closing price on Friday. Micrus shares have climbed
nearly 50 percent this year.

Micrus develops, manufactures and markets implantable and
disposable medical devices for use in the treatment of cerebral
vascular disease.

The deal follows the purchase of neurovascular device maker
ev3 Inc (EVVV.O: ) by Covidien plc (COV.N: ) for $2.6 billion, or
$22.50 a share. Covidien on Monday said it had successfully
completed its tender offer for ev3 shares.

“The neuro space is hot again,” Leerink Swann analyst Rick
Wise said in a note to clients.

Micrus combined with J&J’s Codman & Shurtleff business will
offer “a full range of stroke treatments and the potential to
impact the condition in ways that could not be realized by
either company alone,” Michael Mahoney, chairman for J&J’s
DePuy family of companies, said in a statement.

The deal is expected to be neutral to slightly dilutive to
J&J’s 2010 earnings per share upon closing, which is expected
in the second half of the year.

Micrus, J&J and ev3 compete against Boston Scientific Corp
(BSX.N: ) in the roughly $500 million worldwide market for coils
that are threaded into the brain via catheter to prevent an
aneurysm from causing a stroke.

The market has been growing at a 15 percent to 20 percent
annual rate as physicians convert to using the minimally
invasive coil from the traditional surgical treatment, said
Jeff Jonas, a portfolio manager for asset management firm
Gabelli & Co, which holds shares of both J&J and Micrus.

Micrus’ coil also has been taking market share from market
leader Boston Scientific, he said. For J&J, the deal
“strengthens their pipeline and it strengthens their presence
in the business.”

“They have an extremely good technology,” Jonas said of
Micrus’ coil. Micrus also has a promising blood clot removal
device in development.

Micrus had revenue of $91.9 million in the fiscal year
ended March 31.

The deal with J&J values Micrus at about 3.5 times annual
sales, below what Covidien (COV.N: ) paid for ev3, which valued
ev3 at about 5 times sales, Jonas said.

“I was expecting a little bit more,” he said, noting that
Boston Scientific’s rumored interest in selling its
neurovascular business may have influenced what price J&J was
willing to offer for Micrus.

Wise said J&J is likely to remain on the lookout for
faster-growth technologies to acquire. He also speculated
whether Abbott Laboratories (ABT.N: ) or Medtronic Inc (MDT.N: )
might be compelled to join the hunt for neurovascular assets,
noting “it seems clear that the neuro space has become one of
the more attractive medtech markets for would-be acquirers.”

Boston Scientific’s neurovascular business, with $350
million, in projected sales, could fetch $1.75 billion, Wise
said.

Stroke is the third most common cause of death in the
United States, according to the National Stroke Association.
The majority of victims have an ischemic stroke, which occurs
when arteries are blocked by blood clots or other deposits.
Others experience a hemorrhagic stroke, which occurs when a
brain aneurysm bursts.

Shares of J&J were down 12 cents at $60.42 in morning
trading on the New York Stock Exchange, while Micrus shares
rose 99 cents, or 4.46 percent, to $23.18 on Nasdaq.
(Reporting by Lewis Krauskopf and Susan Kelly, editing by
Gerald E. McCormick and Gunna Dickson)

CORRECTED – UPDATE 2-J&J to buy Micrus Endovascular for $480 mln