Johnson & Johnson CFO Caruso: $10B share buyback doesn’t affect M&A appetite

The $10 billion share repurchasing program revealed yesterday by Johnson & Johnson (NYSE:JNJ) won’t affect the healthcare giant’s appetite for mergers & acquisitions, especially when it comes to bolstering the cardiovascular portfolio of its struggling medical device division, CFO Dominic Caruso said this week.

For J&J, which announced the buyback Oct. 13 along with its 3rd-quarter numbers, M&A is the #2 priority behind dividends, Caruso told analysts during a conference call.

“[The buyback] in no way has any negative impact on our outlook for M&A and our pursuit of value creating acquisitions to drive shareholder value. So we have the financial strength and flexibility to do both and we’re very pleased to be able to continue to do that,” he said, according to a Seeking Alpha transcript. “I wouldn’t interpret the $10 billion share buyback as impacting our appetite for scale of any size at M&A at all. Our appetite for M&A of any scale has entirely to do with whether or not the acquisition is going to create value for shareholders. And as you know we are disciplined about that.”

Although a mega-deal isn’t off the table, the finance chief said J&J is more likely to look at tuck-ins.

“It is true that over our history, we have done many-many acquisitions, and the largest ones are a few and far between. But that has to do with what [medical device chairman Gary Pruden] mentioned, with business of our scale, we can bring in lots of tuck-ins,” Caruso said. “But it doesn’t preclude us from that also looking for large scale acquisitions.”

Pruden said the company is still interested in shoring up a cardiovascular business that chairman & CEO Alex Gorsky called “subscale” over the summer, especially in areas like heart failure and structural heart. Those are “fast-growing categories where there is a lot of unmet need and where we think we can add to our breadth that we have with the [electrphysiology] business currently,” Pruden said during the call.

“We think cardiovascular is a large category. Agreed we don’t have the same scale as we do in surgery and orthopaedics, but we will look for opportunities to add to that scale with the appropriate types of investments that will create shareholder value in spaces where we think there is a lot of growth and opportunity,” Pruden said. ”

Other areas of interest include minimally invasive techniques for surgical oncology and obesity treatment, plus treatments for osteoarthritis and osteoporosis, Caruso said.

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