J&J Acquires Robotic-Surgery Firm Auris for $3.4 Billion

(Bloomberg) -- Johnson & Johnson has agreed to buy surgical robotics company Auris Health Inc. for about $3.4 billion in cash, in a deal that would give the drug giant a lung-cancer diagnostic and treatment tool.

Under the terms of the deal, announced Wednesday, J&J could also make additional payments of up to $2.35 billion to Auris based on milestones, the people said. Auris, a closely held firm led by industry veteran Fred Moll, has developed robotic surgical scopes operated with a handheld device that are steered into patients' lungs to identify cancerous tumors.

Auris will be part of J&J's medical-devices division. The world's largest maker of health-care products, J&J also has a robotic-surgery company called Verb Surgical Inc. that it formed with Verily Life Sciences, part of Google parent Alphabet Inc., in late 2015.

“What we're trying to really garner is to convene this community of world class robotics expertise,” Ashley McEvoy, chairman of J&J's medical-devices unit, said. Bloomberg reported in January that J&J was pursuing an acquisition of Auris.

Moll will join J&J after the deal closes, which is expected by the end of the second quarter. He was the founder of Intuitive Surgical Inc., a pioneer in robotic laparoscopic surgery tools now valued at roughly $60 billion. Intuitive's shares fell as much as 2.5 percent, and were down 0.6 percent to $536.65 at 10:15 a.m. in New York.

“Auris will now become a more formidable competitor given the advantage of JNJ's commercial scale,” said Vijay Kumar, an analyst with Evercore-ISI.

Read more: A case of mistaken identity send the other Auris soaring

Dealmaking is heating up in the medical-technology industry as device makers hunt for innovative products to boost growth. In December, Medtronic Plc completed a $1.7 billion deal to acquire Mazor Robotics Ltd., an Israeli company whose robotics-assisted products aid in spine and brain surgeries. Auris's most recent funding round valued the Redwood City, California-based company at about $2 billion.

Medical companies around the world are racing to develop technologies that make surgeries safer and less invasive. Auris and a subsidiary of J&J's medical-devices business entered a partnership in May last year to develop integrated systems for robotic control, navigation and application of microwave ablation via bronchoscopes.

Acquiring Auris will help J&J develop digital tools for diagnosis and early-stage intervention in lung cancer, an area where the company has been increasingly focused.

“The focus of our lung cancer team has really been around getting early access and visibility to the disease earlier on to get it diagnosed so you can provide appropriate treatment,” McEvoy said.

Auris's tools could allow lung cancer to be caught eariler because they are able to reach further into the lung to conduct a minimally invasive biopsy. The health-care giant will explore options to treat earlier-stage lung cancer with these tools.

J&J was advised by JPMorgan Chase & Co. while Auris worked with Centerview Partners.

--With assistance from Manuel Baigorri and Nabila Ahmed.

To contact the reporter on this story: Cynthia Koons in New York at ckoons@bloomberg.net

To contact the editors responsible for this story: Drew Armstrong at darmstrong17@bloomberg.net, Timothy Annett, Mark Schoifet

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