A Medical Device Daily

ArthroCare (Austin, Texas), a developer of minimally invasive surgical products, reported that its board has begun an evaluation of its financial and strategic alternatives to enhance shareholder value.

The board said its decision to look at alternatives is based on its belief that its current stock price does not reflect the value of its business and that it will consider all available options, including recapitalization, stock repurchase, the sale or disposition of one or more corporate assets or a strategic business combination. It has retained Goldman Sachs & Co. to assist in evaluating the alternatives.

“We remain confident in the strength and growth opportunities of our business, as reflected in our reported 2007 results and the guidance previously provided for 2008 in our recent earnings call, as well as the opportunities for near and long-term value creation for our shareholders through execution of our business plan,” said Michael Baker, CEO of ArthroCare.

On Feb. 27, the company reported that it would repurchase up to $75 million of outstanding common stock (Medical Device Daily, Feb. 28, 2008), its second repurchase announcement in two months. ArthroCare also reported repurchase of $75 million of stocks in December 2007.

ArthroCare has recently come under fire from short sellers who have accused the company of having an under-the-radar relationship with DiscoCare (Margate, Florida), a reimbursement company it acquired in January for $25 million in cash, in order to increase sales (MDD, Jan. 7, 2008).

Arthrocare officials have denied that the company has done anything wrong, and has defended the DiscoCare purchase in a special conference call sponsored by Bear Stearns (New York) in late January (MDD, Jan. 23, 2008).

Many of ArthroCare’s products are based on its Coblation technology, which uses low-temperature radio frequency energy to dissolve rather than burn soft tissue, minimizing damage to healthy tissue.

In other dealmaking news:

• NuView Radiopharmaceuticals (Park City, Utah) reported an exclusive license agreement with the University of Southern California (Los Angeles), bringing it development and commercialization rights to a derivative of the naturally found biological molecule adenosine, called F-18 FXA, for use as a diagnostic cardiac PET radiopharmaceutical. The USC Stevens Institute for Innovation facilitated the transaction.

Peter Conti, MD, PhD, Professor of Radiology at USC Keck School of Medicine and NuView medical director is the co-inventor of the F-18 FXA technology. The agreement takes the cardiac application to clinical trials.

“[O]ur Flourine-18 radiolabeled adenosine derivative appears to be a good substrate for imaging the heart and blood flow,” said Conti. “Conducting further studies should help us understand the mechanism of cardiac uptake.”

NuView is a private life sciences company focused developing molecular imaging radiopharmaceuticals for the detection and management of cardiovascular and cancer disease.

• Diagnostics company Vermillion (Fremont, California) said it has entered an exclusive license agreement with Stanford University (Stanford, California) to develop and commercialize a biomarker panel used to assess the risk of peripheral artery disease (PAD).

Vermillion will undertake the development and commercialization of a PAD blood test, which utilizes the multi-marker panel.

In collaboration with Stanford, Vermillion completed a 540-patient clinical study evaluating the ability of the biomarker panel to classify individuals into high- and low-risk groups for PAD, with the results to be published in a clinical journal in the coming months, the company said. Vermillion also is establishing a clinical steering committee to guide a clinical trial to support registration of the PAD test with the FDA.

• Pediatrix Medical Group (Fort Lauderdale, Florida) said it completed the previously disclosed sale of its newborn metabolic screening laboratory to PerkinElmer (Waltham, Massachusetts) for an undisclosed amount of cash.

Pediatrix, which reported its sales plans back in December, said it continues to operate its separate, internally developed newborn hearing screen program, a hospital-based service that screens for hearing loss, typically prior to a newborn’s discharge.

Pediatrix, a provider of neonatal, maternal-fetal and pediatric physician subspecialty services, recently expanded to include anesthesiology services.

• Community Health Systems (CHS; Franklin, Tennessee) reported the sale of nine hospitals to Capella Healthcare (Franklin, Tennessee) a private for-profit hospital company, for $315 million.

The sale includes hospitals in Alabama, Arkansas, Missouri, Oregon and Tennessee with trailing revenue of about $425 million, according to the company.

CHS owns, leases or operates 116 hospitals in 28 states.

• Gentiva Health Services (Melville, New York), a provider of home health services, said it has completed its acquisition of 100% of the interest in Home Health Care Affiliates (HHCA; Memphis, Tennessee), and certain affiliates, for $55 million in cash, subject to post-closing adjustments.

The transaction, extending Gentiva’s home health operations to 37 states, was funded by a combination of Gentiva’s existing cash and revolving credit facility borrowings.

HHCA operates home health and hospice agencies in Mississippi under the brand names Gilbert’s Home Health and Gilbert’s Hospice Care. It said the transaction will be accretive to FY08 results.