Whatever else can be said about Boston Scientific (Natick, Massachusetts), you can't say it doesn't listen to investors and analysts. In apparent response to criticisms that it lacks an ongoing flow of new products, the company, over the past two months, has been reloading its pipeline through the acquisition of new companies and their technologies. In a wave of purchasing, the company acquired four companies and their systems in the area of interventional cardiology.
The buying spree was launched in mid-February with perhaps the company's most important purchase, the acquisition of Interventional Technologies (IVT; San Diego, California) and its Cutting Balloon system, in a deal valued at $345 million. IVT focuses on balloon angioplasty systems, with its most promising product being the Cutting Balloon technology for creating arterial dilation via tiny scalpels. The device received FDA commercial clearance last year and has thus far been used in an estimated 125,000 procedures worldwide, according to IVT.
That deal was followed about a week later with the announced plan to acquire Embolic Protection (EBI; Campbell, California) for $75 million, plus future milestones. The purchase gives Boston Scientific a path for entering the growing embolic protection side of interventional cardiology via EPI's Filterwire device. The device is a guidewire-mounted system for capturing dislodged embolic material that might travel through the bloodstream to the heart or brain and cause heart attack or stroke. And the purchase would appear to complement intellectual property acquired from Embol-X last year.
On the heels of these two purchases, Boston Scientific then made smaller acquisitions in the sector of drug and stent combinations for interventional use. At the very end of February, it purchased Quanam Medical (Santa Clara, California), a private company that develops medical devices using polymer technology, with a focus on drug/stent and drug delivery systems for cardiovascular applications. Quanum claims leadership in the arena of drug delivery via stents, and the acquisition will boost the company's drug-delivery portfolio with an additional implant-based system and a family of proprietary biomaterials. The first compound being evaluated by Quanum is a paclitaxel derivative, initiating pilot studies in 1998 and currently conducting pivotal trials in Europe.
The next acquisition, in early March, was Catheter Innovations (Salt Lake City, Utah), a private maker of catheter-based venous access products used to deliver chemotherapy drugs, antibiotics and nutritional support to critically ill patients, and owned by investment company CB (Berkman Capital) Funds (Portland, Oregon). Catheter Innovations' product line incorporates its Pressure-Activated Safety Valve (PASV) protection technology, which includes a three-position valve that acts as an automated clamp to open inward for the long-term infusion of intravenous fluids and outward for blood withdrawal. Boston Scientific said the addition of Catheter Innovations' technology complements the strength in the non-valved sector of the venous access market offered through its own Medi-tech division and will expand its technology portfolio in the venous access market, which it valued at $500 million annually. Company president and CEO Jim Tobin said the deal "is further evidence of our commitment to leadership in the broad field of interventional medicine," an assessment that could be applied to all four acquisitions. Terms of the last two deals have not yet been disclosed.
In the midst of this buying binge, however, Boston Scientific has not yet been able to reel in the largest prize of all, Medinol, its Israeli partner supplying the bulk of its stents and stent materials. Despite continuing assurances by Tobin that negotiations remain ongoing and active, sources to both companies are predicting no early consummation of that deal, and some suggest that it might just as likely end in a breakup.
Sulzer eyes split-up, rejects InCentive
Shareholders of Sulzer AG (Winterthur, Switzerland) will be voting at the company's annual general meeting this month on the planned spin-off of Sulzer Medica into a freestanding business, creating two independent companies. At an annual press briefing last month, Sulzer AG reiterated its rejection of a purchase offer by InCentive Capital AG, calling it "unacceptable" and saying that it undervalued the industrial businesses and offered "no clear strategy."
InCentive has proposed a set of resolutions for the annual meeting that, if passed, would give it control of both Sulzer AG and Sulzer Medica without paying anything and before shareholders are able to decide on InCentive's bid. "This is unacceptable," said Sulzer Chairman Ueli Roost. InCentive has offered CHF410 a share for Sulzer Industries, which Roost characterized as "far too low," adding that "much of the evidence for why it is too low lies in the financial results and forward strategy presented today."
Company officials have been analyzing possible structures for a separation of Sulzer Medica from the parent company's industrial activities and have chosen a solution they termed "both fast and tax-efficient." If the plan is approved at this month's meeting, Sulzer shareholders will receive two Sulzer Medica Ltd. shares for each Sulzer Ltd. share held. The distribution would presumably take place in August, and an extraordinary shareholders meeting of Sulzer Medica Ltd. will be held in 3Q01 to elect new board members and decide upon the amendment of articles of incorporation.
Sulzer AG said Sulzer Medica "is strategically focused on its core orthopedics, cardiovascular and biotechnology businesses." It holds what Sulzer AG calls "attractive market positions" and is "poised to increase its focus on the higher growth markets of the future." The company said Sulzer Medica's recently completed acquisitions of Paragon in the dental implant sector and IntraTherapeutics in peripheral stents "were significant steps reinforcing the company's strengths." Its "well-filled product pipeline in all core business segments and large market potential" mean the medical unit has a "very promising" outlook. Sulzer AG management said it is "committed to achieving a smooth and expeditious transition in anticipation of [Sulzer Medica's] full independence." It noted, however, that the appointment of a successor to Sulzer Medica CEO Andre Buchel has been delayed by the strategic realignment.
As an industrial company, Sulzer will build on the core Sulzer Metco, Sulzer Turbomachinery Services, Sulzer Pumps and Sulzer Chemtech businesses.
CEO Fred Kindle said he places high priority on the independent development of those businesses under the Sulzer corporate umbrella. "Although synergies will naturally be exploited, our chief priority is to ensure that each core business activity is competitive in its own right and generates shareholder value." He said the divestiture program for non-core industrial businesses is well under way, with the sale of Sulzer Turbo completed and negotiations on disposals of the businesses of the Sulzer Infra and Sulzer Textile businesses "well advanced."
The divestiture of Sulzer Burckhardt will be undertaken in the second half of 2001.
Sulzer Medica's product offerings include joint prostheses, spinal implants, dental implants, trauma surgery products, heart valves, peripheral stents and vascular grafts
ANS sees Medtronic role in product denial
In a late February decision, the FDA turned down the application of Advanced Neuromodulation Systems (ANS; Dallas, Texas) to review a neurostimulation pain relief system as a Class II device, and the company issued angry statements indicating that Medtronic (Minneapolis, Minnesota), its competitor in this sector, had influenced the decision. ANS said that the agency's denial of its petition to review the Totally Implanted Pulse Generator (IPG) Spinal Cord Stimulator under Class II rather than Class III regulations was contradictory and inconsistent.
In a statement, ANS cited Medtronic's objections to the reclassification and attempts to "pack the administrative record." ANS president and CEO Chris Chavez said that the larger company's efforts included "one private and therefore inappropriate meeting with the FDA to lobby against the reclassification."
Chavez said that ANS had pursued a regulatory course that had been largely outlined by the agency, and the IPG system had been recommended for approval by an FDA review panel. And in a conference call following release of its initial statement, Chavez said that the decision was a "dramatic contradiction to the least-burdensome provisions of the FDA act." Additionally, he characterized himself as "stunned" upon hearing of the agency's rejection of the applications.
Placement in the less-rigorous Class II category would have allowed ANS to avoid a PMA-style clinical trial of the IPG device to win clearance, and Chavez said that the company is willing to carry out such a trial. But until required to take this path, ANS will use every available channel to reverse the denial, he emphasized. He said that ANS had already begun conversations with Les Weinstein, the ombudsman for the Center for Devices and Radiological Health. Contacted by BBI, Weinstein declined to make any comment about the controversy.
During a conference call, Chavez repeated his charge that Medtronic may have influenced the decision, but he added, "We're not in the business to beat up on Medtronic. Hopefully they're not in the business to beat up on us. They used all of the resources available to a very, very large company. They skillfully used their lobbyist and whatever means available to accomplish this victory – and defeat for us."
Chavez said that the company has been prepared to launch a clinical trial of the stimulation product, a requirement that would delay approval and market release by up to two years. The product is approved in Europe, but Chavez said he had wanted to delay the European launch until winning FDA clearance. But he said that after the FDA delayed action 14 months "beyond the original statutory requirements, we got tired of waiting. We just decided to take it to the [Europe] market. Every physician has been very impressed with it, and we expect great things with it." He added the hope of still reaching the U.S. market "on an expedited basis."