A slowing economy that is close to meeting the classical definition of recession has led to a falloff in dealmaking in the medical device sector, but that doesn't mean things have been stagnant. According to a tabulation of deals by BBI's sister publication, Medical Device Daily, approximately 440 separate deals were announced and/or completed through the end of September, in all worth more than $330 billion, not including those for which no terms were disclosed.
The most active company in this sector has been Boston Scientific (BSX; Natick, Massachusetts), recording six major purchases in an effort to round out and strengthen its pipeline of products in interventional medical technologies. Boston Scientific began the buying spree in February, when it completed the acquisition of Interventional Technologies (IVT; San Diego, California), a maker of balloon angioplasty systems, and followed that with the purchases of Embolic Protection (Campbell, California); Quanam Medical (Santa Barbara, California); Catheter Innovations (Salt Lake City, Utah) and Cardiac Pathways (Sunnyvale, California). Of the reported deal values, the total was $585 million, with the largest purchase being the $345 million purchase of IVT. Additionally, the company made an undisclosed investment in Endotex Interventional Systems (Cupertino, California), in a deal including an exclusive option to purchase the company, which specializes in carotid stent technology.
A key acquisition Boston Scientific failed to land was Israel-based Medinol, its partner supplying it with nitinol stents. After months of negotiations, Medinol rejected Boston Scientific's offers as being far below the company's worth, with the two companies then launching suit and countersuit activity which is likely to be protracted and expensive.
Medtronic (Minneapolis, Minnesota) was not far behind in big dealmaking activity, and it recorded the No.1 deal in terms of value with the $3.8 billion purchase of MiniMed (Northridge, California) and a stake in Medical Research Group (MRG) in August, thus launching the company into the diabetes market in a very big way. MiniMed and MRG were combined to form Medtronic MiniMed, which will be headquartered in Northridge. In other purchases prior to that blockbuster deal, Medtronic acquired intellectual property related to intravascular sensing and signal detection from Cardima (Fremont, California) and purchased the assets of the Contegra Pulmonary Valved Conduit product line from VenPro (Irvine, California).
Johnson & Johnson (J&J; New Brunswick, New Jersey) was also a big acquirer. At the beginning of the year, it made two major purchase in the cardiovascular sector. Its Cordis (Miami Lakes, Florida) subsidiary purchased Atrionix (Palo Alto, California); and J&J purchased Heartport (Redwood City, California), with Heartport merged into the Cardiovations division of J&J's Ethicon (Somerville, New Jersey) unit. In the diabetes, sector, J&J purchased Inverness Medical Technology (Waltham, Massachusetts) in a stock-for-stock deal worth $1.3 billion, giving J&J Inverness' One Touch blood glucose meters and test strips and its fluid sampling technology. Inverness will become part of J&J's LifeScan division, a manufacturer of blood glucose monitoring systems. J&J also made a highly visible and expensive move into the pharmaceutical sector, acquiring Alza (Mountain View, California) for $10.5 billion, a price tag surpassing the $4.9 billion it paid for Centocor (Malvern, Pennsylvania) in 1999.
Other dealmaking highlights in the over-$200 million category, through September:
Tyco International (Pembroke, Bermuda) agreed to purchase C.R. Bard (Murray Hill, New Jersey) for $3.2 billion, its lone medical technology purchase thus far in 2001. The acquisition will give Tyco Healthcare new product lines in hernia repair, gastroesophageal reflux disease treatment, prostate cancer and peripheral vascular disease products.
Royal Philips Electronics (Amsterdam, the Netherlands) in July said it would purchase Marconi Medical Systems (Cleveland, Ohio) for $1.1 billion – that deal completed late last month – giving it leadership in computed tomography scanning and strengthening its position in magnetic resonance imaging and nuclear medicine. Philips also agreed to a five-year technology partnership with Marconi to purchase up to $150 million of Marconi's communications solutions. And in August, Philips completed the acquisition of Agilent Technologies' (Palo Alto, California) Healthcare Solutions Group (Andover, Massachusetts), which focuses on imaging, monitoring and resuscitation products. Agilent received $1.6 billion in cash proceeds and an additional $100 million to satisfy post-closing conditions.
In September, GE Medical Systems (Waukesha, Wisconsin) said it would buy Imatron (South San Francisco, California) for about $200 million in stock to broaden its medical imaging portfolio. Additionally, GE Medical Systems Information Technology (GEMSIT; Milwaukee, Wisconsin) in July said it would purchase Data Critical (Bothell, Washington) for $68 million to advance its clinical information systems. And GEMS also made a move to buy about 65.4% of the shares of Kretztechnik AG (Zipf, Austria), a maker of 3-D ultrasound systems, from Medison (Seoul, South Korea).
Baxter Healthcare (Deerfield, Illinois) signed a deal to purchase the assets of Cook Pharmaceutical Solutions (Bloomington, Indiana), the drug delivery unit of the Cook Group, for $219 million. In August, Baxter Healthcare's parent company, Baxter International, bought ASTA Medica Onkologie GmbH & Co. (Frankfurt, Germany), the medical oncology subsidiary of Degussa AG (Dusseldorf, Germany), for $470 million. Announced at the same time, Baxter also purchased some assets of the cell processing business of Nexell Therapeutics (Irvine, California) for $4.3 million.
Creating a dominant player in the field of heart-assist devices, Thoratec Laboratories (Pleasanton, California) acquired Thermo Cardiosystems (Woburn, Massachusetts) in a stock-for-stock deal worth $570 million. The new company, will continue to focus on cardio-assist devices.
Dentsply International (York, Pennsylvania) purchased Degussa Dental, a unit of Degussa AG (Frankfurt, Germany), for $500 million, with the combination creating a professional dental products company more than three times the size of its nearest competitor.
In June, SPX (Muskegon, Michigan) signed an agreement to acquire Kendro Laboratory Products (Newton, Connecticut), a maker of sample preparation and processing products and services for various life sciences markets, for $320 million in cash.
In a big-bucks deal in the distribution sector, AmeriSource Health (Valley Forge, Pennsylvania) and Bergen Brunswig (Orange, California) merged in a $7 billion stock-for-stock deal creating a new company, AmerisourceBergen, to be based in Valley Forge. The merger of the two major suppliers of pharmaceuticals and related health care services was expected to produce about $35 billion in annual operating revenue.
AbioCor implants are 3rd and 4th in trial
Continuing its policy of little fuss and less fanfare, Abiomed (Danvers, Massachusetts) reported two more implants of its AbioCor artificial heart in late September and mid-October without releasing many details about the procedures or the patients. The latest implants are the third and fourth in the company's five-implant enrollment of the trial approved by the FDA.
While the first two implants were performed at Jewish Hospital (Louisville, Kentucky), the latest were carried out at two other heart centers: The third implant was performed Sept. 27 at St. Luke's Episcopal Hospital (Houston, Texas), home of the Texas Heart Institute, and the fourth on Oct. 18 at the UCLA Medical Center (Westwood, California).
The implant procedure at St. Luke's was carried out by a team led by Dr. O.H. (Bud) Frazier, who had been present in the operating room during the second implant in Louisville. St. Luke's was established in 1954 by the Episcopal Diocese of Texas, and the Texas Heart Institute was founded there by famed cardiovascular surgeon Denton Cooley in 1962, specifically for the study and treatment of disease of the heart and blood vessels. The third procedure came on the heels of a statement concerning the condition of the first two implanted patients, Bob Tools and Tom Christerson. Both men, that statement said, had been doing well enough to receive guests. At presstime, Tools had been living nearly four months sustained by the AbioCor, and he was "gaining weight and enjoying excursions outside the hospital," according to his surgeons.
The fourth implant, at the UCLA Medical Center, was carried out, according to a press statement from Abiomed, in an 11-hour procedure by cardiothoracic surgeons Hillel Laks and Daniel Marelli and cardiologist Jaime Moriguchi, the principal investigators of the medical center's trial team. Laks, professor and chief of cardiothoracic surgery at UCLA's School of Medicine and director of the facility's heart, lung and heart-lung transplant program, described the implant procedure as having taken place "exceptionally well" and that the AbioCor device was "functioning beautifully."
Except for describing the latest AbioCor recipient as "a man in his 70s," and saying he was "resting comfortably," Abiomed and the medical centers continue the policy of withholding additional details in order to protect patient privacy and to maintain focus on clinical care. According to the few reports issued thus far, the first three AbioCor recipients were all making progress in their rehabilitation. All had required initial ventilation and had some minor problems with internal bleeding, but they have been described as showing improved health.
In the latest statement, the UCLA Medical Center's heart transplant program is described as "one of the largest in the world, having performed more than 1,100 heart transplants since the program began in 1984." Laks founded the UCLA Alternate Recipient Heart Transplant Program in 1992, and he was the first U.S. cardiac surgeon to perform bypass surgery on a donor heart prior to transplantation.
In Europe, the North Rhine-Westphalia Heart Center (Oeynhausen, Germany) has been identified by Abiomed as the first site to perform the implant of an AbioCor in that region, with the European trial set to begin within the next six months.
Hounded, Huntingdon to move to U.S.
Huntingdon Life Sciences (Abingdon, England) said it will move its headquarters to the United States in order to shield its directors and shareholders from animal rights activists who have waged a prolonged and frequently violent war to compel the company to close down.
Huntingdon will be delisted from the London Stock Exchange and will be restructured as the sole subsidiary of a new shell company, Life Sciences Research (LSR), based in Maryland and backed by a group of non-UK private investors with $1.5 million. LSR, which will be traded on the Nasdaq market, will be run by existing Huntingdon directors and management if shareholders agree to the proposed 1-for-50 share offer that will give them an 85.4% stake in the new company.
Responding to the news of Huntingdon's move to the U.S., Greg Avery of Stop Huntingdon Animal Cruelty (SHAC), said that HLS was "on the run." But he said that U.S. rules would not stop campaigners targeting the company and its backers: "We will now concentrate on targeting their customers." The group also is likely to target Huntingdon's look-alikes in Britain, but there have only been limited protests to date at the three largest contract research organizations there: Quintiles (Edinburgh, Scotland), Covance (Harrogate, England) and Inveresk (Tranent, Scotland). High-profit genetic research organizations, such as the Roslin Institute (Edinburgh, Scotland), which created Dolly the cloned sheep, could also be future targets. Leaders of Stop Huntingdon Animal Cruelty are due in court for the imprisonable offense (under English law) of creating a public nuisance.
Despite the $1.5 million price tag to move Huntingdon to the U.S., Brian Cass, managing director, said it was the "most practical and cost-effective way" to restructure. The Huntingdon trade name will be retained and contract laboratory work at the U.S. and UK laboratory locations will not be affected. In spite of a strong order book, with revenues at their highest level for four years, Huntingdon reported a 61% increase in pre-tax losses to $9.3 million for the six months to June 30.