The formation of Genzyme Biosurgery – a new entity which will become a subsidiary of Genzyme (Cambridge, Massachusetts) – will be accomplished through the merger of two existing Genzyme divisions and Biomatrix (Ridgefield, New Jersey). The new unit will focus on biomaterials and biotherapeutic products and be stronger financially, the participating companies hope.

Combining with Biomatrix will be Genzyme Tissue Repair and Genzyme Surgical Products (both Cambridge). Once the merger is completed, Genzyme will have three publicly-traded divisions, instead of four: Genzyme Biosurgery, Genzyme General, and Genzyme Molecular Oncology. In the agreement, the two Genzyme divisions will be combined in tax-free, stock-for-stock exchanges.

The merger will give Biomatrix shareholders 47% ownership in the new company, with Genzyme Tissue Repair shareholders holding 27%, and Genzyme Surgical Products shareholders holding 26%. Genzyme Biosurgery will have about 35 million outstanding shares that will trade on Nasdaq. The combined market value of all three companies at the time the intended combination was announced was $1.3 billion.

Besides merging three leaders in the biomaterials and biotherapeutic products market, the deal is intended to accelerate Genzyme's effort to use biomaterials and biological products to enhance or replace conventional mechanical approaches to surgery and other medical procedures. "We see a great market for these products," said Duke Collier, president of Genzyme Surgical Products. "We think a combination of very strong device-selling skills and biotechnology product development is a pretty unique opportunity. And we'll see where it takes us."

Collier will assume the role of president of Genzyme Biosurgery when the merger closes, which is scheduled for the end of June, pending regulatory and shareholder approval. "It [the merger] strengthens up for us, scientifically and commercially, a good platform," Collier told BBI.

PE files patent complaint against Waters

PE Corp., MDS and Perkin-Elmer Sciex Instruments, a joint venture of PE Corp. and MDS, have filed a federal complaint against the U.K. subsidiaries of the Waters Corp. (Milford, Massachusetts). The complaint charges patent infringement by certain mass spectrometry products made by Micromass UK Ltd. and Micromass. Micromass and Waters have replied that these products do not infringe any valid patent claims and that the litigation will have no material adverse effect on their operations. Waters claims worldwide leading positions in three complementary analytical technologies: high performance liquid chromatography, thermal analysis, and mass spectrometry. These account for $3.5 billion in annual revenues of the annual analytical instrument industry total, which Waters puts at $16 billion.

Saliva Diagnostic in restructuring

Saliva Diagnostic (Vancouver, Washington) last month reported a variety of restructuring moves. It has closed its manufacturing facility in Vancouver and will lay off all employees at that facility. The company said it is currently negotiating to outsource its production to fill existing and future orders and that outsourcing will reduce the firm's cash needs and "allow more aggressive pricing in a competitive world market."

Other moves include pursuing licensing of its patented Capillary Barrel System to other companies on a royalty basis. The company also announced the resignation of Stefan Paskell, executive vice president. Finally, Saliva Diagnostic said it is "actively seeking to resolve various pending claims and has settled various outstanding debts over the last several months."

Reprocessor opens new facility

Alliance Medical (Phoenix, Arizona), a firm that bills itself as "the leading full-service disposable medical device reprocessing company in North America," has opened a new state-of-the-art reprocessing facility. The 41,000-square-foot facility was built for "advanced reprocessing of specifically validated medical devices," the company said in a statement. The new facility includes administrative offices and features two certified Class 10,000 clean rooms, a full-time facilities maintenance engineer, and custom-designed processing equipment. These include a pressurized automated laparoscopic lumen and biopsy forceps cleaners and a laser etching and scanning mechanism for individual device serialization and performance data capture.

Thermedics begins tender offer

Thermo Electron subsidiary Thermedics (Woburn, Massachusetts) commenced a cash tender offer of $8 per share for all outstanding shares of its Thermedics Detection subsidiary.

The tender offer is part of a reorganization plan under which Thermo Electron will spin in, spin off, and sell various businesses to focus solely on its core measurement and detection instruments business. (See The BBI Newsletter, March 1999). The goal of the tender offer is to bring Thermedics' and Thermo Electron's combined equity ownership in Thermedics Detection to at least 90%, with Thermedics Detection then to be spun into Thermedics through a "short-form" merger at the same cash price as the tender offer. The spin-in is set for completion in the present quarter.

Mentor settles with Boston Scientific

Mentor Medical, a subsidiary of Mentor Corp. (Santa Barbara, California), has agreed to pay Boston Scientific (Natick, Massachusetts) an undisclosed sum for a paid-up license to certain patented procedures and devices used in the percutaneous treatment of female urinary incontinence. The payment settles a suit brought against it by Boston Scientific in the U.S. District Court for the Central District of California. Mentor makes products for various medical specialties, including urology and plastic and reconstructive surgery.

Gambro strengthens position in Mexico

Gambro AB, (Stockholm, Sweden) announced that its Mexican subsidiary, Gambro de Mexico, has assumed the renal products sales business in Mexico from its former joint venture partner. This represents approximately $8 million in annual sales. The company said the move "substantially strengthens" its position in Mexico, the largest market for renal products in Latin America, and is part of its strategy for an increased direct sales presence in that region.

Companies... in brief

Advanced Medical Products (Columbia, South Carolina) has changed its name to ADVA International. The company said it is readying a "possible reverse merger with a privately held company in an attempt to recover some value for the company's present shareholders" ... Conway Stuart Medical (Sunnyvale, California) has changed its name to Curon Medical, according to the company, "to better communicate the company's ongoing mission to develop treatments for gastrointestinal disorders, including gastroesophageal reflux disease." Its initial product offering is the Stretta System ... DiaSys (Waterbury, Connecticut) has entered into a private placement agreement to sell up to $4 million worth of convertible preferred securities and warrants to Excaliber Limited Partnership and BH Capital Investment LP (Toronto, Ontario, Canada). To date, the company has received proceeds of $1 million, for which it has issued the equivalent of 100,000 common shares. DiaSys makes medical laboratory equipment with applications in urinalysis, microbiology, and cytology ... Endovasc (Montgomery, Texas) said it has retained J.P. Turner & Co. (Atlanta, Georgia), an investment banker, to assist in securing additional capital for future development. Endovasc develops products for vascular disease and the heart, including a system for delivering a vaso-dilator for arteries throughout the body, a bio-degradable covered stent for arterial occlusion, and a product for increasing circulation to weakened hearts ... Formatech (Lowell, Massachusetts) is constructing a contract Aseptic Fill Manufacturing facility in Andover, Massachusetts, focusing on clinical trial material supply. The 34,500-square-foot facility will fill liquid and manufacture lyophilized final dosage units, with batch sizes for most clinical supply demands ... La Jolla Diagnostics (La Jolla, California) shareholders have approved changing the company's name to to "better reflect the health products side of our business and is appropriate for our soon-to-be-announced new initiative." When approved by the board, the company will file with the NASD for a new ticker symbol ... Mecon (San Ramon, California), acquired in February by GE Medical Systems, will change its name to GE Medical Systems Healthcare Solutions. The company said the name change reflects the company's emphasis on IT solutions for health care ... Minntech (Minneapolis, Minnesota) reported completing repurchase of 300,000 shares of common stock and is continuing the repurchase program under an extension of the program for another 300,000 shares. Minntech President and CEO Thomas McGoldrick said the company believes its stock was greatly undervalued. Minntech develops dialysis products and services and medical device reprocessing technologies ... Tissue technology company Organogenesis (Canton, Massachusetts) reported raising net proceeds of $9.4 million through the placement of 688,925 shares. The company originally projected raising $6.2 million, but the offering, priced at $14 per share, was oversubscribed ... Raytel Medical (San Mateo, California) has opened Raytel Medical Imaging, a diagnostic imaging center providing magnetic resonance imaging (MRI) services in Collegeville, Pennsylvania ... Spinal Concepts (Austin, Texas), a developer of spinal implant technology, said it completed a $9.3 million sale of Series D preferred stock, with proceeds going to expand its U.S. network of sales representatives, fund the clinical trial for the Infix Interbody Fusion Device and further R&D activities ... Swissray International (New York), a developer of direct digital radiography (ddR) systems for medical imaging informatics, said it received a down payment of over $2 million from the Romanian Ministry of Health for 32 ddR Multi-Systems, the total sale, valued at $13.8 million and guaranteed by the Swiss Export Risk Guarantee. The company also said it has entered into a financial services program agreement with DVI Strategic Partner Group (DVI), for DVI to operate a lease finance program on behalf of Swissray America's U.S. customers.