Medical Device Daily Associate Managing Editor

Automated blood processing systems company Haemonetics (Braintree, Massachusetts) and Arryx (Chicago), a privately held nano-technology company, have signed a definitive agreement in which Haemonetics will acquire the outstanding shares of Arryx that it does not already own for $26 million in cash.

Haemonetics and Arryx have been collaborating since 2004 in developing and commercializing blood separation and processing technologies and Haemonetics acquired a 19% minority stake in the company at that time via a $5 million equity investment (Medical Device Daily, Nov. 2, 2004). In 2005, the company paid an additional $3 million to expand its field-of-use license beyond blood to all areas of healthcare.

“We feel the outright purchase of [Arryx] and its technologies will significantly expand opportunities for Haemonetics and its future growth,” said Brad Nutter, Haemonetics' president and CEO during a conference call on the acquisition. “Given the outstanding progress and now proven technology of the Arryx/Haemonetics collaboration, we see it makes sense for us to combine both companies and channel our efforts.”

Arryx's technology uses light to form optical traps to move and manipulate small objects. Using laser beams and holograms, the systems can independently and in parallel hold, move, separate and otherwise manipulate hundreds of microscopic and nanoscopic objects.

Arryx's first product, the BioRyx 200 system, works with a microscope to independently hold, move, rotate, join, separate, stretch or manipulate hundreds of microscopic objects using laser beams. The system can independently control and apply these beams as traps simultaneously to hundreds of objects, or it can apply hundreds of beams as a trap for a single object.

Nutter said the Arryx buy was different than the company's past “bolt-on” acquisitions. “It is strategic in a more profound way, which speaks directly to our plan to transition the company into new markets and expand our overall core competencies. Nano-separation technology adds to our blood separation competency and provides us with a new technology platform,” he said.

Over the past 18 months, Nutter said the collaboration team between the two companies has been able to trap or separate red blood cells, platelet and white blood cells. He added that recently they have also been able to optically trap “other components within blood.”

While he said he believes the Arryx deal can help the company leverage its existing core business, “we are convinced that this technology will allow us to move into potentially significant new markets in the future, markets that are only accessible through a complete new technology platform enabled by nanotechnology.”

Without disclosing greater detail, Nutter said the acquisition will give Haemonetics the capability to move from performing blood separation via “conventional” means “into a broad spectrum of molecular separation using cutting edge nanotechnology.”

While being “intentionally vague” about what these potential new markets would be, he said they are markets that can be entered directly by Haemonetics or via co-marketing and licensing agreements.

Willam Still, vice president of business development and corporate marketing for Haemonetics, elaborated on the potential new applications for the Arryx technology, noting that the collaboration team has found that the system has the capability to trap and manipulate bacteria.

“So in addition to our current markets, we believe there may be therapeutic and diagnostic applications for this technology,” Still said.

The transaction is expected to close in 3Q06 and is subject to satisfaction of customary closing conditions. Arryx's personnel and operations will remain in Chicago.

Haemonetics said it expects an additional 8 cents to 10 cents of earnings per share dilution associated with operating expenses and amortization in fiscal 2007. The company's new pro-forma earnings per share guidance is $2.05 to $2.17. The company said it will post a fiscal 2007 guidance scenario on its web site. Additionally, as a result of the transaction, Haemonetics expects to record a one-time charge, principally for in-process research and development, which is subject to final independent valuation.

At the close of fiscal year 2006, the company had $251 million in cash free for mergers and acquisitions, so it did not need to borrow money to finance the transaction.

In other dealmaking news:

• BioMed Realty Trust (San Diego) reported signing a purchase and sale agreement with Sun Microsystems (Santa Clara, California) to acquire the Sun campus in Newark, California, for about $215 million. BioMed said it intends to re-market and re-develop the space for use by life science tenants.

The campus includes 10 buildings with about 1.4 million square feet of primarily office space, as well as undeveloped land.

“This transaction represents a unique opportunity for BioMed to add to the company's life science portfolio in San Francisco – the largest life science market in the country,” said Alan Gold, president and CEO of BioMed.

The acquisition is expected to close in 3Q06.

BioMed also reported that its underwriters have exercised their over-allotment option in full to purchase an additional 1,361,250 shares of common stock at $28.65 a share in connection its previously announced follow-on offering that priced on May 10, 2006. In total, the company sold 10,436,250 shares of common stock, raising gross proceeds of about $299 million.

BioMed is a real estate investment trust focused on providing real estate to the life science industry.

• American Medical Systems Holdings (AMS; Minnetonka, Minnesota), commented further on the financing of its pending acquisition of Laserscope (San Jose, California), maker of a surgical treatment of obstructive benign prostatic hyperplasia, or BPH(Medical Device Daily, June 6, 2005).

The total acquisition price for Laserscope shares and options is about $715 million, or $690 million net of Laserscope cash. The financing of this transaction is committed in the form of up to $565 million of senior secured financing from CIT Healthcare and up to $180 million of senior subordinated unsecured financing from other lenders.

AMS said it is currently evaluating lower-cost options that may include convertible senior subordinated notes with a net share settlement feature.

The company said 2007 revenues from Laserscope urology products are estimated to be $135 million-$150 million, growing to $180 million-$200 million in 2008, estimates reflecting “anticipated successful launch” of Laserscope's GreenLight HPS system, continuing penetration of laser technology into the surgical treatment of obstructive BPH, and the leverage of the AMS global sales channel. AMS said it expects that the range of year-over-year revenue growth of the combined company in 2007 and 2008 will be 20%-24%. The company estimated the Laserscope acquisition will be accretive to reported earnings per share in 2008 and beyond.