Thermo Electron (Waltham, Massachusetts) last month announced the launch of a major restructuring effort over the next year, designed to streamline the company structure and focus it more clearly on instrumentation and monitoring products for the life sciences. The plan requires both spinning together and spinning off various businesses with total revenues of $1.2 billion annually. Ultimately, Thermo Electron said, it will become "one integrated, publicly traded company," with the spin-off companies having their own separate boards and management teams. Analyst consensus was that the restructuring would be beneficial, since the company's corporate structure has become overly complex.

Richard Syron, Thermo Electron chairman, president and CEO, said the restructuring would make the company "the preeminent provider of measurement and detection instruments." The new companies that will be formed will be Thermo Electron – Measurement and Detection Instruments; Spectra-Physics Lasers, acquired by Thermo Instrument in February 1999; and Thermo Fibertek, which provides separation technologies for the pulp and paper industry.

As the measurement and detection instruments business, Thermo Electron will include the integration of up to nine other businesses that currently provide instruments for various life sciences and other industrial markets, including telecommunications. These businesses, together, had 1999 sales of $335 million.

As an independent firm, the instruments business will provide products for the life sciences, telecommunications, analytical, process control, laser, optical components, precision temperature-control, and environmental-monitoring markets. Syron will remain chairman, president, and chief executive officer of Thermo Electron, and Earl Lewis will continue as president of the instruments business.

Firms hit with device problems

Three of the major players in the cardiovascular sector had to deal with malfunctions of mechanical devices over the past few weeks. St. Jude Medical (SJM; St. Paul, Minnesota) had to recall a large number of its mechanical heart valves and then issued warning letters about one of its pacemakers, while Medtronic (Minneapolis, Minnesota) and Guidant (Indianapolis, Indiana) also had to issue warnings to doctors concerning implantable device glitches. Ironically, all three of the warnings were issued during the Valentine's Day weekend.

St. Jude had the earliest and largest problem when in late January it said it was withdrawing, worldwide, up to 24% of its Silzone-coated heart valve product line because of blood leakage around the valve cuff. Called "paravalvular leak," the problem was discovered as part of the company's Artificial Valve Endocarditis Reduction Trial (AVERT) and served to bring the trial to an early end. SJM is ending further distribution of the valves and will replace them with non-Silzone products, action which will require a one-time charge of up to $20 million.

Then, in mid-February, St. Jude began sending out physician notifications that nearly 900 of its Affinity cardiac pacemakers potentially could fail because of a defect. Involving three models – 5120, 5230 and 5330 – the Affinity pacemakers were recently launched by St. Jude's pacemaker division in Sylmar, California. The company said that the pacemakers could show "intermittent loss of output" because a problem with the resistor-circuitry connection in the device. The company did not launch a total recall of the product. Rather, SJM said it would pay up to $800 of the nonreimbursed cost for explant. The need for explant, the company said, should be a clinical judgment made on a "prophylactic basis."

Just before St. Jude's Affinity warning letters were issued, Medtronic and Guidant experienced similar problems. Medtronic notified doctors concerning a possible malfunction in the telemetry of some of its Gem II defibrillators. According to company spokesperson Diana Campau, the reported glitch could cause the devices to operate erratically and could occur in about 50 of 1,100 units released last May in the U.S. The company had identified that particular subset of devices by tracking the model numbers and isolating a specific product lot, she told BBI. Medtronic advised doctors that any patient with one of the devices should activate the Patient Alert System, a feature of the device that warns patients concerning problems with the unit, she said. If a problem is detected as a result of that process, it is then a physician's decision concerning what action to take next, Campau said. Medtronic received a single report of the problem in one of the devices and then issued its warning.

Guidant's warning letters concerned one of its primary defibrillator devices, its Prizm implantable cardioverter defibrillator, with the company notifying physicians that one of its parts potentially could fail. The malfunction could occur in as few as two out of 364 devices produced between Aug. 13 and Sept. 7 of last year, the company said. Guidant said that a physician had alerted it concerning the problem of overly fast pacing in a device that was to be implanted in a patient, and the procedure was cancelled. The malfunction was a "random component failure," according to a Guidant spokesman.

3 firms form new tissue regeneration company

Three Boston-area biotechnology companies – Creative BioMolecules (Hopkinton, Massachusetts), Ontogeny (Cambridge, Massachusetts), and Reprogenesis (also Cambridge) – will merge their assets to form a new public company called Curis, to be focused on developing tissue regeneration products.

Expected to be completed this summer, the merger will create a company that will have a market capitalization of about $600 million and bring complementary products and expertise to its R&D effort. Creative BioMolecules will bring its OP-1 bone graft device, the first product of which is being reviewed for marketing approval in the U.S., Europe and Australia. The OP-1 Implant is a combination of OP-1 and a resorbable collagen scaffold, surgically implanted in bone fractures that have not healed, activating a highly specialized bone cell reaction that starts normal bone regeneration. Ontogeny has programs in bone and cartilage disorders, Type I diabetes and basal cell carcinoma, and is partnering to developing a Sonic hedgehog protein – named for its bristly appearance – in neurological disorders. Reprogenesis has an advanced-stage clinical product, Chondrogel, in a pivotal Phase III for vesicoureteral reflux, a serious pediatric urological disorder. Its post-coronary artery bypass graft restenosis candidate, Vascugel, is just entering the clinic.

Overall, Curis will have a preclinical pipeline of products to treat cardiovascular disease, stroke and skin cancer. It also has protein, small-molecule and stem cell product opportunities for treatment of diabetes, peripheral neuropathy and hair growth.

Under terms of the merger, Creative BioMolecules' shareholders will receive three Curis shares for every 10 shares they hold, giving them a 43% interest in the new firm; Ontogeny's shareholders will hold about 38%, and Reprogenesis' shareholders, about 19%.

Premier Laser reduces workforce

Premier Laser Systems (Irvine, California), in a move to deal with what it termed "short-term liquidity issues," has released 54 of 80 employees, representing nearly two-thirds of its staff. Along with the announcement of what it termed staff "furloughs," the company reported a loss of $3.3 million for the recent quarter on sales of $2.4 million. The loss was significantly below that reported in the year-ago quarter – $12.2 million – but sales also were significantly down; the company reported sales of $12.1 million a year earlier. President and CEO Michael Quinn said that the sales slump resulted from "delayed introduction and manufacturing of ophthalmology products resulting from the transition of manufacturing existing product lines from the Ophthalmic Imaging Systems facility to Premier." He also noted delays in production of dental and ophthalmic products introduced last year. The company's statement made no predictions concerning its ability to return the employees to work at some future time.

Premier also said it had hired the firm Crossroad LLC (Newport Beach, California) to advise it concerning future strategies and financial planning.

Gambro to expand dialyzer production

Gambro AB (Stockholm, Sweden) announced plans to expand its production and delivery of dialyzers and unveiled a major investment for manufacturing its synthetic hollow fiber Polyflux dialyzers in Hechingen, Germany, with the expansion required to meet added demand for the product, the company said. Gambro will expand production through 2001 "to reach an extra capacity of almost 1.5 million dialyzers annually."

The Polyflux dialyzer features the Polyamide S membrane with a three-layer design and microdomain surface designed to resemble "that of nature's own biological membrane," Gambro said in a statement. The dialyzer was launched in the U.S. for single use last fall, and also is planned to be introduced for reuse.

Siemens unveils new MR facility

Siemens Medical Engineering (Erlangen, Germany) has opened a new manufacturing and administration facility for magnetic resonance (MR), special products and components, replacing a factory built in the 1960s. Costing DM200 million, it was constructed on the former site of an American military base directly adjoining Siemens Medical Engineering headquarters.

The building consolidates magnetic resonance, special products and components development, production and logistics for production of 800 MR systems annually. Siemens Medical Engineering President Dr. Erich Reinhardt said the facility is designed to use "shortened manufacturing paths to streamline work procedures and allows alteration of MR system pre-assembly processes."

National Boston Medical to split divisions

In a reorganization effort, National Boston Medical (NBM; Taunton, Massachusetts) said last month that it will divide its two operating divisions – Infotopia and Bontempi – into two publicly traded companies. Infotopia produces marketing infomercials; Bontempi is NBM's medical division which supplies high-end surgical and dental instruments to health care organizations.

Fresenius units plead guilty, will pay $101M

Three subsidiaries of Fresenius Medical Care North America (Lexington, Massachusetts) have admitted their guilt in three separate criminal conspiracies to defraud the government of illegal reimbursements. NMC Homecare, LifeChem and NMC Medical Products (MPD), three subsidiaries of National Medical Care (NMC), will pay a combined total of $101 million in connection with the plea agreements. In a judgment issued by Judge Edward of the Federal District Court in Boston, Massachusetts, NMC Homecare must pay a criminal fine of $49.3 million; LifeChem, $36.6 million; and MPD, $15.2 million.

Companies ... in brief

Affymetrix (Santa Clara, California) said initial purchasers of its recently completed private placement of $175 million principal amount of 4.75% convertible subordinated notes due 2007 have exercised its option to purchase an additional $50 million of notes, convertible into Affymetrix common stock at a price equal to $321 per share. Proceeds from the offering, including exercise of the option, are $225 million ... Bio-Rad Laboratories (Hercules, California) plans to sell $150 million of its 11 5/8% senior subordinated notes due 2007, through a private placement. Bio-Rad makes life science research products, clinical diagnostics and analytical instrumentation ... BioTransplant (Charlestown, Massachusetts) has completed a private placement of approximately 1.2 million shares of common stock to selected investors, raising $9.7 million, or $8 per share. The company will use the proceeds to advance the clinical development of its AlloMune family of product candidates and other general corporate purposes ... GenVec (Gaithersburg, Maryland) opened its new 43,000-square-foot corporate headquarters and R&D center. The $7.5 million facility will support the development and commercialization of innovative gene-based products to treat heart disease, cancer and other major diseases ... Image Systems (Minnetonka, Minnesota) reported that the Nasdaq SmallCap Market has found it to be in compliance with the bid price requirements for continued listing. Image Systems makes high-resolution, high-bright monitors for customers who have stringent and/or unique requirements, including the medical, military and scientific marketplace ... Mdeverywhere (Durham, North Carolina), said it has raised $11 million in equity financing through venture capitalists Advent International, Acacia Venture Partners, and its first venture investor, Monarch Capital Partners. Jon Brewer of Monarch called Mdeverywhere "the first in a new breed of wireless technology companies that enable mobile professionals to get work done wherever they are."

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