In a bid to bolster its offerings in the atrial fibrillation (AF) market, Boston Scientific (Natick, Massachusetts) reported that it plans to acquire CryoCor (San Diego), a maker of a disposable catheter system intended to treat cardiac arrhythmias, for $17.6 million in cash, or about a $1.35 per share. The stock closed on Tuesday, the last day before the merger was disclosed, at $1.13 a share.

This acquisition follows on the heels of a development agreement between the two companies, in place since June 2007, to pursue therapeutic solutions for AF, the most common cardiac arrhythmia, which affects millions of people around the world (Medical Device Daily, July 2, 2007).

The existing development agreement involves the development of a console to deliver cryo energy to Boston Scientific's cryo balloon catheter. The company's cryo balloon is being developed to provide a safe, standardized and broadly applicable method to isolate the electrical activity originating from the pulmonary veins, which are believed to be a source for the initiation and propagation of AF.

"In the current development project, CryoCor's console demonstrated its ability to efficiently deliver nitrous oxide to our proprietary cryo balloon catheter," said Fred Colen, executive VP, operations and technology at Boston Scientific Cardiac Rhythm Management. "This acquisition will allow us to further refine this base console technology, and gaining exclusive rights to CryoCor's family of intellectual property will provide us a key strategic advantage."

"We are pleased to see our cryoablation system and our intellectual property assets partnered with one of the world's leading electrophysiology companies," said Ed Brennan, CEO of CryoCor.

CryoCor initially received a hard-won approval for use of its Cardiac Cryoablation System for the treatment of right atrial flutter (AFL), a condition in which the upper chambers of the heart do not pump in synch with the lower chambers, by an 8-2 advisory panel vote last June (MDD, June 29, 2007). It then entered its development agreement with Boston Sci less than a month prior to its formal PMA approval for AFL by the FDA, a move that at the time of the agreement CryoCor CFO Gregory Tibbits admitted to MDD was "... enabling a potential competitor," though he noted at the time that the larger firm still was working on feasibility studies of its cryogenic balloon catheter.

Last August, CryoCor became the first company to report the completion of enrollment in a U.S. pivotal clinical study for the treatment of AF (MDD, Aug. 28, 2007), again raising questions as to why the company would sell out so cheaply. The company had enrolled more than 170 patients in its pivotal clinical study and planned to complete a 12-month follow up for each patient.

A clue may have surfaced last month when CryoCor said that its annual report on Form 10-K included an audit opinion with a "going-concern" qualification, a statement by CryoCor's independent registered public accounting firm expressing substantial doubt, based upon current financial resources, as to whether the company could continue to meet its obligations beyond 2008 without access to additional working capital, though it noted that the expected collection of $4 million from its collaboration with Boston Scientific would be sufficient to meet its anticipated cash requirements until 4Q08.

Paul Donovan, a spokesperson for Boston Scientific, declined to comment on the merger to Medical Device Daily beyond what was in the press release, and CryoCor had not returned phone calls by press time.

The acquisition, which has been approved by the board of CryoCor, has been structured as a cash tender offer, scheduled to begin within the next 10 business days. Any untendered shares will then be converted into the right to receive the same cash price per share as shareholders who tendered their shares in the offer.

Boston Sci's Electrophysiology business makes cardiac ablation products designed to treat common cardiac arrhythmias. Its Blazer, Blazer XP and Chilli II products are used to treat arrhythmias such as atrial flutter and ventricular tachycardia. It also supplies a line of multi-electrode diagnostic catheters, ultrasound catheters and accessories. The cryo balloon catheter is currently under development and not approved for sale.

In other dealmaking news: Analogic (Peabody, Massachusetts), an OEM supplier of radio frequency amplifiers for MRI systems, reported the successful completion of its previously disclosed acquisition of Copley Controls (Canton, Massachusetts), a supplier of gradient amplifiers for MRI and precision motion control systems used in computer-controlled automation systems (MDD, March 7, 2008).

Copley is now a wholly owned subsidiary of Analogic. The consideration paid by Analogic was $76.875 million in cash, which represented the agreed purchase price of $68.75 million plus an adjustment of $8.125 million. The adjustment resulted from Copley's estimated working capital as of the closing date, which included $5 million of cash, exceeding the working capital of $16.2 million as required under the terms of the agreement.

Analogic and the former shareholders of Copley have elected to treat the acquisition as an asset purchase for tax purposes. As a result, Analogic will make a payment to the former shareholders of Copley of up to an additional $1.8 million in the aggregate as reimbursement for the tax consequences of the transaction.

Analogic estimated that, subject to the final determination of Copley's actual indebtedness and working capital as of the closing date, the total consideration to be paid, including the full reimbursement to Copley shareholders for the tax consequences of the transaction, will be approximately $78.675 million.

In addition to its Canton headquarters, Copley has offices and local technical support in the U.S., Europe, and Asia, comprising about 250 employees worldwide. Its revenues for the calendar year 2006 were $73.6 million; preliminary calendar year 2007 revenues are estimated to be $83 million.

Analogic estimated that revenues related to the acquisition will be about $83 million in calendar 2008 and, excluding one-time purchase accounting adjustments, accretive to earnings in the company's FY08 and fiscal years thereafter.