Medical Device Daily Associate

Natus Medical (San Carlos, California) reported that it has agreed to acquire privately held Olympic Medical (Seattle) in a cash acquisition valued at about $19.3 million. The company said it expects to complete the acquisition “immediately.”

Natus, a provider of healthcare products used for the screening, detection, treatment, monitoring and tracking of medical ailments such as hearing impairment, neurological dysfunction, epilepsy, sleep disorders, newborn jaundice and newborn metabolic testing, will pay about $16.6 million at closing and assume Olympic’s existing payables, including roughly $2.7 million of debt. It is expected to have about $1.2 million in cash on its balance sheet as of the closing.

Olympic develops medical products used in the neonatal intensive care unit (NICU) and pediatric department of the hospital, including devices for the detection of neurologic function of newborns.

“The acquisition of Olympic strengthens our position as the market leader in the development of products for the detection, treatment, monitoring and tracking of common disorders in newborns and children,” said Jim Hawkins, president/CEO of Natus during a conference call to discuss the deal.

“We believe that we can add significant value to Olympic Medical by leveraging their unique products through our marketing and sales organizations,” Hawkins said, adding that Olympic “is a profitable operation, delivering high-quality products to their customers, including a significant recurring revenue stream generated through disposable products. We will seek to accelerate Olympic’s sales growth by bringing their products into new markets around the world.”

One of the most promising opportunities that Olympic presents, according to Natus, is its Cool-Cap system, a device designed for infants younger than 36 weeks who suffer brain trauma from a loss of oxygen during delivery — called severe hypoxic-ischemic encephalopathy — which can happen if the umbilical cord is in the wrong position, if the placenta comes loose from the uterus or if the uterus tears.

Cooling, or mild hypothermia, is thought to help prevent the damage that occurs when brain cells are deprived of oxygen and begin to die, especially within the critical six hours following birth.

The device, which is still awaiting FDA approval, was recommended for approval by the FDA’s neurological device panel by a 5-1 vote in June of 2005 (Medical Device Daily, June 21, 2005). “If approved,” said Hawkins, this system “will become the only FDA-approved device on the market for lowering body temperature as a treatment for birth asphyxia.”

He noted that the condition occurs in six out of every 1,000 live births and, according to results presented by Olympic and the FDA, 45% of babies treated with the Cool-Cap just after birth survived without serious brain damage, compared to 34% of babies treated with standard care. The study also showed, however, that the device was not as helpful for patients with the most severe brain injuries.

Since the Cool-Cap is not approved, Hawkins noted that his company expects to take a one-time 4Q06 charge for the write-off of acquired in-process research and development associated with the acquisition, which the company expects could be in the range of $4 million to $6 million.

Another important device for Olympic its CFM 6000, a cerebral function monitor that received FDA marketing clearance in May 2003. It is designed for long-term patient monitoring in the neonatal intensive care unit and other acute-care departments.

The company said it plans to retain Olympic’s Seattle-based operations, as well as their already established brands and existing products.

Jay Jones, president and founder of Olympic, will continue on as president of the organization. Olympic has about 100 employees and recorded sales of $16 million during calendar 2005.

Olympic currently sells it products through telemarketing, mail order and distributors, primarily in the U.S.

In other dealmaking news:

• Pediatrix Medical Group (Fort Lauderdale, Florida) reported the acquisition of Monmouth Neonatal Group (Long Branch, New Jersey), a physician group practice with four physicians and six advanced nurse practitioners. The amount of the transaction was not disclosed.

Combined patient volume for the practice includes more than 8,500 annual NICU patient days at Monmouth Medical Center ’s Level III NICU. The practice specializes in treating premature and low birthweight newborns, focusing on respiratory intensive care services.

Monmouth Medical Center says it was the first community hospital in New Jersey to establish a Level III NICU and its physicians are actively involved in the hospital’s pediatric residency program. Physicians in the group are also part of an initiative designed to enhance the relationship between parents and healthcare providers through a model of care that provides educational support to infants’ families.

Pediatrix paid cash for the practice and the transaction is expected to be accretive to earnings.

Pediatrix is a provider of newborn, maternal-fetal and pediatric physician subspecialty services. Founded in 1979, its neonatal physicians provide services at more than 240 NICUs, and through Obstetrix, its perinatal physicians provide services in many markets where Pediatrix’s neonatal physicians practice. Combined, Pediatrix and its affiliated professional corporations employ more than 890 physicians in 32 states and Puerto Rico.

• AmerisourceBergen (AB; Valley Forge, Pennsylvania) reported that it has completed the acquisition of the outstanding stock of Health Advocates (Tampa, Florida), for about $83 million in cash.

Health Advocates is a provider of Medicare set-aside cost containment services to insurance payors primarily within the workers’ compensation industry.

The new business is expected to be slightly accretive to the company’s fiscal 2007 earnings.

Medicare set-asides are required in certain worker’s compensation settlements. The set-asides are funds established to cover future medical and prescription drug expenses incurred as a result of a job-related injury that would have been paid by Medicare.

Health Advocates, with revenues of about $20 million over the last 12 months, will be renamed PMSI MSA Services and will operate under PMSI, AB’s workers’ compensation services business.

AB is one of the world’s largest pharmaceutical services companies serving the U.S., Canada and selected global markets.