A Medical Device Daily

The U.S. Federal Trade Commission (FTC) said it agreed to allow Kyphon (Sunnyvale, California) to buy Disc-O-Tech Medical Technologies (Herzlyia, Israel), and its U.S. subsidiary, Disc Orthopaedic Technologies (Monroe Township, New Jersey), subject to the sale of some assets to address antitrust concerns.

The FTC said the approval was contingent on Kyphon selling Disc-O-Tech’s Confidence product lines, which are used to treat vertebral compression fractures often linked to osteoporosis.

Kyphon has 60 days to sell the product line to an FTC- approved buyer.

“Without the commission’s action today, the acquisition by Kyphon of Disc-O-Tech’s Confidence product would have deprived Americans suffering from vertebral compression fractures, including the elderly, of the benefits of competition for these vital products,” said Jeffrey Schmidt, director of the FTC’s Bureau of Competition. “The commission’s order contains strong relief that will preserve competition, ensuring that these products will be provided at lower prices and higher quality.”

A complaint filed this week by the FTC alleges that Confidence is Kyphon’s main competitive threat and, absent the acquisition, would make significant inroads into its near-monopoly position in this market.

“Kyphon’s acquisition of Confidence appears to have been motivated, in part, by its desire to keep those assets out of the hands of other major medical equipment companies,” the commission said in a statement.

The FTC noted that Disc-O-Tech’s Confidence system competes directly with Kyphon’s higher-priced kyphoplasty product and uses a highly viscous cement that makes it a safer alternative to vertebroplasty. Accordingly, it has become a closer substitute for Kyphon’s product than other vertebroplasty products.

In September, the FTC granted Kyphon U.S. antitrust clearance with respect to its acquisition of the non-vertebroplasty spine-related assets and associated intellectual property rights of Disc-O-Tech (Medical Device Daily, Sept. 18, 2007).

Kyphon valued the Disc-O-Tech deal at as much as $240 million when it was disclosed late last year (MDD, Dec. 22, 2006).

Kyphon is in turn set to be purchased by Medtronic (Minneapolis) in a $3.9 billion deal that was disclosed in July (MDD, July 30, 2007).

In other dealmaking news: Natus Medical (San Carlos, California) reported that it has entered into an agreement to acquire Excel-Tech (Oakville, Ontario) for a cash price of C$3.25 per share. In addition, each share subject to an Excel-Tech stock option will convert into an amount equal to the excess of C$3.25 over the exercise price of the option. The transaction is valued at about C$62.5 (U.S. $63.6 million) based on about 19.4 million Excel-Tech shares outstanding on a diluted basis.

Excel-Tech develops computer-based electro diagnostic systems and disposable supplies used by medical practitioners to aid in the detection, diagnosis, and monitoring of neurologic and sleep disorders.

The acquisition is to be completed by way of a statutory plan of arrangement in Canada under which Natus will acquire all of the outstanding common shares of Excel-Tech. Natus said it believes the acquisition will be immediately accretive to earnings, excluding associated one-time charges.

“This acquisition affirms our position as the market leader in neurology and brings Natus one-step closer to achieving our stated goal of growing revenue to a $250 million annual run-rate by the end of 2008,” said Jim Hawkins, president/CEO of Natus. “Excel-Tech adds to our growth opportunities by broadening our product offerings in neurology, including [its] products for the diagnosis of peripheral nervous system dysfunction.”

“Excel-Tech’s full line of products for the neurology clinician expands our current product offerings with products that include a high-end long-term EEG patient monitoring system for the diagnosis of epilepsy, electromyography systems, or EMG systems, used in the diagnosis of neuropathies and myopathies, and intra-operative monitoring systems, or IOM systems, used during surgical procedures in the operating room,” added Hawkins.

Excel-Tech reported revenue of C$32.5 million in the twelve months ended July 31, 2007, cash and cash equivalents of C$16.4 million as of July 31, 2007, and owns the land and building housing their corporate facility in Oakville, Ontario.

In addition to available cash on hand, Natus said it intends to finance a portion of the purchase price through a commitment secured from Wells Fargo Bank, subject to customary closing conditions, to provide $35 million in new senior term and revolving credit facilities. The acquisition is not subject to any financing condition on the part of Natus.

Directors and officers of Excel-Tech, owning about 24% of the company’s outstanding common shares, have agreed to vote their shares in favor of the transaction.

Natus is a provider of healthcare products used for the screening, detection, treatment, monitoring and tracking of common medical ailments such as hearing impairment, neurological dysfunction, epilepsy, sleep disorders, and newborn care.