Creating a major consolidation in the laboratory equipment and services sector, Thermo Electron (Waltham, Massachusetts) and Fisher Scientific International (Hampton, New Hampshire) last month rolled out their merger plans to create a Goliath in that space via a tax-free, stock-for-stock exchange. To be named Thermo Fisher Scientific, the combined company will be headquartered in Waltham and will continue to have an office in Hampton. Thermo will be the acquiring firm, though it had half the sales of its larger competitor, about $2.6 billion vs. Fisher’s $5.6 billion.

In a conference call to discuss the deal, Paul Meister, vice chairman of the board for Fisher, billed the merger as “transformational.” The enlarged firm, he said, will have a greater ability to provide “integrated, end-to-end technical solutions” to the life science and drug discovery markets and “to better meet market needs more completely, more quickly and more cost-effectively.” In terms of drug discovery, he noted its ability to help accelerate the development of new drugs at less cost.

He said that Thermo Fisher will roll out a range of new products and have increased ability to grow via acquisitions. Given the various synergies predicted, the combination is projected to produce more than $9 billion in sales in 2007.

Fisher’s strengths are in biochemicals, nutrients for growing cells, glassware and sterile liquid-handling systems. Thermo claims a leading position in providing analytical instruments, with a concentration on advanced measuring instruments such as spectrometers used for chemical and protein analysis. While there is product overlap, the companies emphasized the complementary nature of their offerings so that Thermo Fisher will be able to offer an increased number of integrated and “end-to-end” solutions to the laboratory and research sectors. It will be able to field a global sales and service organization of nearly 7,500 professionals.

Upon completion of the transaction, Thermo’s shareholders will own about 39% of the combined company, and Fisher shareholders would own about 61%. Marijn Dekkers, president and CEO of Thermo, will become president and CEO of the combined company; Meister will become chairman of the board. Following transaction close, Paul Montrone, CEO and chairman of Fisher, will be an advisor to the company to concentrate on launching new business opportunities. Jim Manzi, chairman of the board of Thermo, will serve on the board of the combined company.

Montrone said, “For more than 100 years, Fisher has played an important role in aiding scientific discovery. Our focus on supplying innovative product and service solutions has enabled our 350,000 customers to concentrate on what they do best –improving health and extending life. Thermo has an equally solid record, and the combined company will be well-positioned to deliver accelerated earnings growth for shareholders.”

The transaction is expected to generate $200 million of cost and revenue-related synergies in three years, with 2007 synergies expected to be at least $75 million. Operating cash flow is expected to be in excess of $1 billion in 2007. In addition, the Thermo Electron board has increased the current authorization of its buyback program to $300 million.

Kodak eyes spin of Health Group

In a continuation of recent restructuring activities – but perhaps in a rather surprising direction – Eastman Kodak (Rochester, New York) indicated its intention to sell off its Health Group, couching the plan in the boilerplate verbiage of exploring “strategic alternatives.”

The company said it has retained Goldman, Sachs & Co. as its adviser in the exploration of the alternatives, the announcement coming on the heels of another quarterly loss report, its 6th consecutively. Kodak reported a 1Q loss of $298 million, compared to a loss of $146 million in the year-ago period, the increase driven largely by efforts to move from its traditional film-based product line to largely digital offerings.

The potential spin-off of the Health Group appears somewhat counterintuitive since Kodak is pursuing a shift from film to digital technologies in its core business, and the Health Group, with 2005 revenue of $2.7 billion, is also pursuing the increased emphasis on digital technologies. The group’s health imaging products include digital X-ray capture, medical printers and X-ray film.

Antonio Perez – who assumed the CEO and chairmanship posts at the company last June and has been orchestrating the recent restructuring moves – in a conference call called the Health Group “a very valuable business” with leading products and leading sector shares for those products and “a tremendous heritage in the health imaging market.” But, he said that the “dynamics” in the sector “are redefining the business model and the scale required for sustained success and leadership.”

The move to explore alternatives, he said, had not been decided recently, he assured investors. “We have been preparing for this possibility for some time and will move this process forward as rapidly as possible,” he said. “While the Health Group is enjoying strong organic growth in elements of its digital portfolio, such as digital capture solutions and healthcare information solutions, we have been observing for some time consolidation in this industry. Given our valuable assets and the changing market landscape, we feel that now is the time to investigate strategic alternatives.”

Perez told listeners that the restructuring costs would be the highest in 2006, with the restructuring completed in 2007.

Cook forms new unit in women’s health

Cook (Bloomington, Indiana) officially launched its Women’s Health business unit last month at the American College of Obstetrics and Gynecology (ACOG; Washington) annual clinical meeting in Washington. To be named Cook’s Women’s Health, the woman-focused initiative will address “some of the most prevalent issues” in women’s health including infertility, chronic pelvic pain, pelvic organ prolapse and incontinence, the company said.

Christina Ann , strategic business unit leader of Cook’s Women’s Health, told Biomedical Business & Technology, “We have lined out a roadmap throughout the different life stages of a female patient, basically starting [with] teens, then the group of 20 to 40, 40 to 60 and 60-plus,” In completing “extensive research and surveys,” Cook said that it found that women are “confronted” with the potential for a host of diseases throughout their lifetimes. “That is one aspect that gave us the drive to start a women’s health business unit,” Ann said. Up until now, one big area of focus for Cook has been in vitro fertilization, but she said that the company wanted to go beyond that, to “look at a female in the whole.”

Another driver for Cook is the recognition that even besides the obvious differences between men and women, men and women’s bodies are different in a wide range of less obvious ways and therefore require different devices and treatments, sometimes for the same diseases. Ann said that “because of the knowledge gap in medicine, women have not always gotten the proper treatment, because women have always been excluded in randomized studies because of their fertile age.”

Therefore, in studies for pharmaceuticals, devices or other healthcare products, the decisions on those items are made on an “average population that is mainly male,” she said.

Cook is seeking to change that approach. “Cook can do that pretty [easily], because we have the technology and innovation in our other business units . . . [including] business units on cardiovascular diseases, endoscopy or surgery, so we have internal knowledge within our company, and it’s been pretty easy for us to do cross-fertilization . . . to bring those technologies and actually adapt [them] to the female patient,” said Ann .

One example of a product being developed by the unit that addresses both genders but has to be tailored for the female body is a device for abdominal aortic aneurysm. “Obviously, those sizes [of AAAs] are very different for women than the sizes for men,” she said.

To form the Women’s Health unit, Ann said that Cook relied not only on existing technology but also drew on personnel already employed by the company. The number of people the Women’s Health unit has now nearly doubled, she said. Currently, the unit has about 100 people dedicated to it globally, and it will be a “continuous process” of adding more people at all levels around the world.

B&L’s problems keep adding up

Bausch & Lomb (B&L; Rochester, New York), while battling charges that its lens cleaning solution products may be related to the occurrence of severe eye infections among contact lens users, is facing increased accounting problems internationally. Reports continue to indicate that the investigation into the accounts of the company’s foreign units has been widened from Korea to India, Japan, Thailand and Brazil. These investigations are likely to make more difficult the reports of its 2005 financials, already delayed. The irregularities will also hit its 2005 results, which have been delayed.

In mid-May, the company said a probe of its Brazil subsidiary is complete and the probe of its Korea subsidiary is nearly complete. But other investigations appear to be ongoing The company, said in a filing that results of the probe into its operations in Brazil would reduce the company’s previously reported net income for the first and second quarters of 2005 by $600,000 and will reduce the previously reported net income for 2000-2004 by $19 million.

The probe of its Korean business will result in revenue recognition adjustments for vision care sales in Korea from 2002 to 2005. The company currently estimates the unaudited impact of an accounting change would be to reduce previously reported net sales for 1Q05 and 2Q05 by about $1.2 million and reduce the previously reported net sales for the period 2002-2004 by a total of about $7.2 million.

Meanwhile, the Centers for Disease Control and Prevention (Atlanta) continued to issue regular reports of additional cases in the U.S. of Fusarium keratitis eye infections, with a high percentage of the cases being reported by users of B&L contact lens solution products.

The agency in early May said it had confirmed 106 cases of the infection, which can lead to blindness if not properly treated. And of 98 confirmed cases for which the CDC said it has “complete data,” 66% were related to use of B&L’s ReNu with MoistureLoc contact lens solution, while another 21% said they used a ReNu MultiPlus solution. About 7% of the cases used products made by Alcon (Fort Worth, Texas).

In its most recent statement on the eye infections, the CDC said that it is still too early in the investigation to link the infections with a particular product or solution.

But the agency also said that the publicity concerning the infections and the potential link to lens cleaning solutions may have also contributed to the rise of reported cases, since the infection is not one that is normally required to be reported by health professionals. “Thus, it is possible that some of the cases currently being investigated represent infection which might normally occur and, as a result, are not related to the outbreak,” the CDC said.

While B&L has withdrawn from the market its ReNu with MoistureLoc product, its ReNu MultiPlus lens cleaning solution remains on store shelves.

Uncleared products result in convictions of two

In another case of serious damage to eyes, the FDA last month reported that two executives of an Illinois company were convicted of selling uncleared surgical sterilizing devices that led to the loss of an eye by 18 people Ross Caputo was president and CEO of AbTox (Mundelein, Illinois) and Robert Riley was the vice-president of regulatory affairs of the company, when it received permission to market a small gas plasma sterilizer only for use in sterilizing flat stainless-steel surgical instruments without lumens (tubes) or hinges. The defendants instead marketed a larger, unauthorized version of the sterilizer and promoted its use for a wide array of non stainless-steel instruments.

The defendants face significant penalties including incarceration, fines and restitution, according to the FDA. Two other defendants, Mark Schmitt, formerly director of marketing of AbTox, and Marilyn Lynch, formerly director of clinical services of Abtox, previously pled guilty in this case.

The agency said that AbTox showed the hospitals that purchased the larger unauthorized units the clearance letter for the smaller, authorized unit. “These larger units were used in an unauthorized manner,” the FDA said, “because AbTox marketed them that way, to sterilize complex instruments, including cataract instruments that have small tubes which are used to put solution into the patient’s eye.”

One unauthorized use was to sterilize ophthalmic instruments that had brass joints which reacted to the sterilizing agent creating a toxic residue. The agency said that AbTox knew of the reaction but did not advise users or pursue corrective action. The blindness was caused by a harmful copper acetate residue that remained in the tube of the instrument after sterilization by this machine.

Hospitals purchased 168 of the unauthorized units, including Department of Veterans Affairs hospitals and other government agencies, totaling more than $18 million in sales. Hospitals in Chicago, Columbia, Missouri, and St. Louis reported to AbTox that their sterilizer was suspected of causing injuries to several patients.

The company failed to notify the FDA about these reports as required.

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