Medical Device Daily
In a year-end deal that will now position orthopedics giantStryker(Kalamazoo, Michigan) as one of the largest device reprocessing firms in the U.S., the company has signed a definitive agreement to acquire privately heldAscent Healthcare Solutions(Phoenix) in an all-cash transaction valued at $525 million."Stryker's move into the reprocessing and remanufacturing market underscores its commitment to reducing healthcare costs and preserving the environment. Reprocessing and remanufacturing saves hospitals money and reduces medical waste," Patrick Anderson, Stryker's vice president, corporate affairs, told Medical Device Daily. "Reprocessing certain single use devices (SUD) can significantly reduce supply chain costs, enabling many hospitals to save more than $500,000 annually in unnecessary costs and redirect critical funds to patient care initiatives. Reprocessing certain SUDs can also eliminate hundreds of tons of waste annually in local communities."
This is the second acquisition for Stryker this quarter on top of some hefty deals. The company is making use of $2 billion in cash reserves.
Last month it spent more than $100 million to acquire OtisMed (Alameda, California), a software company. At the same time, Stryker reported it would acquire the assets used to produce Sonopet Ultrasonic Aspirators, a bone-cutting tool, and its accessories from Mutoh (Tokyo) and Synergetics USA (O'Fallon, Missouri). At the time, Stryker said it will make $67 million in upfront payments in the two deals, plus potential future milestone and royalty payments of up to $36 million. Those transactions were expected to close this year (MDD, Nov. 12, 2009).
The current acquisition, also expected to close by year end 2009, is expected to be neutral to Stryker's 2010 earnings per share. The deal is subject to customary closing conditions and the board of directors of both Stryker and Ascent, as well as Ascent shareholders, have all approved the transaction.
Ascent was formed in 2005 in a merger of medical device reprocessors Alliance Medical (Phoenix) and Vanguard Medical Concepts (Lakeland, Florida) (MDD, Aug. 16, 2005). At the time, Ascent reported that it represented close to half of the hospitals in the U.S. who use reprocessed medical devices, making it the largest third-party reprocessor of single-use medical devices.
Ascent currently provides its services to 1,800 hospitals and numerous group purchasing organizations throughout North America. In 2008 it reported sales in excess of $100 million.
"The U.S. disposable medical devices market is roughly $32 billion, of which it's estimated that $3.6 billion consists of devices that can be safely reprocessed," Anderson said. "Because reprocessed products are approximately 50% the cost of OEM products, the target market for reprocessing and remanufacturing is approximately $1.8 billion."
Both companies seem focused on the fact that the merger will not only contribute to the nation's efforts to reduce healthcare costs, but that it's a "green" move.
Rick Ferreira, COO of Ascent, said, "Together, Stryker Corporation and Ascent Healthcare Solutions will be in a position to offer multiple ways to serve a sector that is under increased pressure to control costs and reduce its environmental footprint while maintaining the highest possible quality in patient care."
Ascent will become a division of Stryker operating under the MedSurg group of businesses and will continue to be known as Ascent Healthcare Solutions.
Ascent offers products in 35 medical device families including cardiovascular, endoscopic/laparoscopic, gastroenterology, general surgery/respiratory, ophthalmology and orthopedic/arthroscopic.
In other dealmaking news:
• Intelliject (Richmond, Virginia) reported an exclusive license with sanofi-aventis U.S. (Bridgewater, New Jersey) for an epinephrine auto-injector, in the U.S. and Canada territory. Under the license, sanofi-aventis U.S. will be responsible for manufacturing and commercialization. Intelliject will be responsible for the on-going development and for obtaining U.S. regulatory approval and has retained certain co-promotion rights in the territory.
Sanofi-aventis U.S. will pay an initial upfront payment of $25 million. Intelliject will also be eligible to receive development and commercial milestones of up to $205 million as well as tiered double-digit royalties on sales of any products commercialized under the license.
Anaphylaxis is a severe allergic reaction that involves a number of body systems and can be fatal within minutes. It's estimated that there are up to 2,000 episodes of anaphylaxis per every 100,000 people in the U.S. each year.
• Covidien (Dublin) has completed a previously reported sale of its Oxygen Therapy assets to Chart Industries (Garfield Heights, Ohio). Financial terms of the transaction were not disclosed.
The sale of the Oxygen Therapy product line, which includes products sold under the Companion and Helios brands, was made following a thorough review and evaluation of a number of strategic alternatives. The decision is consistent with Covidien's strategy to streamline its portfolio and reallocate resources to its faster-growing, higher-margin businesses.
• Del Global Technologies (Roselle, Illinois) and UMG (Harrison, New York) have completed the transaction to sell certain assets and the product lines of Del Medical Imaging from Del Global to UMG. The transfer of ownership was finalized on Nov. 24. The name of the new entity is Del Medical and will remain at its current location in Roselle.
"UMG intends to continue to run Del Medical, Inc. as a wholly-owned subsidiary, enhance the existing product line and maintain the collective current channels of distribution," said Toufic Lorenzo, president/CEO of UMG.
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