Just a year removed from its amicable split-off from Tyco International (Pembroke, Bermuda), Covidien (Mansfield, Massachusetts) finds itself in a rather unique situation. On one hand, the company is enjoying more freedom to grow the business, but it still has to, in the words of one company exec, "play catch-up" to make sure the business grows according to its well-structured plan.
The company took a huge step toward that end yesterday by launching Covidien Ventures (CV), a corporate venture funding vehicle.
Covidien Ventures will invest in areas of strategic importance to the company, with the goal of providing early exposure to innovative technologies and enhancing market intelligence in healthcare products.
"Our areas of strategic importance include medical devices, imaging, and pharmaceuticals," Bruce Farmer, VP of public relations, told Diagnostics & Imaging Week. "We formed the venture fund to aid in the development of new and emerging markets."
Covidien Ventures will be managed by Daniel Sheehan, VP of corporate venture capital, who recently joined Covidien from Affinity Capital Management. Sheehan, who has 20 years of experience in venture capital, business development and investment banking, will direct the new fund and lead the investment process for Covidien.
"Covidien Ventures will allow us to make early-stage investments and investigate emerging technologies in the healthcare areas of interest to Covidien," said Amy Wendell, senior vice president, corporate strategy and business development. "This exposure could potentially lead to our acquiring technology, intellectual property or start-up companies to expand our product portfolio and accelerate business growth."
One of the goals, however, isn't to reinvent the wheel, according to Farmer.
"One of the ways to do this is to find these technologies already out there in their early stages," Farmer said. "We haven't made any investments yet. From our standpoint (CV) is just up and running."
He added that this was not a venture fund and that each investment would stand on its own and be evaluated on how much money was being put into it.
Since the separation from Tyco, the company has performed better than expected, according to some analysts. It formally split from Tyco last year.
The company reported third-quarter net sales rising 14% to $2.6 billion from $2.3 billion a year earlier, driven by higher volume and new products, and an operating income of $545 million vs. a loss of $761 million in the prior-year period.
For the first nine months of fiscal 2008, sales of $7.3 billion were 11% above the $6.6 billion in the prior year, with operating income of $1.4 billion vs. $199 million a year earlier, and diluted EPS from continuing operations of $2.03 vs. a loss of 86 cents a share in the comparable period.
While the company was attached to Tyco, it feverishly wrestled with sluggish revenue growth and declining profitability because of under-investment. In 2006, the company had $9.65 billion in sales — a paltry increase from the $9.54 billion in sales it did in 2005.
The goal, Covidien officials say, is to push revenue growth into the mid-single digits within the next few years.
Now with revenue of nearly $9 billion, Covidien has more than 42,000 employees worldwide in 57 countries, and its products are sold in more than 130 countries.
HDC creates firm to make breast cancer tests
Health Discovery Corp. (HDC; Savannah, Georgia) reported that Dr. Richard Caruso will change his role with the company from member of the board of directors to senior advisor in order to activate a new independent company called Smart Personalized Medicine to be able to pursue the goal of developing a breast cancer prognostic test using HDC's support vector machine (SVM) technology and the cooperation of the University of Texas-M.D. Anderson Cancer Center (Houston).
Caruso said, "I have established ... Smart Personalized Medicine to pursue the goal of developing a superior breast cancer prognostic test using HDC's SVM technology. As such, I would like to now finalize negotiations and execute a license and development contract with HDC in the field of breast cancer in exchange for an HDC participatory equity position in this new company and a per-test royalty to be paid to HDC after successful commercialization of the new test."
He added that "the HDC licensing attorney has advised both HDC and me that to avoid any potential conflict-of-interest issues in my negotiations with HDC, I should be negotiating from an independent position and not as a member of the HDC board. I respect that opinion and am honoring that request."
HDC is a developer of SVM-based molecular diagnostic and prognostic tests in genomics and proteomics, as well as digital image analysis in pathology and radiology.