I suspect someone or ones are acquiring stock for a run at a buy-out. I have three prime suspects.
J&J needs to fill their stapler-cutter product lines and the patent for the existing technology is running out soon and the new CRDC technology will make the old technology obsolete. Hospitals will only carry one stapler cutter and there are applications that only CRDC's can do (pediatrics, small trocar, articulation, etc.). If they do make a play for CRDC then Covidien which currently with J&J control ~90% of the stapler-cutter market will have to either compete with a winning J&J or purchase the right to use it from them---not good for Covidien.
2nd Covidien ---same story as above for J&J. If either of these two make a play for Cardica there is a good chance of a bidding war---~$10 plus stock offer.
Consider there is a $2 billion revenue market in US alone. If Gross margins are 60+ %, and neither of these companies will need new marketing, manufacturing or Administration expenses, this purchase could be contributing ~$1.2 B per year to either winner. Net of taxes, ~$800 million per year within 5 years. If CRDC has ~60 million shares they could pay $13.50 per share for only 1 years earnings! A bargain to be desired.
3rd ISRG probably would not prefer to have J&J own their license to the new technology. ISRG will be if not already developing the replacement of the old tech stapler-cutter for their Da Vinci. J&J is a current minor and potentially a future major competitor to ISRG's robotic minimally invasive operation--J&J is currently focusing on enhancing the traditional minimally invasive operation theater. If ISRG buys Cardica they could enter into agreements with J&J, Covidien and others to use the new stapler-cutter technology in non-robotic MIS. This would be acceptable to the first two but not optimal. Thus they may let ISRG buyout Cardica and negotiate a license instead of bidding against ISRG. Est Price offer---~$5 to $7@
The Wall Street Journal is reporting that Johnson & Johnson (JNJ:NYSE) is close to selling its Ortho Clinical Diagnostics division to the Carlyle Group (CG: Nasdaq) for as much as $4.2 billion. The blood-testing unit has been for sale since September, and we've been expecting a sale to happen, especially after talks with Carlyle heated up in December.
The price is at the low end of initial expectations of $4 billion to $5 billion, but we view it as a positive as it is a non-core asset and has been underperforming the other parts of JNJ's medical device segments. We expect the company to use the proceeds to reinvest in its faster-growing medical device sub-segments and into its pharmaceutical division
GSA, nice analysis! I agree that JNJ, COV and ISRG are the obvious acquisition candidates, however, there can be some other anxious device companies ready to break up the duopoly. It is know that AMC was offered a billion for their company and did not sell. So that speaks to large player wanting in to this space such as ABT, MDT or Stryker. To satisfy major shareholders, I think CRDC will raise the cash to further develop their product line and get the share price closer to the IPO price of $10.00. Know the the M30 is fda cleared, it should set the stage for simple 510k's for M45, M Flex Shaft and MExpress. Also need to complete the approval of the white cartridge which should be next. Japan approval later this year also will be a major share appreciating event as will ISRG utilizing M technology on the DaVinci. Hope CRDC can work through any AMC noise as they execute on these vital few.