A Medical Device Daily

St. Jude Medical (St. Paul, Minnesota) reported that it has agreed to acquire EP MedSystems (West Berlin, New Jersey) for about $92.1 million, to bolster its presence in the market for irregular heartbeat devices.

EP shareholders will receive $3 for each EP MedSystems share they own, with the option of receiving that amount in cash or St. Jude common stock. That price is more than double the closing price of EP's shares on Tuesday, when they closed at $1.41 on Nasdaq.

The number of shares of St. Jude common stock that EP shareholders will receive will be determined based on the average closing price over 10 trading days, ending on the second business day before the transaction closes. The cash and stock elections are subject to pro-ration such that St. Jude will issue 40% of the total merger consideration in St. Jude common stock and 60% in cash.

St. Jude's board also approved an additional stock buyback authorization of $50 million, increasing its share repurchase authorization from $250 million to $300 million. The additional buyback authorization will be used to offset the shares issued in this transaction.

The companies anticipate the acquisition will close in 3Q08.

St. Jude will record a special charge for in-process R&D. This acquisition does not change the company's existing guidance for 2008 earnings per share, exclusive of the special charge, it said.

St. Jude said this transaction will immediately add two new growth drivers to its program for products used in atrial fibrillation (AF) and other electrophysiology (EP) catheterization procedures. This includes the EP-WorkMate computerized electrophysiology workstation with a fully integrated EP-4 Computerized Cardiac Stimulator and expansion options to incorporate the NurseMate Remote Review Charting Station. The EP-WorkMate platform already enjoys a number two share of the global market for EP recording systems in spite of limited sales and marketing resources, the company noted.

The company also said the EP buy will expedite its entry into the intracardiac ultrasound echocardiography (ICE) market with the EP's ViewMate II intracardiac ultrasound system and the next generation ViewFlex PLUS ICE catheter scheduled for market release this quarter. This market is growing at an estimated 25% to 30% per year and includes both EP and interventional cardiology applications.

Full year 2007 net sales for EP were about $19 million.

"This transaction will accelerate the growth of St. Jude Medical's program to help physicians cure atrial fibrillation," said Daniel Starks, president/CEO and chairman of St. Jude. "EP MedSystems' new ClearWave signal recording technology and its next generation ViewFlex PLUS ICE catheter will be especially important additions to our AF technology platform."

David Bruce, president/CEO of EP, said, "This transaction delivers significant shareholder value and enables our key product platforms to benefit from the extensive worldwide distribution, customer support and product development infrastructure of St. Jude Medical."

The transaction is subject to certain closing conditions and regulatory approvals, and approval by EP MedSystems shareholders. Following the close of the transaction, Bruce is expected to join St. Jude, and EP will become part of the company's AF division.

Bear Stearns (New York) med-tech analyst Rick Wise wrote in a research note that the acquisition "provides true 'plug & play' add-ons to St. Jude's already well established AF & EP platform."

He also noted that the EP WorkMate System will be an adjunctive therapy to St. Jude's current EnSite mapping/navigation software. Wise said WorkMate provides cardiac recording capabilities not available on St. Jude's EnSite platform.

"The addition of WorkMate further solidifies St. Jude's already broad AF product portfolio, and offers physicians another tool to help in the process of diagnosing and treating AF." With the addition of EP, Wise said he believes St. Jude's AF unit will grow 20% or more over the next 2-3 years.

In connection with the transaction, Gibson, Dunn & Crutcher is serving as legal counsel for St. Jude. Piper Jaffray & Co. is acting as financial advisor to EP, and Morgan, Lewis & Bockius is serving as legal counsel for EP.

St. Jude said it will provide more details on the transaction on its 1Q08 earnings conference call that is scheduled for April 16 at 8:00 a.m. CDT.

In other dealmaking news:

• GE Healthcare (Chalfont St. Giles, UK) said it has completed the acquisition of VersaMed (Pearl River, New York), a provider of portable critical care ventilators for respiratory care. Terms of the deal were not disclosed.

GE said VersaMed's product offering will expand its capabilities in respiratory care management, offering healthcare professionals a wide choice of unique advanced life support ventilators to meet a variety of patient needs and care settings.

VersaMed's flagship product, the iVent201 ventilator, is an intensive care-grade ventilator designed to be compact and portable, and so especially designed for use in hospitals for acute and sub-acute care, in emergency transport and in the home.

• ProMetic Life Sciences (Mount-Royal, Quebec) has signed a letter of intent to acquire the American Red Cross' (ARC; Washington) common stock holding in Pathogen Removal and Diagnostic Technologies (PRDT), the joint venture established by ProMetic and ARC in 2002 to develop products to diagnose and reduce pathogens in blood, blood derivatives, biopharmaceuticals and other biological products (Medical Device Daily, April 9, 2002).

According to ProMetic, the transaction is a natural progression following commercialization of the P-Capt filter and the prion reduction resin that was fully licensed to ProMetic.

The terms of the deal call for an ongoing royalty stream to ARC, based on income derived from PRDT technology. In exchange, ProMetic will raise its ownership position in PRDT to 77% by acquiring ARC's 51% stake in PRDT. The remaining 23% will continue to be held by the academic co-founders.

ARC will continue to hold its preferred stock and maintain representation on the board.

"With the commercialization of the PRDT technology well underway and the projected strong market demand for this technology, ProMetic's increased stake in PRDT to 77% will allow for the revenues derived from the technology to be fully consolidated into ProMetic's financial results," said Bruce Pritchard, VP of corporate development for ProMetic.