A Medical Device Daily
A Swedish company said it would pay Boston Scientific (Natick, Massachusetts) $750 million in cash for its cardiac and vascular surgery businesses.
Getinge Group (Stockholm, Sweden), a global provider of healthcare equipment and systems, said it would use the acquisition to establish a base for building a global cardiac surgery business in the coming years.
The deal is expected to close within 45 to 90 days, according to Boston Scientific.
As part of its plan to “divest non-strategic assets and increase shareholder value,” Boston Scientific reported in August that it wanted to sell its cardiac and vascular surgery units (Medical Device Daily, Aug. 20, 2007).
The sale of these units is in addition to Boston Scientific’s earlier reported plans to explore the sale of its fluid management business (MDD, July 26, 2007) and its disclosure that it was selling the auditory assets of Advanced Bionics (Valencia, California) while retaining the pain management assets of that company after a protracted legal struggle with that company’s management (MDD, Aug. 13, 2007).
Last month the company said it would eliminate about 2,300 positions worldwide, or about 13% of an 18,000-person, non-manufacturing workforce baseline as of June 30 (MDD, Oct. 19, 2007).
Boston Scientific has struggled with its finances since its $27.2 billion acquisition of Guidant (Indianapolis) last year. As a result of that transaction, the company is carrying more than $8 billion in debt.
The company also has been hurt by a drop in sales of implantable heart devices. In 2Q07 Boston Scientific’s defibrillator sales were down 20% from two years before, when a series of recalls hurt the company’s reputation. Sales of stents were down 27% from a year ago.
Boston Scientific acquired its cardiac surgery business in April 2006 as part of the Guidant transaction. The cardiac surgery business develops medical technologies designed for use in surgical cardiac procedures, including beating-heart bypass surgery systems and endoscopic vessel harvesting for coronary bypass surgery. The business employs about 450 people.
Boston Scientific acquired its vascular surgery business in 1995. The vascular surgery business develops synthetic grafts and patches used to surgically treat vascular disease, including the repair of abdominal aortic aneurysms and peripheral vascular anatomy. The business has about 250 employees.
The combined revenues of the two businesses in 2006 were about $275 million.
“Our goal is to drive growth and bring new technologies to these markets, ultimately benefiting cardiac and vascular surgeons and their patients,” said Johan Malmquist, president/CEO of Getinge. “We are excited to complement our existing portfolio with these valuable businesses, each of which brings leading market positions and impressive product lines.”
Boston Scientific makes devices for a broad range of interventional medical specialties.
Getinge provides equipment and systems to customers within healthcare, extended care and pharmaceutical industries/laboratories. The company comprises three business areas: medical systems (systems for surgery and intensive care), infection control (system equipment for disinfection and sterilization) and extended care (care ergonomics).
According to Getinge, the cardiac surgery market is estimated at about $2.3 billion and is growing by 8% to 10% a year.
The market for artificial grafts (vessel implants) for vascular surgery is about $300 million globally, the company noted. This market is aimed at replacing diseased or damaged blood vessels with synthetic vessels.
Boston Scientific’s cardiac surgery division has sales of about $189 million with “very good” profitability, Getinge said. The division has roughly 450 people and is headquartered in San Jose, California. The manufacturing operation, which has about 200 employees, is in Dorado, Puerto Rico. Slightly less than 90% of its sales are to customers in the U.S. through a direct sales organization of about 90 sales representatives. The business has a portfolio with more than 200 active patents.
The vascular surgery division has sales of about $84 million and also has good profitability, according to Getinge. The division employs slightly more than 250 people in Wayne, New Jersey. About 55% of its sales are to customers in the U.S. Most products are sold under the Hemashield brand and the products are supported by a portfolio of about 80 active patents.
The company said it is financing the acquisition through external borrowing, of which nearly 20% is intended to be refinanced through a new share issue in Getinge next spring. The new share issue is being guaranteed by Getinge’s principal shareholder, Carl Bennet, the company said.
In other dealmaking activity:
• Edwards Lifesciences (Irvine, California) reported an agreement to buy certain assets of the CardioVations division of Ethicon (Somerville, New Jersey), a Johnson & Johnson (New Brunswick, New Jersey) company, for about $27 million.
The deal is expected to close by the end of the year.
The CardioVations product line is expected to generate sales of more than $20 million in 2008, Edwards said. It includes the Port-Access products, such as the EndoCPB and EndoDirect systems for minimally invasive heart valve surgery, including soft tissue retractors, venous and arterial cannulae, vent and coronary sinus catheters, and reusable instruments, for performing port-access cardiac valve procedures.
The purchase price includes inventory, related intellectual property rights and the assumption of certain liabilities, Edwards said. It is not expected to have an impact on earnings in 2008 and will be accretive thereafter, the company said.
Edwards focuses on specific cardiovascular disease states, including heart valve disease, peripheral vascular disease and critical care technologies.
• Alliance Imaging (Anaheim, California), a provider of diagnostic imaging services, said its affiliate, Alliance Oncology (also Anaheim), bought the assets of eight radiation therapy centers in Alabama, Arkansas, Mississippi and Missouri from Bethesda Resources, a subsidiary of Sonix (New York).
The price consists of about $36 million in cash and assumed debt. Annualized revenue from the acquisition is expected to total about $14 million, the company said. The acquisition was financed through internally generated funds, borrowings under credit facilities, and capital leases.