After April’s group of large consolidation’s in the diagnostics sector (see May BB&T), the trend continued in June with Qiagen (Venlo, the Netherlands) saying it will acquire Digene (Gaithersburg, Maryland); and Inverness Medical Innovations (IMI; Waltham, Massachusetts) continued its drive to become what might be called a conglomerate with the purchase of Cholestech (Hayward, California)

Qiagen will buy Digene for $1.6 billion in cash and stock, to expand into testing for cervical cancer and sexually transmitted diseases. The deal values Digene shares at $61.25, a 37% premium to its closing price on the NASDAQ June 1. Qiagen shareholders will own about 78% of the combined company and Digene shareholders will own about 22%.

Digene’s flagship product is a test for the detection of human papillomavirus (HPV), the cause of essentially all cervical cancers after a decade long collaboration between the two companies. The Centers for Disease Control and Prevention (Atlanta; CDC) estimates that 6.2 million Americans acquire a new genital HPV infection every year and that 80% of women will be infected by the age of 50, the companies said. Digene notes that its HPV Test is the only test for HPV that is both FDA-approved and CE-marked.

“The strategic rationale for this transaction is compelling as it combines Qiagen’s leading technology portfolio and our breadth of molecular diagnostic tests with Digene’s leadership in what is seen as the fastest-growing segment of molecular diagnostics,” said Peer Schatz, CEO of Qiagen, during a conference call discussing the merger. “The joint franchises link virology with oncology, thereby creating an exceptional platform to add next-generation and high-value molecular diagnostic products and strategically position the company for future growth. Schatz noted that “currrent estimates predict a global potential market of more than $1 billion for HPV testing.”

Qiagen said it expects the acquisition to contribute revenue of $58 million to $60 million in the fourth quarter and $260 million to $270 million for the full year 2008. The combined company will have more than 2,500 employees worldwide.

IMI continued its recent buying spree with its agreement to acquire Cholestech in a stock-for-stock exchange deal valued at roughly $326.3 million. This latest acquisition by follows close on the heels of IMI’s pending $92.50-a-share buy of Biosite (San Diego). IMI, thus besting rival suitor Beckman Coulter (Fullerton, California); its March acquisition of Instant Technologies (Norfolk, Virginia) for $43.7 million; and its acquistion in February of Promesan (Milan, Italy), a distributor of point-of-care diagnostic tests, for about EUR 13.4 million ($4.4 million).

Cholestech is a provider of diagnostic tools and information for risk assessment and therapeutic monitoring of heart disease and inflammatory disorders. IMI said it expects opportunities to develop between Cholestech and its existing point-of-care organization, as well as with those of other recently acquired and to-be-acquired companies and expects the transaction to be accretive in the short term.

Ron Zwanziger, CEO of IMI, said, “We expect that the acquisition of Cholestech, especially when coupled with our recent and pending acquisitions, will provide Inverness with the unique ability to assess cardiac risk, diagnose cardiac conditions and potentially monitor the condition and response to therapy of cardiac patients. The large installed base of Cholestech systems in physicians’ offices will also be helpful as we continue to expand into this market segment.”

Aspect, Boston Scientific end development alliance

A small-company partnership with a big company is considered good -- the end of such an alliance, bad. Swimming against that perceptual current, Aspect Medical Systems (Norwood, Massachusetts) put mostly positives on the breakup of its alliance with Boston Scientific (Natick, Massachusetts). The companies last month announced that they are ending their collaborations aimed at assisting clinicians in the diagnosis and treatment of depression, Alzheimer’s disease and other neurological conditions. Aspect is best known for its bispectral monitoring system used to prevent either the under-use or over-used of anesthesia (and, it claims, thereby preventing surgical awareness). And it has been attempting to use this platform as a springboard for moving into other neurological monitoring sectors, including psychological problems such as depression.

As a result of the agreement breakup, Aspect launched a buyback of its shares, and Mike Falvey, CFO of Aspect, told Biomedical Business & Technology, that though the decision to end the alliance, while initiated by Boston Scientific, will bring benefits to both companies. Aspect will immediately acquire 2 million shares of Aspect stock now held by Boston Sci at roughly $15.91 a share, the average closing price of its stock over the past 20 trading days. Shares closed Monday at $16.02 a share. Boston Sci held about 6 million Aspect shares, or 27% of shares outstanding. For the next six months, Aspect has the right to buy back the rest of the shares held by Boston Sci for $15 a share, or the average closing price of Aspect stock over the 10 trading days prior to Aspect exercising its right to repurchase, whichever is higher. Boston Scientific has also agreed not to sell any of its Aspect stock, except to Aspect, during the six-month period. Boston Sci is relieved from all obligations to the alliance.

The neuroscience alliance was established in May 2005 and involved a commitment by Boston Sci of $25 million over five years to support research by Aspect in the depression and Alzheimer’s markets. To date, Boston Scientific has provided $10 million of the $25 million originally committed. Aspect regains all commercial rights to products developed under the alliance that were previously shared with Boston Sc.

Falvey said that Aspect has had a couple of collaborations with Boston Scientific since 2002 and that the two companies have had a “very close working relationship and really a great partnership over the last five years.” He added that it’s been a model partnership between a big company and small company, each understanding the other’s strengths.

Though Aspect Medical will not be getting the remaining $15 million from Boston Scientific to support product development, the timing of this agreement couldn’t be better. Falvey said that two years ago when the companies entered the collaboration Aspect had just become profitable and there were still a lot of technological risks associated with the neuroscience program. Since then the product, he said, has indicated significant potential, and the company has a lot more financial resources now. “We’re in a much better financial position than when we started this two years ago,” Falvey said.

During a conference call, Nassib Chamoun, president/CEO of Aspect, said. “The alliance with [Boston Scientific] provided us the resources to expand and accelerate the program without a financial burden to our shareholders, generally. Today, the situation has changed. The interim results from the BRITE trial indicate that the technology has continued to develop and... we believe we can continue to fund the program, on our own, if we so chose.”

As part of the 2002 agreement, Boston Sci held an option to distribute products developed by Aspect in the procedural sedation space. With Boston Sci declining this option, all rights to products developed in conjunction with this agreement will revert to Aspect. As a result of this, Aspect will recognize about $3.8 million of previously deferred alliance revenue this quarter.

Aspect and Boston Scientific agreed that all obligations and rights granted by either company in connection with the 2005 neuroscience strategic alliance and the 2002 OEM product development agreement will end. In connection with the 2002 agreement, Boston Scientific established a revolving credit facility available to Aspect, which was also terminated. Aspect said it has never drawn down on this line of credit.

Aspect develops brain-monitoring technology. To date, the company’s Bispectral Index (BIS) technology has been used to assess about 20 million patients and has been the subject of more than 2,800 published articles and abstracts.

First suit filed vs. AMO for MoisturePlus recall

The first of several liability and class action lawsuits was filed against Advanced Medical Optics (AMO; Santa Ana, California) last month, with the range of court actions likely to be a financial liability and a large operational distraction for the companyh over the next several month. The suit alleges harm by use of MoisturePlus contact lens solution made by AMO, with the recall and subsequent legal action mirroring the difficulties of Bausch & Lomb (B&L; Rochester, New York) and its MoisturePlus lens solution earlier in the year.

In both cases, there has been no definitive evidence that either of the solutions is the cause of eye infections, with both companies and regulatory authorities emphasizing that the solutions need to be used with special attention to following the directions for proper use — and thereby suggesting that the problems are, in a sense, patient non-compliance in nature. But another interpretation could be that the solution technology and processing is essentially not very user-friendly and needs major tweaking — or scrapping altogether if it cannot be sufficiently tweaked.

The MoisturePlus product was voluntarily recalled late last month as a precaution because of reports linking it to cases of acanthamoeba keratitis (AK), a serious eye infection, caused by a parasite. The link between the solution and the infection was identified as a result of an investigation by the Centers for Disease Control and Prevention (Atlanta). The eye infection, caused by a waterborne organism, can lead to permanent vision loss or blindness, the CDC said.

The lawsuit names AMO and others as defendants, filed in behalf of California consumers who bought the product but have not alleged physical injuries. The lawsuit seeks reimbursement of money consumers spent to buy the contact lens solution, reimbursement for the cost of replacing potentially contaminated contact lenses and lens cases as a result of the FDA’s recommendation that these products also be discarded by anyone who has used them in conjunction with Complete MoisturePlus.

The lawsuit alleges that AMO falsely marketed the solution as an effective disinfectant and cites CDC data showing that consumers who disinfected their lenses with Complete MoisturePlus had a seven-fold increased risk of developing AK as compared with consumers who used other lens disinfectant products.

Shortly after filing of the lawsuit, AMO held a conference call to say it would shift its focus to “rub” formulations of lens cleaners and hydrogen peroxide products. “Rubbing promotes the most thorough level of lens cleaning and disinfection and is therefore in the best interest of all contact lens wearers,” James Mazzo, president/CEO of AMO said, underlining the idea that the process of cleaning is the culprit, not the solution used in the process. “The industry has grappled for years to balance efficacy, comfort and convenience,” Mazzo added.

“Our expectation is that the AK issue will accelerate the pendulum-shift away from convenience and back toward efficacy,” Mazzo said. “We also expect to see a swing toward increased use of hydrogen peroxide solutions... given that hydrogen peroxide solutions are most effective against AK, there may be a significant market opportunity here for our hydrogen peroxide products.”

The CDC has estimated that AK infections occur in around 2 out of every 1 million contact lens users in the U.S. annually. But it said that it performed a multi-state investigation of recent AK cases and determined that the risk of developing the infection was at least seven times greater for those consumers who used Complete MoisturePlus solution vs. those who did not.

“The bottom line at this point is that we still don’t know what caused the higher incidences of AK cases among the people that reported to the CDC that they used Moisture Plus at some point in the 30 days prior to their infection,” Mazzo said. “The challenge here has been that there are a variety of potential factors relating to both the general increase in the number of AK cases as well as the apparently higher incidence of cases related to the use of Moisture Plus.”

Cummins alleges defamation by SunTrust and two analysts

Robert “Skip” Cummins was known for making plenty of noise while he was CEO of Cyberonics (Houston), frequently voicing his disagreements with regulators and analysts and frequently venting against — and usually by means of — the media. Cummins was ousted from the company late last year in an investigation of stock option grants by the company, but that hasn’t appeared to dampen his aggressiveness or willingness to engage in a fight.

Cummins last month filed a defamation lawsuit against SunTrust Banks (Atlanta) and two analysts for comments related to a stock option grant he received a day before the device maker’s shares soared 78%. Cummins claims the analysts defamed him by suggesting a June 15, 2004, grant of 150,000 stock options may have been illegal. The grant was awarded the same day an FDA advisory panel recommended approval of Cyberonics’ implantable VNS Therapy device for the application of treatment-resistant depression, adding to its approval for treatment of epilepsy. Cyberonics shares jumped $15.23 to $34.81 the following day — Cummins reaping an overnight profit of about $2.3 million.

Hazan alleged that Cyberonics timed its stock option grants to coincide with positive news that would likely boost the share price. The Securities and Exchange Commission began looking into the matter in June. Judson Graves, a partner at Alston & Bird in Atlanta, representing SunTrust and the analysts, said that the two analysts, Amit Hazan and Jonathan Block, have been SunTrust’s “most talented and trusted... We’re confident their work will hold up under this or any other scrutiny....We met with Mr. Cummins and his lawyers and nothing they said changed our minds.”

Block still works for SunTrust Robinson Humphrey (New York), a unit of SunTrust Capital Markets, while Hazan now works at CIBC World Markets, according to the complaint, which alleges that improper statements appeared in two June 2006 research reports and comments appearing in The New York Times and Houston Chronicle newspapers and on Bloomberg News.

Cyberonics’ compensation committee had unanimously recommended the grant in question May 28, and the board had postponed consideration of it on June 1, the complaint says.

“The June 15, 2004, options were not ‘backdated,” the complaint states. “Defendants’ allegations falsely portrayed what really happened... falsely described the nature of the options granted and as a result were severely damaging to Mr. Cummins professionally and personally.”

Cummins and CFO Pamela Westbrook resigned last November, when Cyberonics said it would restate six years of results after discovering errors in its accounting for option grants between 1999 and 2003.

A board shake-up earlier this year saw the election of dissident shareholders backed by billionaire investor Carl Icahn, who held a 9.8% stake in the company.

Organogenesis to build HQ and factory in Massachusetts

Organogenesis (Canton, Massachusetts), a biotechnology company that makes living artificial skin, reported that it will build a new headquarters and factory in Massachusetts and add 300 jobs over the next five years after the state offered it an incentive package worth up to $18 million, the company said.

Four years after emerging from bankruptcy, the privately held Organogenesis reports having annual sales of about $50 million and is looking to expand from the wound-healing product into new arenas such as cosmetic skin care.

Organogenesis had been planning to expand in Rhode Island, said its CEO, Geoff MacKay, and had also considered Connecticut. But after months of meetings, Massachusetts business-development officials put together a deal to keep the company in the state. The state will provide $12.9 million in grants and infrastructure support to Organogenesis, plus as much as $5 million in low-interest loans. The exact mix of grants and other incentives has yet to be worked out.

AB&C and KFDunn form new life sciences division

Aloysius Butler & Clark (AB&C; Wilmington, Delaware), a national healthcare marketing company, and KFDunn (New Castle, Delaware), a diagnostics, devices and biotech marketing communications firm, have merged to form KFDunn Life Sciences. The busines will be a division of AB&C, with Kathleen Dunn serving as president. According to the companies, the merger creates one of the few life sciences marketing communications agency in the country and makes AB&C among the first agencies to integrate life science, patient care and social marketing.

The agency said its social marketing expertise was expanded in late 2006 with the addition of Shari Short, who most recently served as a partnership program coordinator for the National Cancer Institute. Short’s experience with research and program development and evaluation has equipped the agency to provide evidence-based healthcare marketing to reach patient populations and influence attitudes and behaviors

KFDunn provides communication services for clinical diagnostics, radiology, molecular diagnostics, biotech, bioinformatics, genomics, proteomics, drug discovery and biomedical products; AB&C is a 36-year-old communications agency established in B2B and consumer marketing.

• Endovasc (Montgomery, Texas) reported the creation of BioFlow as a new subsidiary, to manage the continued development of biodegradable stents. Endovasc and Nathan Blumberg, MD, have jointly transferred the intellectual property from both of the previous joint ventures involving TissueGen (Arlington, Texas) into BioFlow.

Diane Dottavio, PhD, president/CEO of Endovasc, told Biomedical Business & Technology that the first project of BioFlow would be to develop a biodegradable urinary stent for ureteral application. Dottavio said that urinary stents are currently made of rubber or silicone and are not biodegradable. After a procedure such as ureteroscopies (procedures to visualize the ureter and extract stones) and lithotripsies (external ultrasonic destruction of stones), a stent is often placed in the urinary tract to prevent the small stone fragments from coalescing and obstructing the ureter after the procedure.

“Once the fragments are gone they have to remove the stent, which is a second whole procedure, it’s painful, and it produces a cost to the patient that we think we can eliminate,” Dottavio said.

BioFlow will manage product definition and the development process through a sponsored laboratory research agreement. The objective is to develop biodegradable ureteral and urethral stents that can be degraded in the body within seven to 14 days after a procedure, Dottavio said, compared to other biodegradable stents on the market which degrade in more like six weeks, she added. All IP developed under this research agreement is assigned to BioFlow.

Endovasc is focused on developing and commercializing drug candidates in the areas of cardiovascular and metabolic medicine.

• Artes Medical (San Diego) has formed a new subsidiary, Spheris Medical, to develop new medical applications of its microsphere tissue bulking technology. Artes’s technology is currently incorporated in ArteFill, an FDA-approved non-resorbable injectable dermal filler for the correction of wrinkles known as smile lines or nasolabial folds, according to the company. The company will license the non-aesthetic applications of its medical technology to Spheris, which will focus on the development of new product applications, enter into licensing arrangements and partnerships.

In pre-clinical studies, materials produced with the Artes technology have been used to provide bulking of the esophageal sphincter and the urinary sphincter to assess the possible use of the technology for the treatment of GERD gastroesophageal reflux disease (GERD) and stress urinary incontinence (SUI), the company said. Other non-company pre-clinical studies have also been conducted to evaluate the technology for spinal disk bulking and repair. Additional potential uses include bulking of the soft palate and respiratory tissue to treat snoring for patients with sleep apnea, adding cushioning to the bottom of the foot to treat painful foot syndrome, and treatment of fecal incontinence, Artes noted.

ArteFill was approved by the FDA in October 2006 based on data from the company’s 12-month controlled, randomized, double-masked, multi-center U.S. clinical trial, which compared outcomes for patients treated with ArteFill with those of patients treated with the leading bovine collagen-based filler.

At the six-month evaluation, which was the primary efficacy evaluation period for the clinical trial, the wrinkle correction in patients treated with ArteFill persisted and showed statistically significant improvement compared to the wrinkle correction in the patients treated with the collagen control, who returned to their pretreatment status, the company said. The ArteFill patients were also evaluated one year after treatment, demonstrating continued safety and wrinkle correction.

An ArteFill Skin Test is required before initial treatment. The most common adverse events associated with ArteFill treatment, similar to those observed with other dermal fillers, are lumpiness, persistent swelling or redness and increased sensitivity at the injection site, the company noted.

ArteFill is comprised of polymethylmethacrylate (PMMA), microspheres and bovine collagen, and is the only PMMA-based injectable product that has been approved by the FDA for the treatment of facial wrinkles. Artes Medical said ArteFill is only available in the U.S.

• Southern Home Medical Equipment (Spartanburg, South Carolina) reported that it has launched a national franchising campaign of its subsidiary, Encore Medical Staffing. Greg Tucker, president/CEO said, “We are excited about the future of our company. The nurse staffing division of our company will prove to be a significant part of our business for years to come. We’re just now scratching the surface and we’ve already had 12 serious inquiries concerning the Encore business.”

Encore Medical Staffing will supplyhealthcare professionals on a per diem and temporary contract basis to hospitals, rehab centers, nursing homes and other medical facilities. The majority of the staffing professionals consists of registered nurses, licensed practical nurses and certified nursing assistants.

Southern Home Medical is a holding company with a focus on medical equipment operations in the Southeastern U.S.