2nd UPDATE: J&J Buying Stroke-Treatment Co Micrus For $480 Million

Johnson & Johnson (JNJ) said Monday it plans to bolster its lineup of stroke-prevention products by buying Micrus Endovascular Corp. (MEND) for about $480 million, marking the latest deal in a neurovascular-device market that appears to be heating up.

J&J's planned purchase of San Jose, Calif.-based Micrus comes weeks after rival Covidien PLC (COV) announced plans to buy ev3 Corp. (EVVV), a Micrus rival, for $2.6 billion. Leerink Swann analyst Rick Wise said the Covidien-ev3 combination may have spurred on J&J due to a hospital-purchasing trend of focusing more on bundled portfolios of products.

Following these deals, "it seems clear that the neuro space has become one of the more attractive MedTech markets for would-be acquirers," Wise wrote in a research note.

This could have bearing for Boston Scientific Corp. (BSX) if it decides to sell its Neurovascular division as part of a restructuring plan the company has said could include both divestitures and purchases. Analysts have speculated this could happen, although Boston Scientific hasn't commented on what it might sell. Analyst Wise questioned whether Abbott Laboratories (ABT) and Medtronic Inc. (MDT), which have big vascular-products businesses, might feel compelled to join the fray.

The J&J-Micrus deal highlights the value of Boston Scientific's neuro assets, which also include its neuromodulation unit, Wise said.

J&J's purchase of Micrus values the latter company at $23.40 per share, which is just a 5.5% premium to Friday's closing price. But the company's shares were up 48% on the year before the announcement and had climbed 28% since June 1, when Covidien announced plans to buy ev3. Covidien announced Monday it has successfully completed a tender offer for that deal.

Ladenburg Thalmann analyst Juan Sanchez called J&J's offer "appropriate," in that it credits Micrus' "accomplishments while also accounting for the potential challenges of a lack of commercial product diversification and competition." He downgraded his Micrus rating to neutral from buy.

Micrus makes implantable and disposable products to treat vascular problems in the brain, such as aneurysms and atherosclerosis that cause types of strokes. Its product lineup includes tiny coils that are pushed into brain aneurysms to block blood flow. J&J noted in a release that an estimated 795,000 people in the U.S. experience a stroke each year at an estimated cost of $73 billion.

Micrus posted sales of $91.1 million in its fiscal 2010, which ended March 31, up 16% from the prior fiscal year. It had forecast that sales would rise by 10% to 17% in the new fiscal year.

J&J said Micrus would join Codman & Shurtleff Inc., which is the neuro-device business within J&J's DePuy companies. J&J will add Micrus to a devices-and-diagnostics franchise that posted $23.6 billion in sales last year, when it became the largest business segment at the health-care conglomerate.

Micrus shares recently traded up 4.4% to $23.17, near the planned purchase price. J&J's shares slipped 24 cents to $60.30.

-By Jon Kamp, Dow Jones Newswires; 617-654-6728; jon.kamp@dowjones.com

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