Cytyc (Marlborough, Massachusetts), until recently, a company known primarily for cervical cancer diagnostics, has added therapeutic oncology to its offerings with the purchase of Proxima Therapeutics (Alpharetta, Georgia), a developer of delivery systems for cancer treatment. The deal indicates that the company is continuing to position itself as a major power in women's health offerings.

Cytyc will pay $160 million to acquire Proxima. And a two-year earnout, based on incremental sales growth in breast-related products, will be paid out of existing cash, the company said.

In a Feb. 10 conference call, Patrick Sullivan, chairman, president and CEO of Cytyc, characterized Proxima as "an exciting company that continues our expansion into a diversified women's health company."

Sullivan compared Cytyc's purchase of Proxima to its addition of the NovaSure Impedance Controlled Endometrial Ablation System, via the acquisition of Novacept (Palo Alto, California) last year (Diagnostics & Imaging Week, April 1, 2004). That acquisition, valued at $325 million, then led to the development of Cytyc Surgical Products as a wholly owned Cytyc subsidiary.

Sullivan said that Proxima's technologies serve key un-met medical needs and that its products "continue our relationships with breast surgeons and breast centers."

That relationship was established largely with development of the FirstCyte Breast Test for breast cancer risk assessment, with Cytyc's purchase of ProDuct Health (Menlo Park, California) in 2001 (D&IW, Nov. 1, 2001).

Proxima's lead product, the MammoSite Radiation Therapy System (RTS), is a single-use brachytherapy technology for treating breast cancer. The system positions radiation sources directly into the post-lumpectomy site to optimize radiation treatment delivery while minimizing damage to healthy tissue. MammoSite RTS is designed to reduce treatment time to five days compared to 30 to 35 days for traditional whole-breast external beam radiation therapy, according to Proxima.

Proxima also markets its GliaSite RTS system, a site-specific radiation treatment for brain tumors that received FDA clearance in April 2001. GliaSite is comprised of a balloon catheter that is inserted into the cavity created by the surgical removal of a malignant brain tumor, then filled with Iotrex, a proprietary liquid radiation source. Over three to seven days, GliaSite delivers radiation directly to the tissue surrounding the cavity, where tumors are most likely to recur, while reducing radiation exposure to healthy brain tissue.

Sullivan said that the addition of Proxima's products "enables us to expand our product offerings into cancer treatment while leveraging our existing infrastructure and expertise in women's health and oncology. In addition, we will be further strengthening our formidable sales force with the addition of Proxima's oncology-focused sales team."

Proxima launched the MammoSite RTS following FDA clearance in May 2002. The company reports, to date, more than 7,000 breast cancer patients treated with the system. While there are no specific FDA patient restrictions on the use of MammoSite, current medical society guidelines recommend use with patients at least 45 years old with tumors less than 3 cm with negative lymph nodes.

The Centers for Medicare & Medicaid Services (CMS; Baltimore) last year approved new reimbursement codes for the Mammosite treatment.

At last October's meeting of American Society for Therapeutic Radiology and Oncology (ASTRO; Fairfax, Virginia), about 20 papers concerning the therapy were delivered, compared to seven the year before. And a large 1,700 patient registry is now tracing results of system use.

At the ASTRO meeting, a technical consultant for Proxima said that Mammosite treatment could reach "standard of care" status in the field in another 10 years.

MammoSite revenue in 2004 was about $12.6 million, representing 50% growth over the previous year. Cytyc said it believes the overall annual market opportunity is in the $300 million range.

Cytyc expects sales related to the Proxima acquisition in the last three quarters of 2005 to be from $15 million to $17 million, and for the transaction to be 1 cent to 2 cents dilutive to earnings in 2005, break-even to earnings in 4Q05 and accretive in 2006.

Cytyc terms its ThinPrep System "the most widely used method" for cervical cancer screening in the U.S.S. The ThinPrep System consists of the ThinPrep 2000 Processor, ThinPrep 3000 Processor, ThinPrep Imaging System, and related reagents, filters, and other supplies. ThinPrep also provides the platform for launch into breast cancer risk assessment with the FirstCyte Breast Test.

The purchase of Proxima is expected to close by the end of the current quarter, subject to customary closing conditions and clearance under the Hart-Scott Rodino rules.

Besides discussing the benefits of the Proxima purchase, Cytyc executives outlined the company's strong quarterly and year-end financials and its healthy prospects for 2005.

They reported 4Q04 revenue of $110.6 million, an increase of 41% compared to the year-ago quarter, and total 2004 revenue of $393.6 million, compared to $303.1 million for 2003. Net income for the year was $73.6 million, compared to $76.2 million in 2003.

Excluding a one-time charge of $19.1 million related to the acquisition of Novacept, the company's income for FY04 was $92.7 million.

Sullivan said that the company's new Surgical Products division "outperformed our initial expectations, exiting the year with an annual revenue run rate of approximately $100 million." Revenue from the date of acquisition to the end of December was $63.6 million.

He also reported strong growth for the ThinPrep Pap Test system and ThinPrep Imaging System. "We shipped a total of 158 imaging systems to U.S. customers since the launch of the Imager program, and 144 of these units were revenue-generating at Dec. 31, 2004. Additionally, we continued to see international market penetration primarily driven by the ThinPrep Pap Test."

OSI Systems (Hawthorne, California) reported completing the acquisition of Blease Medical Holdings (Chesham, UK), a manufacturer of anesthesia systems, vaporizers and ventilators. Financial terms were not disclosed.

Blease will join the OSI Healthcare Group, comprised of Spacelabs Medical (Issaquah, Washington), Dolphin Medical (Hawthorne, California) and Osteometer MediTech (also Hawthorne).

OSI said Blease will work closely with patient monitoring systems manufacturer Spacelabs to develop products and applications focused on the perioperative market.

Deepak Chopra, chairman and CEO of OSI Systems, said, "This acquisition provides Blease and Spacelabs with the opportunity to further enhance their growing presence in the perioperative market and enables us to be more competitive in the Asian and European marketplace[s], where the bundling of anesthesia and patient monitoring systems is commonplace."

He noted that while each company will continue to do business under its own name and there are no immediate plans to integrate the brands "leveraging in manufacturing service and sales wherever possible would be explored."

Nicholas Ong, formerly Spacelabs vice president of global marketing, has been named president of Blease.

OSI is a global developer of security and inspection systems, medical monitoring products and optoelectronic-based components, as well as a provider of engineering and manufacturing services.

In other dealmaking news:

Inverness Medical Innovations (IMI; Waltham, Massachusetts), a manufacturer of medical devices and consumer and professional diagnostics products, reported signing an agreement to acquire privately held Binax (Portland, Maine), a developer of rapid diagnostic products, primarily related to the respiratory system.

IMI will acquire all of the stock of Binax in exchange for 1,433,333 shares of its common stock and additional consideration of $8.6 million in cash at closing.

Inverness has agreed to register the shares issuable in the transaction prior to the closing. The agreement also provides for additional consideration to the Binax shareholders of up to $11 million in cash, contingent upon Binax meeting product development objectives over five years.

"We expect to benefit from Binax's established reputation in respiratory diagnostics, and we are excited about the potential new product development opportunities," said Ron Zwanziger, Inverness CEO.

The transaction, expected to close in 1Q05 or early 2Q05, is subject to Inverness obtaining the consent of its lenders and other customary conditions.

Synova Healthcare Group (Media, Pennsylvania) reported closing on all the shares of Synova Healthcare Inc. (also Media). As a closing condition, the company name of Advanced Global Industries has changed to Synova Healthcare Group, Inc., with the new trading symbol SNVH. Synova Healthcare, Inc. is now a wholly owned subsidiary of Synova Healthcare Group, Inc.

Synova distributes rapid, non-invasive diagnostic tests.