A Medical Device Daily

Smith & Nephew (London), the global medical technology business, announces that its Advanced Wound Management business has agreed to purchase privately held BlueSky Medical Group (Carlsbad, California) from its founders for an initial payment of $15 million.

The company has also agreed to pay further milestone payments of up to $95 million to Blue Sky related to revenues and other events.

Blue Sky has developed products for treating chronic wounds using negative pressure wound therapy (NPWT) and manufactures a range of negative pressure pumps and wound dressing kits to serve its global customer base.

According to S&N, the market for NPWT is the fastest growing segment of the woundcare market. It has expanded rapidly in recent years and is now estimated to be a global market worth $1.2 billion in 2006. The market is growing at an annual rate in excess of 12% in the U.S. and greater than 25% in non-US markets. NPWT is a technology used to treat chronic wounds such as diabetic ulcers, pressure sores, and post-operative and hard-to-heal wounds. It aids the more rapid healing of wounds by the application of sub-atmospheric pressure to an open wound.

The two founders of BlueSky, Richard Weston and Tim Johnson will assist in integrating the business into S&N's Advanced Wound Management business.

"We are very pleased to acquire this business which gives us immediate entry into the negative pressure wound therapy market, the fastest growing segment of the advanced wound care market," said David Illingworth, COO of S&N. "This significantly improves the long term growth prospects of the Advanced Wound Management business of Smith & Nephew."

BlueSky had revenues of about $11 million from its distributors in 2006 (equivalent to $55 million in market sales) and net assets of under $1 million. The acquisition of BlueSky is expected to dilute S&N's 2007 earnings by around 1%, to be broadly neutral in 2008 and to be accretive from 2009 onwards. The impact in 2007 will be to reduce the trading margin of the Advanced Wound Management business by about 1% (about 2% in the second half).

BlueSky has been engaged in litigation with Kinetic Concepts (KCI; San Antonio, another NPWT business, and was recently successful in its defense of a patent infringement suit (Medical Device Daily, Aug. 31, 2006). Although this decision is the subject of an appeal, Smith & Nephew said it believes that BlueSky's products do not infringe KCI patents.

While Biosite (San Diego) stopped short of calling Inverness Medical Innovations' (IMI; Waltham, Massachusetts) richer $92.50-a-share offer a superior proposal to that of rival suitor Beckman Coulter (BC; Fullerton, California), it did say that the offer, which values the shares at $2.50 more apiece than BC's bid, "is reasonably likely to lead to a superior deal."

Apparently that was good enough — for now — for IMI, which had stipulated last Thursday when it made the sweetened offer that it wanted an official statement from Biosite saying ifs offer was superior that same day or it might withdraw the offer (MDD, May 11, 2007).

"We remind the market that while we have the right to withdraw our offer in light of Biosite's failure to announce that our offer constitutes a superior proposal, we are electing not to withdraw it at this time," said Ron Zwanziger, president/CEO and chairman of Inverness. "We reiterate our intention to complete a transaction with Biosite via a cash tender offer at $92.50 per share. We will announce material developments regarding our binding offer as they occur."

IMI made the new offer last week when BC increased its bid by $5 a share for Biosite to $90, matching IMI's earlier offer (MDD, May 3, 2007)Coulter Inc. increased their bid by $5 per share to $90 per share or about $1.64 billion.

If Biosite terminates its merger with BC in favor of the IMI proposal, it will have to pay BC a $50 million breakup fee

IMI, which already owns 4.9% of Biosite's outstanding shares, and BC have been fighting over the company since March (MDD, March 27, 2007).

BC has had a business relationship with Biosite over the past four years in the area of B-type Natriuretic Peptide, a test that aids in the diagnosis, risk stratification and assessment of severity of heart failure and the risk stratification of patients with acute coronary syndromes. It combines BC's laboratory instrument systems, with Biosites's near-patient tests.

Biosite makes tests to diagnose cardiovascular disease, infectious diseases, drug abuse, and diseases involving blood clots and the circulation of blood in the brain.

In other dealmaking news:

• Tyco International (Pembroke, Bermuda) said on Friday the majority of debt holders have not accepted its tender offer and the company is extending its offer for the debt.

Just under 32% of holders of Tyco's bonds under its 1998 indenture, totaling $4.6 billion, have tendered the bonds, Tyco said in a release. Around 33% of the holders of its 6% bonds due 2013, totaling $1 billion, have accepted the tender, Tyco said.

The company said it is extending the tender offer until tomorrow.

A group of bondholders are challenging Tyco's tender offer arguing that the conglomerate if offering a below-contract price for the debt.

• American International Group (New York) last week filed a bondholders' lawsuit against Tyco to stop the tender offer.

"As previously disclosed, Tyco and the company do not believe that the separation of Tyco into three separate public companies is prohibited by the indentures," Tyco said in a press release.

Tyco is planning to spin off its electronics and healthcare divisions into independent companies by the end of June. The remaining Tyco International will consist of the company's fire and security and engineered products divisions.

As part of the spin-off, Tyco said it will buy back most of its outstanding dollar-denominated public debt, worth about $6.6 billion.

Tyco also said the majority of holders of the debt sold under its United States Surgical (Norwalk, Connecticut) and Tyco Electronics units have been tendered.