It appears that the high-stakes game of “chicken” between Guidant (Indianapolis) and suitor Johnson & Johnson (J&J; New Brunswick, New Jersey) is over, with Guidant flinching first to the tune of roughly $4 billion. The two companies said in mid-November that the merger agreement had been restructured, with J&J now scheduled to pay about $21.5 billion for , nearly $3.9 billion less than the original $25.4 billion that the companies had agreed upon when the deal was first disclosed late last year.

Under the new terms, which have been approved by the boards of directors of both companies, each share of Guidant common stock will be exchanged for $33.25 cash and 0.493 shares of J&J common stock. The new price of $63.08 per share –$12.92 less than the original $76 per share price – represented a 9% premium over Guidant’s closing share price the day before the revised deal was unveiled. The final cost to J&J will be $19 billion after backing out Guidant’s cash on hand. Guidant shareholders still must approve the revised agreement. If that happens, the companies said they expect to close the transaction in 1Q06.

With the agreement on the revised deal, Ron Dollens, Guidant’s president and CEO, announced his immediate retirement from the company and board of directors after more than a decade of leading the organization. The company’s board also said that James Cornelius, previously non-executive chairman of the board, would become chairman and interim CEO.

“The combination with Guidant will help us address more aspects of cardiac disease than ever before, bringing new capabilities in cardiac rhythm management for the treatment of heart failure and arrhythmias and bringing complementary skills in coronary stenting for the treatment of coronary artery disease,” said J&J Chairman and CEO William Weldon during a conference call on the revised merger terms.

J&J CFO Robert Darretta Jr. said the Guidant buy should have an “immediate impact” on J&J’s sales and structure. He said during the conference call that assuming the deal is closed on schedule, the company’s Medical Devices and Diagnostics business segment would represent more than 40% of J&J’s sales, “and in fact, will become the largest of our three business segments,” which also include Consumer and Pharmaceuticals.

The acquisition, he said, will help to promote “greater balance” between the company’s business segments. In contrast, he pointed out that in 4Q01 nearly two-thirds of J&J’s operating profits came from its pharmaceutical business segment.

The deal, which originally was expected to close in 3Q05, appeared to be in jeopardy due to Guidant’s continued problems over this past summer with the recall of thousands of pacemakers and implantable cardioverter defibrillators (ICDs). When J&J showed signs of wanting to back away from the original deal earlier in November, Guidant sued J&J to complete it as originally structured.

J&J had maintained, however, that it did not feel bound by the original terms of the deal because product recalls and related regulatory investigations, claims and other developments have had “a material adverse effect” on Guidant’s value. Since June, Guidant has recalled or issued warnings on about 88,000 ICDs – including its top seller, the Contak Renewal 3 – and almost 200,000 pacemakers because of reported malfunctions. The company has resumed sales of the recalled devices, but it has taken a hit in its market share and reputation, primarily because of reports that the company failed to alert physicians and patients for nearly three years about a design flaw that could cause one of its ICDs, the Ventak Prizm 2 DR model, to short-circuit and malfunction and that Guidant kept selling older versions of the device after developing an improved model of the device not prone to short-circuiting.

In a federal filing the week prior to the announcement of the revised deal, Guidant said the Securities and Exchange Commission had launched a formal inquiry into product disclosures and trading of its shares. It also said it is now the subject of civil investigations led by the attorneys general of Arizona, Oregon and Illinois on behalf of a total of 34 states and the District of Columbia. And New York Attorney General Eliot Spitzer sued Guidant for fraud, accusing it of not telling doctors about a potentially fatal flaw in some of its ICDs. That suit follows close on the heels of similar filings by the attorneys general of Massachusetts and Minnesota. The company also faces numerous lawsuits from patients and shareholders

Guidant said that despite the financial change, the agreement with J&J was as fundamentally strong today as it was back in December. “The fact is that this agreement makes sense for Guidant’s shareholders and employees,” Cornelius said during the conference call, adding: “It appropriately reflects the business challenges we’ve experienced during this period.” He said the company “remain[s] confident about Guidant’s capabilities to rebuild its Cardiac Rhythm Management market share,” though he acknowledged that rebuilding “will require time, resolve and resources. The union with Johnson & Johnson will allow us to address these issues and do more for patients with cardiovascular disease than ever before.”

The Federal Trade Commission (FTC) conditionally approved the proposed acquisition on Nov. 2. Under the terms of the FTC’s conditional approval, if the deal is consummated, J&J will be required to: 1) grant to a third party a fully paid-up, non-exclusive, irrevocable license, enabling that third party to make and sell drug-eluting stents (DES) with its Rapid Exchange (RX) delivery system; 2) divest to a third party its endoscopic vessel harvesting (EVH) product line; and 3) end its agreement to distribute Novare Surgical Systems’ (Cupertina, California) Enclose proximal anastomotic assist device.

J&J already has agreed to license its DES assets to Abbott Laboratories (Abbott Park, Illinois). The company also has reached an agreement to sell its EVH assets to Datascope (Montvale, New Jersey). As for Novare, the FTC said it expects that company would be able to find a new Enclose distribution partner “within the next couple of months.”

Previously, as part of the European Commission’s clearance of the deal on Aug. 25, J&J agreed to divest the European steerable guidewires business of its Cordis (Miami Lakes, Florida) unit and the Guidant Endovascular Solutions (Menlo Park, California) business in Europe. It said it is in the process of identifying purchasers for those businesses.

Dollens has been Guidant’s CEO from its initial public offering in 1994 and subsequent spin-off from Eli Lilly and Co. (also Indianapolis) to the present. He served a combined 32 years with those two companies. “I am confident that it is the proper time to pursue my previously announced retirement,” he said in a company statement. “I’ve been privileged to lead Guidant over the last 11 years and build a solid foundation of organic growth from innovation, global sales distribution capabilities, access to key markets and a dedicated leadership team. These capabilities have been a hallmark of Guidant in the past and will continue into the future under Johnson & Johnson.”

Dollens announced in May 2004 that he planned to retire on Dec. 31 of that year. However, with the disclosure of the merger with J&J in the latter month, he agreed to stay on to shepherd the company through the acquisition process, which turned out to be much more difficult due to the slew of ICD and pacemaker recalls reported earlier this year.

Panel backs idea of OTC sale of HIV tests

An FDA advisory panel last month came down in favor of eventual over-the-counter (OTC) sales of HIV tests, an opinion that buoys manufacturer OraSure Technologies (Bethlehem, Pennsylvania), which said it is likely to move forward with such plans. “It’s our definite intent,” Doug Michels, the company’s president and CEO, told The BBI Newsletter. “I think after our next meeting with the FDA, in which we discuss that, we’ll have a better idea on the timing.”

He said OraSure hoped to secure that meeting within the next 30 days to begin to lay down an OTC regulatory path for its OraQuick Advance rapid HIV-1/2 antibody test, which already has FDA clearance for use in hospitals and labs. The oral fluid product’s “rapid” designation stems from its ability to deliver an answer in 20 minutes, during which time it detects antibodies to HIV-1 and 2 following a saliva swab.

Any movement on gaining OTC status is likely to require clinical studies to ensure that the oral fluid product’s packaging and labeling translate into correct consumer use. That was the general message from members of the FDA’s Blood Products Advisory Committee.

“It’s feasible for such a test to be developed, with due caution,” said Jay Epstein, MD, director of the agency’s Office of Blood Research and Review. He called the meeting an “initial step” and a “proactive” move by the FDA in anticipation of a coming OTC application. “I think we have to take under consideration the advice we received today,” Epstein said, “and then establish our review criteria in anticipation of an application.”

Elliot Cowan, PhD, who heads the product review branch of the FDA’s Division of Emerging and Transfusion Transmitted Diseases, acknowledged a number of benefits of OTC testing, including anonymity and earlier intervention. But he hedged such positives in relation to its risks, most notably inappropriate use and negative post-notification outcomes, especially among teens, in the absence of counseling. However, Joseph Inungu, MD, of Central Michigan University (Mt. Pleasant, Michigan), allayed concerns about suicide with data showing that “notification of a positive HIV test does not appear to lead to a sudden and substantial rise in suicide death.”

Additional issues raised at the meeting included the need for supplemental tests for confirmation, reporting requirements to government agencies and multi-lingual packaging. Michels emphasized the need to show that individuals can accurately interpret instructions, effectively perform the test and interpret its results, and get linked to follow-up care. “Those are issues of primary importance,” Inungu said.

In addition to OraSure, the commercial opportunity could draw others. Already, three additional rapid HIV tests have FDA approval in the hospital or other laboratory settings and compete with OraQuick Advance in those markets. One, the Reveal test from Medmira (Halifax, Nova Scotia), already has OTC status in Hong Kong. That company has its eyes on the FDA’s attitudes toward OTC HIV testing, as evidenced by the attendance of several of its executives at the advisory meeting. But Giles Crouch, Medmira’s vice president of sales and marketing, noted that while OTC status could clearly benefit public health, he cautioned that from a business standpoint, companies should not expect the products to fly off the shelves because of the myriad social stigmas attached to HIV testing. He said that OTC sales would likely only represent about 8% of Reveal’s overall sales; the serum diagnostic product generated about $500,000 in Medmira’s most recent quarter as the company continues to ramp toward commercialization.

GE Healthcare/Volcano in joint development

In an agreement that had its beginnings with discussions late last year, GE Healthcare (Waukesha, Wisconsin) and Volcano (Rancho Cordova, California) last month reported what they are calling a “significant” development collaboration to bring an “industry-first” imaging capability to cardiac catheterization labs around the world. GE and Volcano will cooperate in developing a digital cardiovascular imaging system with integrated intravascular ultrasound imaging (IVUS) capabilities, the companies said.

Bradley Fox, business manager for the Interventional, Cardiology and Surgery business at GE Healthcare, in an e-mail response to BBI, said that project resulted from exploratory discussion in 2004, “exchanging views on the marketplace and directions we were headed with our product lines. We found that we have a very similar view of where interventional cardiology is heading and that we both felt strongly that integration within the cath lab would be a major factor in both improving workflow and in enabling and optimizing new procedures.”

The integration of GE’s Innova all-digital X-ray cath lab system with Volcano’s new PC-based IVUS platform focuses on providing a precise view of coronary and peripheral vessel morphology for the interventional cardiologist. That capability will assist in determining the extent of cardiovascular disease to guide therapeutic procedures, such as stent placement, by determining the exact lesion length and stent length.

“Our integration will be based on Volcano’s S5 device,” introduced at the Transcatheter Cardiovascular Therapeutics meeting in Washington in October, Fox said. The imaging device produced, he said, will be co-developed by Volcano’s team in Rancho Cordova and GE Healthcare’s cardiovascular X-ray team in Buc, France. Fox said the combination of Volcano’s IVUS system and the GE Innova family of interventional suites will be “the first of its kind. Today, clinicians are realizing that intravascular imaging can play a significant role in the success of [drug-eluting stent] deployment – allowing them to assess disease beyond the ‘narrowing’ visible on the angiogram.”

He added that a decision not to use IVUS “is heavily influenced by the workflow impact of having to wheel in and set up the IVUS system. The displays and data management are also not integrated.”

By contrast, the combining of technologies “allows the use of IVUS to be integrated into the workflow [to] simply select and plug in an IVUS catheter – the system will always be there, controlled from tableside with display integrated in the overhead monitors.”

Scott Huennekens, president and CEO of Volcano, said in statement, “We have a shared philosophy with GE [that] success in the marketplace is founded on providing solutions that are both state-of-the-art and simple to use.” He said the goal of the collaboration is not “technology for technology’s sake,” but rather “meeting the clinical needs of our customers in a way that also simplifies their lives and makes their own cath lab operations more efficient and more cost-effective – all while allowing the physician to improve patient care.”

Volcano says its latest PC-based IVUS platform “dramatically reduces the size, weight and noise of the IVUS console, allowing the unit to be easily attached to the patient table, in the control room or in other areas outside of the daily traffic pattern of the cath lab.” With more than 1,200 Innova all-digital X-ray systems installed worldwide, the companies say there is a clear market need for this type of integrated system. GE also will collaborate with Volcano to provide cath lab design, installation and field repair/service of this new system. Current GE cath lab customers can modify existing cath lab rooms with the new integrated IVUS system.

According to Fox, GE Healthcare expects the integrated product to be available by 2Q06. “The GE Innova systems and the Volcano S5 system have both received 510(k) clearance from the FDA,” Fox said in his e-mail. “We are evaluating what additional regulatory actions will be required for the integrated product.” After receiving U.S. and international clearances, the system will be co-marketed by the GE and Volcano organizations.

Volcano also reported that it had reached an agreement with Paieon (New York) to jointly develop products allowing in-the-cath-lab combination of X-ray angiography (in both 2-D and 3-D views) with intravascular ultrasound in the cath lab. The Volcano/ Paieon system is expected to allow physicians and their staff to quickly assess regions of the coronary tree and simultaneously visualize both the patency of the arterial lumen and the presence, quantity and type of coronary atherosclerotic plaques. The companies said that the new composite coronary imaging technology will fuse the images and information from angiograms and ultrasound, making the product fast, simple and readily available to research centers and community hospitals alike.