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http://www.glgroup.com/News/Two-years-on---Thoratecs-failed-acquistion-of-Heartware.-52572.html

Summary
Two years ago, on February 15, 2009, Thoratec made a bid to acquire Heartware and fend off a potential competitor. This analysis looks at how Thoratec, as a market leader, is now hedging its bet against HeartWare and how investors have responded.
Analysis

HeartWare, the heart assist device company from ?down under?, is rapidly penetrating Thoratec?s turf. Thoratec the dominant player in this market, recognized HeartWare?s potential in becoming a significant competitor to its Heartmate II device, which is targeted for use in the bridge to transplant and destination therapy markets. Thoratec attempted to acquire HeartWare shortly after its IPO but could not ultimately obtain SEC approval.

Heartmate II continues to gain acceptance in this market, but Thoratec?s reported development program of a bearing-less pump points to a vulnerability it feels it will ultimately face against Heartware?s HVAD system that uses a magnetic and hydrodynamic suspension system used in its impeller ? the key component that propels blood in a heart pump. The reliability of the ruby bearing used in Heartmate II is well established but clearly is perceived to be inferior to a non-contact bearing. WorldHeart is also using magnetic levitation for its pump.

It appears that investors have picked up on this and this is now reflected in both HeartWareand Thoratec?s valuation. Two years ago to the day, Thoratec made a $282 million dollar bid to acquire Heartware in cash and stock. Today, HeartWare has a market cap of over $1.2 billion dollar versus Thoratec?s $1.5 billion dollar, when its revenue is only a fraction of Thoratec?s and is not yet profitable. As a market leader, Thoratec is likely to experience a loss of market share in an expanding market for the treatment of heart failure. The question will be whether much of this loss in share goes to HeartWare and to what extent will Heartware benefit from the regulatory path that Thoratec clears for similar products and applications.