Early last month, Cyberonics (Houston, Texas) turned down a $480 million purchase offer from medical technology titan Medtronic (Minneapolis, Minnesota), with Cyberonics' President Skip Cummins saying the proposal did not recognize the company's potential for "biotech- type valuation." Cummins said that his company turned down the offer of $26-a-share offer as too little to buy the company's independence, adding that it was far below what the company eventually will be worth. Cyberonics has developed the Vagus Nerve Stimulation (VNS) system, a technology that clearly would fit well with Medtronic's growing line of general electrostimulation and heart rhythm technologies. And, on the surface at least, Cyberonics appears to be the kind of early developmental company looking for a buyout by a Big Device player. But Cummins said that Cyberonics is focused on building on the VNS technology and the opportunities already proven in sales of the system since its FDA approval two and one-half years ago.
He reported that the company has sold 7,500 units for epilepsy treatment since that approval, and he compared this growth to 3,000 unit sales over the same post-approval period for implantable cardioverter defibrillators (ICDs), a technology addressing a 10-times-larger market and having far fewer barriers to acceptance. Both in "near-term prospects and long-term plans," Cummins said, Cyberonics is likely to have greater value as an independent concern. "Going it alone will deliver much higher shareholder value than [Medtronic's] $26-a-share bid," he said. "Even in the short term, as we begin to educate analysts on the Street, eventually people will go to a more biotech-type of valuation for Cyberonics and place appropriate value on each of [our] business units."
The company has moved to accounting in terms of business units that are "separate and distinct," Cummins said. This system, he said, gives a clearer perspective concerning the firm's losses – approximately $48 million for FY00 and approaching a total of nearly $100 million. He noted also that the company's clinical trials for treating depression, obesity and Alzheimer's disease are on schedule, and it has strong prospects for FDA approval and rollout of a product for treating depression in the second half of 2003. This is not the first time that a large company has wooed Cyberonics. In 1996, St. Jude Medical (Indianapolis, Indiana) offered $72 million for the company in a proposed deal that eventually fell through. Despite the turndown, Cyberonics' board is willing to consider a higher bid from Medtronic or a third party, according to Cummins.
In other dealings in the medical technology marketplace:
Edwards Lifesciences (Irvine, California) completed the sale of its Bentley line of cardiopulmonary perfusion products to Jostra AG (Hirrlingen, Germany), a maker of open-heart surgery products, for approximately $30 million. Michael Mussallem, Edwards chairman and CEO, said the divestiture helps the company provide better focus to its product line following its spin-off from Baxter International (Deerfield, Illinois) earlier this year. Jostra said it will produce the full line of Bentley products used to support the heart during stopped-heart cardiac surgery, while Edwards retains its Macchi line of cardiopulmonary products, as well as its manufacturing facilities in Sao Paulo, Brazil, and Uden, the Netherlands. Edwards also maintains distribution rights for Bentley products in Japan and most other countries outside of the U.S. and Western Europe.
ELGEMS (Haifa, Israel), a joint venture of GE Medical (Waukesha, Wisconsin) and Elscint (Haifa, Israel) since 1997, will become a wholly owned subsidiary of GE Medical when that company buys out the other half of the j-v for $30 million. ELGEMS develops and manufactures GE Medical's gamma cameras and other nuclear imaging products, and with GE Medical, ELGEMS developed the Hawkeye imaging system that combines the anatomic delineation of computed tomography with the functional imaging capabilities of nuclear medicine. GE Medical said the purchase underlines its commitment to nuclear imaging, as well as to its Center of Excellence in Israel. Elscint is 55% owned by Elbit Medical Imaging (Tel Aviv, Israel).
Genzyme (Cambridge, Massachusetts) and Biomatrix (Ridgefield, New Jersey) recently amended their merger agreement to provide additional time to complete the formation of Genzyme Biosurgery. The amendment extended from Sept. 30 to Oct. 31 the right for either company to terminate the merger. Additionally, either company may elect to extend this termination right to Nov. 15, if it is engaged in proxy solicitation on Oct. 30. Genzyme Biosurgery is the planned new Genzyme division that will be formed by combining the businesses of Biomatrix, Genzyme Tissue Repair and Genzyme Surgical Products. The merger is set to close during 4Q00.
Under the "merger scrapped" category, Fisher Scientific International (Hampton, New Hampshire) and PSS World Medical (Jacksonville, Florida) said in August that they had mutually agreed not to merge, issuing a joint statement that the merger was "not in the best interest of the companies' shareholders." Fisher is an international supplier of laboratory supplies and equipment, e-commerce procurement technology and related services for research, healthcare, science education and occupational safety. PSS is a specialty marketer and distributor of medical products to physicians, alternate-site imaging centers, long-term care providers and hospitals through 110 service centers in all 50 states and five European countries.
Instru Holdings, a U.S. subsidiary of Instrumentarium (Helsinki, Finland), said it will receive, in addition to previously received payments, $42 million from Baxter Healthcare (Deerfield, Illinois) related to Instru's 1998 purchase of Ohmeda (Helsinki, Finland). Instrumentarium and Baxter are two of the three companies that purchased the Ohmeda businesses from the BOC Group, with the two companies then agreeing to adjust the purchase price allocation, based on future financial performance of the business acquired by Baxter. Instrumentarium Group will record $39 million of the $42 million payment as a reduction of goodwill resulting from the Ohmeda acquisition. It will record $23 million as other operating income for 2000.
Licensing agreement replaces merger
Cytogen (Princeton, New Jersey) and Advanced Magnetics (AM; Cambridge, Massachusetts) said that they mutually decided to drop a proposed merger plan and instead will enter into a marketing, license and supply agreement.
Cytogen will acquire certain product rights to Advanced Magnetics' imaging agents in exchange for two million shares of Cytogen stock. Cytogen will have exclusive U.S. rights to AM's Combidex, a magnetic resonance imaging contrast agent for the detection of lymph node metastases and have exclusive U.S. rights to imaging agent Code 7228 for oncology applications, plus the right of first negotiation for applications outside of oncology. AM will pay all costs associated with clinical development, supply and manufacture of Combidex and Code 7228 and will receive product sale royalties.
"Both Cytogen and Advanced Magnetics agreed that the advantages of a marketing and supply arrangement outweighed the near-term benefits of the merger," said H. Joseph Reiser, PhD, Cytogen president and CEO. "Our ongoing business relationship with Advanced Magnetics is consistent with our strategic focus to build a product-oriented pipeline in oncology, and to that end we continue to investigate other near-term product opportunities."
Jerome Goldstein, chairman and CEO of Advanced Magnetics, said the market and supply arrangement had greater "near-term benefits" than a merger.
Thermo Electron completes reorganization
Thermo Electron (Waltham, Massachusetts) said its plan to tighten its focus on instrumentation through the spin-in of key public subsidiaries is complete following formal approval of its merger with Thermo TerraTech. Thermo Electron's reorganization has included the divestiture of businesses that it considers outside the instrumentation sector. Gross proceeds related to the divestitures total approximately $670 million, including the recent agreements to sell both Lancaster Laboratories, for approximately $72 million in cash, and the medical imaging businesses of Trex Medical, for $55 million – $30 million in cash and $25 million in notes. Those transactions are set for closing this quarter. A third component of the reorganization plan is the proposed spin-offs of Thermo Fibertek and the company's medical products business, both scheduled for completion in early 2001. Richard Syron, chairman and CEO of Thermo Electron, said the company is continuing to work on the divestiture plan and that it is in "serious negotiations with prospective buyers of all other major divestitures previously announced." He said the company will allocate proceeds of the spinoffs to "high-growth opportunities within the instruments industry, particularly in our life sciences and optical technologies sectors."
Agilent forms new life sciences business
Agilent Technologies (Palo Alto, California) has formed a new Life Sciences Business Unit within its Chemical Analysis Group (CAG), saying the new unit will "better address the growing demand" for the life sciences products it produces. The new unit, Agilent said in a statement, "will provide more rapid and comprehensive solutions in genomics, chemical and biochemical measurements, microfluidics, informatics and other analytical areas" to its customers in pharmaceutical, agricultural, genomics and academics sectors. Agilent's CAG will now comprise two business units: life sciences and chemical solutions. The new unit will be headed by Bill Buffington as vice president and general manager, reporting to Rick Kniss, senior vice president and general manager of the CAG unit.
Kniss said that research "in this 'Age of the Genome' has created unprecedented customer demand for practical, cost-effective, integrated products that accelerate research of the disease and drug discovery process – presenting a unique opportunity for Agilent. We see this change as fundamental to Agilent's plans to be a leader in the life sciences markets." He added that the new unit "will also allow us to bring new tools to chemical and environmental analysis."
The new unit serves to diversify Agilent's operations, which have been hit recently by lower sales in the hospital monitoring and instrumentation sectors. The company has reported losses over the past two quarters and is conducting a worldwide structuring. The company said it will cut the workforce of its Healthcare Solutions Group in Andover, Massachusetts by about 10% and move various manufacturing operations to Singapore.
Prodesco launches medical products unit
Prodesco (Perkasie, Pennsylvania), a maker of components for implanted medical products, said it has formed a Medical Products Division. Bob Sievers, CEO of Prodesco, said the new unit will allows the company "to concentrate ... on the aspects of our business that have made us successful in the past – GMP training for our employees and the implementation of quality control systems to ensure that our products are made to exacting customer specifications."
Leading the new division will be Tom Molz, general manager; Keith Smith, business manager; Joe Feher, component finishing manager; and Rich Hoff, broadgoods finishing manager.
Prodesco makes medical and industrial engineered textile structures, with its customers including Guidant, Medtronic and Johnson & Johnson, as well as small startups. The company is ISO 9001 registered and EN46001 compliant.
Medical Analysis Systems lays off staff
Medical Analysis Systems (MAS; Camarillo, California), a provider of in vitro diagnostic quality assurance reagents, software and services, said it will cut nearly 28% of its work force in a restructuring effort. Marty Solberg, president of MAS, said the reductions are part of the company's "long-range plan to right-size specific areas" and cut unnecessary duplication.
MAS became the second-largest supplier of clinical controls materials in the world through the acquisition of Dade Behring's controls business in 1998. Ivan Modrovich said that "Despite our many successes of the past year, we have not capitalized on the new resources and systems this company has put into place ... [W]ith this restructuring we will in short order convert MAS into a cost-effective quality vendor of diagnostic controls and quality assurance services that individual hospitals and hospital purchasing groups will continue to do business with long term."
St. Jude gets go-ahead on PAVE study
St. Jude Medical (St. Paul, Minnesota) has received an investigational device exemption from the FDA to begin its Post AV Node Ablation Evaluation (PAVE) clinical study. PAVE is a multicenter study evaluating treatment options for patients with chronic atrial fibrillation (AFib) who receive an "ablate and pace" procedure. These patients undergo an ablation procedure to reduce AFib, and implantation of a standard right ventricular pacemaker to compensate for the resulting heart block.
The PAVE study will compare the effects of biventricular or left ventricular pacing with the present standard of care of right ventricular pacing. The study will collect data on more than 600 patients in up to 65 centers worldwide. During the trial, patients will be randomized to right ventricular, left ventricular or biventricular pacing for six months. Patients who are randomized to left ventricular-based pacing also will receive a right ventricular lead to provide backup right ventricular pacing.
St. Jude's Genesis system will be implanted in patients who are randomized in the PAVE study to left ventricular-based pacing. The Genesis system is a device-based ventricular resynchronization system for the treatment of heart failure, and is available in Europe.
TriPath receives FDA resolution letter
TriPath Imaging (Burlington, North Carolina) said that it has received a letter from the FDA confirming that it has resolved issues raised in an April 20 warning letter concerning unapproved product claims made by the company. Dr. Paul Sohmer, president and CEO of TriPath, said that it "will continue to advertise and promote our products as approved by the agency."
TriPath Imaging develops, manufactures and markets products to improve slide preparation technology used in cancer screening. The company's AutoCyte PREP System is an automated thin-layer cytology sample preparation system that produces specimen slides with a homogeneous, thin-layer of cervical cells. Its AutoPap Primary Screening System distinguishes between normal Pap smears and those that have the highest likelihood of abnormality.
Affymetrix, CF Foundation in accord
Affymetrix (Santa Clara, California) and the Cystic Fibrosis Foundation (Bethesda, Maryland) have entered into an agreement to develop a custom GeneChip expression array based on the Pseudomonas aeruginosa genome. Pseudomonas aeruginosa is the most common cause of respiratory infections in cystic fibrosis (CF) patients. These custom arrays will be developed for use by not-for-profit and commercial cystic fibrosis researchers.
Affymetrix makes systems to acquire, analyze and manage complex genetic information in order to improve the quality of life. The mission of the Cystic Fibrosis Foundation is to assure the development of the means to cure and control cystic fibrosis and to improve the quality of life for those with the disease.