A Medical Device Daily

CardioNet (Conshohocken, Pennsylvania) reported that it terminated a merger agreement with Biotel (Eagan, Minnesota). Reasons for the cancellation were not disclosed.

Earlier this year, the two companies entered into a binding definitive merger agreement for CardioNet to acquire Biotel for $4.82 per share in cash, for a total transaction value of about $14 million (Medical Device Daily, April 3, 2009).

The acquisition of Biotel was intended to expand CardioNet's product portfolio with a recently approved wireless event monitor, enhancing CardioNet's leadership position in the rapidly emerging field of wireless medicine, the company said at the time.

As part of the acquisition, CardioNet was supposed to acquire Biotel's wholly-owned subsidiary, Agility Centralized Research Services (Chicago), a provider of event, Holter and 12 lead ECG monitoring services.

CardioNet reported last week that it received a letter from Highmark Medicare Services stating effective Sept. 1, 2009 Highmark was adjusting its reimbursement rate for MCOT services to $754 per service. This reimbursement change affects all providers covered under CPT Code 93229.

Randy Thurman, chairman, president/CEO of CardioNet, said, "CardioNet strongly believes that this reduction is unjustified and will immediately pursue with Highmark and CMS a methodology that appropriately values MCOT technology and related services. This review with Highmark and CMS will reinforce for Medicare the demonstrated benefit of Mobile Cardiac Outpatient Telemetry in detecting cardiac arrhythmias and improving the health of Medicare beneficiaries.

"We are strong proponents and supporters of the very real need to manage the cost of healthcare. We believe that early diagnosis through innovation in technology is fundamental to the provision of high quality healthcare and a cost efficient U.S. healthcare system. Nearly 250,000 patients have been enrolled in MCOT to date with physicians and patients greatly benefiting from the CardioNet MCOT technology and service. We have made it our mission at CardioNet to educate the medical community about the value of wireless medicine in the diagnosis and detection of disease and we will further increase our efforts to demonstrate its potential to substantially lower costs to both patients and payers."

Royal Philips (Amsterdam, the Netherlands) reported that it has agreed to acquire the assets of InnerCool Therapies (San Diego) in a deal with an overall value of $12.75 million. InnerCool was founded in 1998 and in 2006, Cardium Therapeutics (San Diego) acquired the medical device company for about $6 million. Philips described the InnerCool deal as an asset purchase for $11.25 million. In addition, Philips agreed to the transfer of about $1.5 million in trade payables. InnerCool makes a catheter device designed to cool blood that travels to the brain, reducing the risk of damage in patients who suffer aneurysms or heart attacks.

In other dealmaking news:

• Zila (Scottsdale, Arizona) reported that it responded to a complaint filed in the Delaware Court of Chancery by Intelident Solutions (Tampa, Florida), a company that previously proposed to acquire Zila for 42 cents per share (MDD, July 14, 2009).

"Zila is disappointed that Intelident is using a litigation strategy to achieve its objectives," according to a company statement. "Intelident appears to be attempting to confuse shareholders with an offer that clearly fails to satisfy conditions necessary to consummate a transaction. Intelident was involved in litigation when it acquired Coast Dental. Zila will not comment on the litigation, but is confident that the Delaware court will reject Intelident's claims, so that Zila can avoid bankruptcy and bring value to its shareholders. The board continues to be prepared to review and act upon superior offers for the benefit of its shareholders in accordance with the exercise of its fiduciary duties."

Zila reported earlier this week that after its board reviewed a non-binding contingent proposal submitted by Intelident Solutions, it concluded that the Intelident proposal is not superior to Zila's existing agreement to be acquired by Tolmar (Fort Collins, Colorado) for 38 cents per share (MDD, June 29, 2009).

Zila is a diagnostic company focused on oral cancer and periodontal disease.

In addition to breaching the contract, the complaint alleges that Zila's directors breached their fiduciary duties to Zila's shareholders by entering into an agreement with Tolmar that prevents the Zila Board from accepting Intelident's "superior proposal" and that it fraudulently induced Intelident into executing a non-disclosure and standstill agreement by misrepresenting that Intelident could negotiate the purchase of Zila's senior secured notes.

• Absorption Systems (Exton, Pennsylvania) reported the acquisition of Perry Scientific (San Diego), an in vivo toxicology and pharmacokinetics testing company. Perry's research services include testing for toxicology, medical devices, preclinical models and CNS pharmacology. These services complement Absorption Systems' portfolio of products and services, which provide definitive data regarding the absorption, distribution, metabolism and excretion, or ADME properties, of small molecules in order to help pharmaceutical companies advance their new drug candidates toward clinical testing and ultimately, regulatory approval.

Terms of the deal were not disclosed.

• Sanarus Technologies (Pleasanton, California) has purchased the assets of Sanarus Medical, a developer of minimally invasive medical devices for diagnosing and treating breast disease. Key members of the management team have joined Sanarus Technologies to provide a continuing base of knowledge, relationships and experience. Terms of the acquisition were not disclosed.

• Grubb & Ellis Healthcare REIT (Scottsdale, Arizona; to be renamed Healthcare Trust of America), a self-managed non-traded real estate investment trust reported the execution of a purchase and sale agreement to acquire a 16 building portfolio from Greenville Hospital System (Greenville, South Carolina). The transaction involves approximately 855,000 square feet of medical office and related space for about $161 million.