Galil Medical (Yokneam, Israel), a global cryotherapy company, said it has filed suit in Delaware court to enjoin the proposed acquisition of Endocare (Irvine, California) by HealthTronics (Austin, Texas). Galil also has asked the court to enforce the merger agreement between it and Endocare.
In November, Endocare agreed to buy privately held Galil in an all-stock deal (Medical Device Daily, Nov. 14, 2008), but an ongoing investigation by the Federal Trade Commission (FTC) held the deal up. Earlier this week Endocare said it was terminating the agreement and would be acquired by urology services provider HealthTronics in a cash and stock deal worth about $16 million (MDD, June 9, 2009).
Both Galil and Endocare develop cryotherapy products for the prostate cancer market. According to Galil, Endocare attempted to justify terminating the merger agreement by asserting in a June 5 letter that conditions to closing the deal had become incapable of fulfillment because the FTC had refused to close its ongoing investigation into the merger. Galil says it has rejected that assertion, and notes that discussions with the FTC commissioners and staff were continuing. The company also noted that last Tuesday the FTC issued a statement explicitly advising that it "currently is not in a position to make a formal assessment one way or the other."
"Galil remains very committed to successfully closing the investigation with the FTC, and concluding our merger with Endocare," said Marty Emerson, president/CEO of Galil. "I believe that this merger is in the best interests of the physicians and patients we collectively serve. The prospects for future innovation, as well as for the global healthcare system, are all best advanced by the merger of these two great organizations."
Emerson told Medical Device Daily that the FTC contacted the company within a few days of the merger being announced in November and that Galil has been working with the agency since then. "We've been working with them as they try to understand the market definition and the impact on innovation if the merger happens or if it doesn't happen and it's been a struggle to come up with how to provide a level of documentation that they're satisfied with," he said.
The FTC is used to working with large companies that have teams of lawyers and more resources at their disposal whereas Galil and Endocare are small companies that lack those resources, Emerson said.
Although the FTC said last week that it has not made a decision on the matter, Emerson said Galil will continue to work with the agency "to try to identify in what way could we give them information that would satisfy them in terms of helping them make a decision, but at the same time would be cost effective for the size of company we are."
"We think that [Endocare's] decision to terminate the agreement was technically wrong, we hadn't been told no by the FTC ... so we're trying to get into court to see if a judge sees things our way because we would like to put this merger back on track," Emerson told MDD.
An Endocare representative told MDD that the company declined to comment on this issue.
"It really made a great deal of strategic sense" for these two companies in the prostate cancer market that are developing cryotherapy products to combine their resources instead of competing against each other, said Larry Haimovitch, president of Haimovitch Medical Technology Consultants (Mill Valley, California) and a regular contributor to MDD.
"I think [the FTC] took a very narrow decision in terms of how they define the market," when it decided to challenge the Galil-Endocare merger," Haimovitch told MDD. He posed the question, "Is it anticompetitive when two cryotherapy companies become one or is it more competitive when there's one cryotherapy company now competing against several other modalities?"
According to the American Cancer Society (Atlanta), about 186,000 new cases of prostate cancer were diagnosed in the U.S. last year. Yet because prostate cancer is typically a very slow growing disease, current treatment options have been controversial and "watchful waiting" is often recommended. However, another option is the CyberKnife robotic radiosurgery system from Accuray (Sunnyvale, California), which is growing in popularity (MDD, April 29, 2009).
Galil makes products using a cryotherapy platform that incorporates powerful freezing technology and 17-gauge cryoablation needle design. According to the company, its systems enable minimally invasive, targeted ablation of benign and cancerous tumors while ensuring rapid recovery and enhanced quality of life for patients. The Presice Cryoablation System features multi-point thermal sensors and advanced IceVue planning software for "excellent" procedure control in treating prostate and renal cancer, Galil says. The SeedNet MRI system provides physicians with an easy-to-use cryoablation solution to precisely ablate tumors while protecting adjacent structures, under MRI guidance.
Endocare has initially concentrated on developing cryoablation (freezing) technologies for the treatment of prostate cancer and believes that its technologies have broad applications across a number of markets, including the ablation of tumors in the kidney, lung and liver and palliative intervention (treatment of pain associated with metastases).
In other dealmaking news, Misonix (Farmingdale, New York), a developer of minimally invasive ultrasonic technology, which in Europe is used for the ablation of tumors and worldwide for other acute health conditions, said it has bought three patents associated with high-intensity focused ultrasound (HIFU) technology from ProRhythm (Ronkonkoma, New York). The patents relate to HIFU transducer arrays method of fabrication, ultrasonic lenses, and an intrabody HIFU applicator. The purchase also includes prototypes, transducers and equipment.
"We believe the purchase of this patented technology will enable us to continue the internal development of our own HIFU transducer applications," said Michael McManus Jr., president/CEO of Misonix. "We believe the covered technology will be useful in developing smaller transducers, which may be reusable or disposable. Additionally, we intend to develop the technology for use in a variety of tissue applications. The use of ultrasound is ideal for minimally invasive applications and the technology may provide us entry into other large and growing markets."
McManus said that Misonix currently has a worldwide license from Focus Surgery (Indianapolis) for kidney, liver and breast applications using HIFU. The company's plan going forward will involve the development of its own HIFU technology, he said.