A Medical Device Daily
Advanced Medical Optics (AMO; Santa Ana, California) yesterday withdrew its $4.2 billion buyout bid for rival eye care products maker Bausch & Lomb (B&L; Rochester, New York).
The move clears the way for B&L, a 154-year-old maker of contact lenses, ophthalmic drugs and vision-correction surgical instruments, to be acquired by private equity firm Warburg Pincus for $3.67 billion.
In a letter to B&L's board members, James Mazzo, CEO of AMO, said he had concluded they "remain intent on delivering Bausch & Lomb to Warburg Pincus at $65 per share."
Mazzo described that deal as "inferior to AMO's proposal both in terms of value and the ability for the Bausch & Lomb shareholders to participate in the significant synergies that combining AMO and B&L would create.
"Accordingly, we have withdrawn our offer," Mazzo wrote in a regulatory filing. "If, in the future, you decide to run a process that is designed to deliver value to your shareholders, please let us know."
Warburg Pincus, a buyout and venture capital firm in New York, agreed with B&L's board in mid-May on a $65-a-share all-cash takeover deal (Medical Device Daily , May 25, 2007).
AMO put in a $75-a-share offer of $45 in cash and $30 in AMO stock for each B&L share on July 5, the final day of a 50-day period set aside for other buyers to make a better bid (MDD, July 9, 2007).
AMO has said its deal would bring a potential boost to earnings and an estimated $180 million in annual cost savings. But its third-largest shareholder, ValueAct Capital, has opposed the takeover move (MDD, July 13, 2007).
On Monday, B&L said it was giving AMO limited permission to discuss its counter bid with key shareholders even while expressing "substantial uncertainty" that the company could win approval.
B&L gave AMO until Friday to provide "concrete, credible evidence" of its ability to secure approval from its stockholders. AMO countered by asking for several weeks to update its shareholders, but Bausch & Lomb was not forthcoming.
"We are disappointed that the Bausch & Lomb board has concluded not to grant adequate time for us to seek to provide you with the information you requested in a manner that would be meaningful," Mazzo said in his letter.
B&L posted $2.3 billion in sales last year and employs about 13,000 employees, while AMO recorded $998 million in sales in 2006 and has 3,300 employees.
Advanced Medical makes artificial lenses and other medical devices for the eye. In the lens solution market, it is a No. 3 player behind AlconLaboratories (Fort Worth, Texas) and B&L.
"It will be interesting to see how Bausch's shareholders react to the news. Given the demands of the Bausch board, this news does not come as a surprise to us," Larry Biegelsen, an analyst with Wachovia Capital Markets, wrote in a research note. "Had [AMO] acquired Bausch, we would have been concerned about [AMO's] ability to successfully integrate the two companies while also addressing major challenges within the current [AMO] business, such as the withdrawal of Complete Moisture Plus contact lens solution and the integration of IntraLase."
Biegelsen added that there are still a lot of uncertainties around the Complete recall, which the company reported at the end of May (MDD, May 30, 2007). This week, the Centers for Disease Control and Prevention (Atlanta) indicated that it is concerned that Complete Moisture Plus is still on the shelf in some stores and that some people continue to use the product, Biegelsen noted. This could result in additional expenses for the company, he said.
"Longer-term, we think [AMO] can do well if the company delivers on the IntraLase synergies and meets our modest expectations for the recovery of its lens care business," Biegelsen concluded.
In other dealmaking activity:
• SurModics (Eden Prairie, Minnesota), a provider of surface modification and drug delivery technologies to the healthcare industry, has acquired Brookwood Pharmaceuticals (Birmingham, Alabama), a provider of drug delivery technology primarily to the pharmaceutical industry, from Southern Research Institute (Eden Prairie, Minnesota) for $40 million in cash at closing and up to an additional $22 million in cash upon the successful achievement of specified milestones.
Brookwood Pharmaceuticals provides its polymer-based technologies to companies developing improved pharmaceutical products. The company has particular strength in injectable microparticles and implant technology, both of which are based on biodegradable polymers, to provide sustained drug delivery. Currently, Brookwood has nearly 30 customer-paid development projects in progress with top pharmaceutical, biotech and device clients as well as smaller public and private companies. These customer projects target a number of key clinical indications in the diabetes, oncology, ophthalmology, cardiovascular, orthopedics, central nervous system and alcoholism markets, in addition to other fields, the company said. Similar to SurModics, Brookwood's business model includes revenue from R&D fees, polymer sales, and royalty and milestone generating licenses.
• Advanced Cell Technology (ACT; Alameda, California) reported that it has entered into a definitive merger agreement to acquire all of the outstanding capital stock of Mytogen (Charlestown, Massachusetts).
The company reported about two months ago that it had agreed to acquire Mytogen and its Myoblast Program for the treatment of heart failure (MDD, June 1, 2007).
ACT will acquire the company for $5 million, payable in common stock, and assume Mytogen liabilities of about $1 million. Mytogen will also receive a warrant to purchase another 1.5 million shares of ACT common stock at $1 each, subject to achievement of certain milestones. Mytogen shareholders will also receive a warrant to buy an additional 1.5 million shares of ACT common stock at 75 cents a share subject to the achievement of certain milestones.
The Myoblast Program may prove particularly beneficial for patients that have experienced a serious heart attack and have a high risk of heart failure. This stem cell therapy involves transplantation of expanded autologous myoblasts (adult progenitor stem cells) derived from a small biopsy of skeletal muscle from a patient's leg. The technology allows for the expansion of myoblasts into hundreds of millions of cells over a period of two to three weeks. The resulting myoblasts are then transplanted back into the patient's scarred heart tissue through the use of a catheter-based procedure.