J&J-Shockwave deal makes strategic sense: analysts

Following a ~10% rally in the previous session amid reports that Johnson & Johnson (NYSE:JNJ) was in talks to acquire it, cardiac device maker Shockwave Medical (NASDAQ:SWAV) extended gains on Wednesday as analysts argued that a potential deal would make strategic sense.

A deal could materialize within weeks, The Wall Street Journal reported late Tuesday, citing people familiar with the matter.

The paper didn't rule out another company emerging as a bidder for SWAV, a developer of intravascular lithotripsy (IVL) devices to treat cardiovascular diseases.

"We see SWAV as potentially a good strategic fit, albeit at a relatively high valuation," for J&J Wells Fargo analysts led by Larry Biegelsen wrote, keeping their Equal Weight rating and $210 per share target on the stock unchanged.

While prior reports implicated Boston Scientific (BSX) and Penumbra (PEN) as potential bidders for SWAV, "JNJ's deep pockets and the implied valuation" mean a bidding war is unlikely, the analysts added.

Meanwhile, Bank of America argued that Shockwave Medical (SWAV) will be a strategic fit for J&J as the healthcare giant expands its interventional cardiology business following its recent cardiology-related acquisitions, Abiomed and Laminar.

However, the firm removed its rating and price target on SWAV, noting that the stock no longer trades on fundamentals after the J&J deal news.