Restructuring rather than consolidation via acquisition marked the first quarter of 2000 in the device industry, with many companies attempting to refocus by becoming leaner rather than larger. While Thermo Electron (Waltham, Massachusetts) has been carrying out a variety of spin-offs and spin-ins (see The BBI Newsletter, March and April 2000), Summit Technology (also Waltham) and Molecular Biosystems (MBI; San Diego, California) represent the more dominant strategy of cutting staff and integrating current operations to produce cost and marketing efficiencies.
In Summit's restructuring effort, the No. 2 laser manufacturer in the U.S. changed its named to Summit Autonomous, the new name reflecting a closer integration of its Autonomous business unit, acquired last year. In the reorganization, Summit will cut 20 of about 520 personnel worldwide, resulting in a 1Q00 charge of $3 million to produce $3 million in annual savings, the company said. Additionally, it said it will take a one-time charge of $8 million to terminate a strategic alliance with Ciba Vision (Atlanta, Georgia), an agreement that came with the acquisition of Autonomous. This will be somewhat offset through the identification of $5 million in expense reductions in its spending this year.
Summit is one of the major U.S. laser makers that lowered its per-procedure royalty fees in conjunction with entry into the Lasik market by Bausch & Lomb (Rochester, New York), thus creating a more competitive environment for this procedure (see BBI, April 2000). Robert Palmisano, Summit's CEO, said that while the firm's business is strong, "the consolidation of our Autonomous and Summit organizations into one entity will result in a more streamlined organization and we are confident that the changes we have undertaken will create no disruption in service to our customers."
In a more drastic reorganization, MBI last month said it was forced to reduce by 60% its 56-member staff, and thatmore cuts are likely to come. The staff reductions mean that the company is dropping its MB-840 development program, a liver-specific computed tomography contrast agent. The cutbacks will reduce the company's annual expenditures by about $5 million, and further reductions will coincide with increased outsourcing of its manufacturing operations to Mallinckrodt (St. Louis, Missouri).
MBI develops contrast imaging agents designed to aid in the detection of common disease and to reduce the need for invasive diagnostic procedures. Its lead product, Optison – which the company bills as the first advanced-generation contrast agent – is approved for ultrasound imaging of the heart wall and cavity. Pivotal trials are under way in Japan for assessment of left ventricular opacification and myocardial perfusion using FS069, which is also known as Optison. The company said it now will focus exclusively on activities associated with Optison. In addition to the trials in Japan, it is in Phase II trials for myocardial perfusion and radiology in the U.S. and Europe.
This is the second major layoff at MBI in the last two years. Approved by the FDA in January 1998, analysts predicted Optison would produce first-year sales of $100 million, but product and royalty revenues didn't even reach $10 million. As a result, MBI sliced its staff by about 28% – or 40 employees – in late 1998, reducing staff numbers at the time to about 100. The company said that Optison sales grew 43% in the 3Q99, ended Dec. 31, over the same period in 1998, and that 3Q99 sales grew 18% over the year-ago second quarter. However, for the nine months ending Dec. 31, the company only had $950,000 in product and royalty revenues. Total revenues were about $6 million.
MBI rebounded late last year when it agreed to be acquired by Palatin Technologies (Princeton, New Jersey) in a deal worth about $27 million. However, in mid-March, Palatin gave notice to MBI that it had changed its mind on the deal.
Edwards Lifesciences begins NYSE trading
Edwards Lifesciences (Irvine, California), the Baxter International (Deerfield, Illinois) spin-off that is focusing on systems for treating late-stage cardiovascular disease, recently began trading under the symbol EW on the New York Stock Exchange. The divestiture was made in the form of a tax-free dividend of Edwards Lifesciences common stock to Baxter shareholders, who received one share of Edwards stock for each five shares of Baxter stock owned on March 29. Edwards shares began trading on a "when-issued" basis on March 27, with the company having approximately 58 million shares outstanding.
The company makes cardiovascular products focusing on surgery, critical care, vascular systems and perfusion products and services, and bills itself as "the worldwide leader in both tissue replacement heart valves and heart valve repair products." Leading product brands include Bentley, Carpentier-Edwards, Cosgrove-Edwards, Duraflo, Fogarty, Novacor, Research Medical, Starr-Edwards, and Swan-Ganz. Additionally, the company offers contract clinical services through its Edwards Lifesciences Cardiovascular Resources operation.
Michael Mussallem, Edwards Lifesciences chairman and CEO, said that the trading launch would allow his company "to leverage our 40-year heritage of innovation, quality and trust in the cardiovascular community and enter a new era as a leading global provider of treatments for patients fighting cardiovascular disease." He added, "We are in an exciting and expanding industry, and we have an opportunity to grow our company and generate additional shareholder value."As an independent firm, the company would be "better positioned ... to drive future treatments for cardiovascular disease," he said.
The company is named for Miles (Lowell) Edwards, an electrical engineer who was one of the inventors of the first artificial heart valve and other advances in medical technology. In the late 1950s, he founded a medical device company in Orange County, California, later named American Edwards Laboratories and acquired by Baxter in 1985. The new company will conduct business in more than 80 countries – with more than 35% of its business outside the U.S. – and had 1999 pro forma sales of more than $800 million. All of the approximately 5,000 Edwards Lifesciences employees worldwide, including non-management employees, will become owners of the company through a special, one-time grant of stock or stock options, Mussallem noted.
Cordis, Guidant agreements end dispute
Rather than continuing a drawn-out and expensive legal battle, the Cordis (Miami Lakes, Florida) unit of Johnson & Johnson (New Brunswick, New Jersey) and Guidant (Indianapolis, Indiana) have formed a variety of agreements. Guidant gave Cordis the right to market and sell rapid exchange catheters and stent delivery systems to its U.S. customers, and the two companies have granted to each other access to various patents in the field of intravascular brachytherapy. This is a relatively new technology which uses the strategy of applying radiation to help prevent and treat restenosis in patients undergoing angioplasty or stent procedures. The companies dismissed the patent litigation between them, saying they will settle any future patent disputes via arbitration.
Cordis will be able to sell rapid-exchange catheters in the U.S., incorporating them with its own angioplasty balloon and stent technologies. Rapid-exchange catheters are used by physicians in interventional cardiology and radiology procedures. "The radiation intellectual property and other technology included in the agreement will help to position Cordis for long-term leadership in interventional cardiology and radiology," said Robert Croce, a J&J group chairman responsible for Cordis's worldwide operations.
Under a separate agreement between Impulse Dynamics NV and Guidant, Guidant will acquire cardiovascular rights, exclusive in the implantable medical devices field, to technology under development by Impulse.