Hewlett Packard spin-off Agilent Technologies (Palo Alto, California) last month said that it will lay off 450 people from its Healthcare Solutions Group (HSG; Andover, Massachusetts) – about 9% of that unit's total workforce – and cut another 200 temporary employees in a major global restructuring. The cutbacks are part of a speed-up in the company's plans to shift major portions of its manufacturing to Singapore, thus reducing manpower needs in Andover, as well as Qingdao, China, and Boeblingen, Germany. The announcement of cutbacks comes following a downturn in Agilent's sales losses in the second and third quarters. The downturn is not Agilent's alone, but is sector-wide, according to Arthur Gasch, president of Medical Strategic Planning (Lincroft, New Jersey), a patient monitoring and telemetry consulting firm, who has tracked activity in this arena through a database of 80% of major U.S. hospitals.

Gasch, who follows the sector for The BBI Newsletter and its sister publication, Medical Device Week, said the slump is largely a fallout from Y2K concerns which saw hospitals upgrading to compliant systems last year and are now "on hold" before purchasing additional new systems, he told BBI. "Our database shows that the U.S. market is completely down," Gasch said. "There were 100% more units sold last year than any one of the previous five years because of Y2K. And this is a replacement market. Every time you have one new unit sold, you have to take one out of service. If you don't take one out of service, no one is selling anything." The freeze on new purchases could be seen taking shape at least 10 months ago, Gasch said, and he does not foresee a rapid recovery.

Agilent said that its workforce reduction should be completed by the end of October, and will result in a one-time charge of about $25 million in 4Q00. The cutbacks and manufacturing shifts are expected to produce savings of $80 million annually, starting in the next fiscal year. Ed Rusckowski, senior vice president for Agilent, confirmed the post-Y2K slump and said its effects had been made worse by tighter government reimbursement policies. "We do see our customer hospitals concerned about their top line, given the balanced budget amendment and stringent controls on revenue reimbursement," Rusckowski told BBI. "They have less money to spend, and they are cutting back on purchases of durable capital equipment," which he identified as the Agilent product area hurt most by the current slump.

"We do know the business is not going away," Rusckowski said in addressing the exact point of recovery. "There's a growing catch-up demand for our products, and the business funnels continue to grow. Plus, there's some relaxing and increasing in reimbursement rates from the federal government, which will help, but there's no confirmation that is happening soon, and no confirmation that the market will rebound quickly." He added that the company has "cautious optimism" for the fourth quarter. Assuming the success of the company's restructuring and a rebound in sales, Rusckowski said there were "no planned announcements" of further cutbacks or other restructuring moves this year.

Agilent was spun off from HP late last year to separate the focus of operations in the monitoring and instrumentation fields. Agilent makes test, measurement and monitoring instruments, systems and solutions, and semiconductor and optical components in the areas of communications, electronics, life sciences and health care.

Thermo Electron takes units public

Thermo Electron (Waltham, Massachusetts) reported completing its previously announced mergers with Thermo Ecotek, ThermoLase and ThermoTrex, with all three companies now to be public. Share distribution is as follows: Minority holders of Thermo Ecotek common stock will receive .431 shares of Thermo Electron common stock for each Thermo Ecotek share; minority holders of ThermoLase shares will receive .132 shares of Thermo Electron stock for each ThermoLase share; and minority holders of ThermoTrex will receive .5503 shares of Thermo Electron stock for each ThermoTrex share. Stock options to purchase shares of Thermo Ecotek, ThermoLase or ThermoTrex, outstanding at the time of the mergers, have been assumed by Thermo Electron and converted into options to purchase Thermo Electron stock; convertible debentures of these units are now convertible into Thermo Electron shares. As reported this past January, Thermo Electron is transforming itself into one publicly traded entity focused on its core instruments business.

Cyberonics sees added markets for VNS

Cyberonics (Houston, Texas) last month reported several new indications and studies for its Vagus Nerve Stimulation (VNS) implantable device. Approved by the FDA for use in the treatment of epilepsy in 1997, new VNS applications in treating depression, obesity and Alzheimer's disease were reported by the company in a conference call. Skip Cummins, president and CEO, said, "These new indications represent 75 times the current market value of VNS treatment for epilepsy alone." These new applications could increase the company's potential U.S. market from about 250,000 patients for epilepsy to close to 19 million for all applications, with the largest potential market being 14 million that could be treated for obesity, he said.

The main component of the VNS system is the implantable NeuroCybernetic Prosthesis (NCP) pulse generator. The device delivers electrical signals to the vagus nerve, providing a constant current for continuous stimulation. Working much the same way as a pacemaker, the device sends an intermittent electrical signal, in this case, to the left vagus nerve in a patient's neck. Cyberonics said it hopes to perfect treatment for other movement disorders, such as Parkinson's disease and tremors, as well as cardiac arrhythmia and migraine headaches. "It should come as no surprise that we are seeking these new indications beyond epilepsy for our product," said Cummins. "It is nothing new to any company that has developed an anti-convulsant product to seek out a broader market."

Nanogen, Hitachi team up on chip technology

Nanogen (San Diego, California) and Hitachi (Tokyo) said they will invest up to $57 million over the next 10 years to develop instruments for DNA analysis. An expansion of a previous manufacturing agreement, the new pact calls for Hitachi to build and design instruments based on Nanogen's NanoChip technology for molecular biology workstations, with Hitachi making an undisclosed equity investment in the U.S. biotech company and also providing annual funding for applications development. The companies estimated that further costs for instrument development, manufacturing and commercialization of new systems could exceed $140 million over the next 10 years.

Nanogen has been ramping up production and marketing of its NanoChip molecular biology workstation, which can be used in a variety of applications, including biomedical research, genomics, medical diagnostics, genetic testing and drug discovery, according to the company. A specific goal of the agreement is to bring the size and cost of NanoChip systems down from the current benchtop size to a much smaller system that could eventually be used as a medical diagnostic device at a physician's office or hospital. Another goal would be to expand capabilities into new areas like gene expression and protein analysis.

Datascope gets FDA warning

The FDA has sent a warning letter to Datascope (Montvale, New Jersey), saying it had used unapproved information in letters that it sent to doctors and on its VasoSeal web site concerning the rate of complications for the VasoSeal ES Vascular Hemostasis Device used to seal artery holes following catheter removal. "These statements essentially contradict the complication rates identified in the approved labeling," the FDA letter said, noting that the actual rate is substantially greater than stated. This misrepresentation "changes the safety of the device," the warning letter said.

Ari Zak, vice president of regulatory affairs for Datascope, expressed surprise at the warning letter, saying the agency had known about the promotional materials and that the company already had undertaken changes in the promotional statements.

Ethicon drops electroporation pact

Ethicon Endo-Surgery (Cincinnati, Ohio), a Johnson & Johnson company, has ended its licensing and development agreement with Genetronics Biomedical (San Diego, California) regarding Genetronics' Electroporation Drug Delivery System for the treatment of cancer. The agreement was signed in late 1998, and Ethicon reportedly had invested at least $10 million in the project. Following the July 27 announcement of the broken agreement, Genetronics' share price dropped 55%, closing at $1.31.

Electroporation is the application of pulsed electric fields that causes a temporary increase in the permeability of human cells and enabling drugs and genes to more readily enter those cells for treatment. Genetronics has used the system in clinical trials to treat certain cancers with bleomycin in the U.S., Canada, Europe and Australia. But it said reviews of these trials " have delayed pre-commercialization activities ... in Europe and Canada, and postponed initiation of a pivotal or other clinical trial in the U.S., and are expected to further delay these activities for at least several more months."

Martin Nash, CEO of Genetronics, said his company had seen no previous warnings of any problems with the agreement, adding that Genetronics remains "enthused" about the technology and that the oncology program will continue, "with the objective to launch the MedPulser system next year for treatment of solid-tumor cancers."

Dura shuts down $200 million Spiros effort

Dura Pharmaceuticals (San Diego, California) said that it will close down its Spiros Development unit working to develop the Spiros drug delivery system, to put greater focus on its pharmaceutical sales effort. The company had put a seven-year, $200 million effort into the Spiros system, a device that uses a small motor to deliver a measured medicine dose directly into the lungs.

Dura will scrub research on two Spiros devices and will lay off 40 of its staff of 1,000 – about 4% – to focus its R&D efforts on an inhaled insulin product in development with Eli Lilly and Co. (Indianapolis, Indiana).