Med-tech giant Medtronic (Minneapolis) has its sights set on a Canadian company that uses freezing to treat heart arrhythmias – and has agreed to pay $380 million in cash to buy it.

The company said yesterday it would make a takeover bid for all of the outstanding shares of CryoCath (Montreal) for C$8.75 a share in cash, or $380 million (C$400 million). The CryoCath board has recommended that its shareholders accept the offer, and the acquisition is expected to close in 4Q08.

The offer price represents a 97% premium to the closing price of the common shares of CryoCath on Wednesday, the last trading day prior to the announcement of the offer and a 93% premium to the volume weighted average trading price of the shares for the last 20 trading days.

CryoCath agreed to a non-solicitation covenant, subject to "fiduciary out," superior proposal and right-to-match provisions and a $13.6 million break-up fee in "certain circumstances," Medtronic said.

CryoCath makes cryotherapy products to treat cardiac arrhythmias. Its flagship product, the Arctic Front, is a minimally invasive cryo-balloon catheter designed to treat atrial fibrillation (AF), an emerging $2 billion market opportunity. The device is already sold in Europe and is in a pivotal study in the U.S.

"We think there is a lot of opportunity in atrial fibrillation and that the afib market is in a lot of ways underpenetrated," Christopher Garland, a Medtronic spokesman, told Medical Device Daily.

Garland said Medtronic sees CryoCath as the market leader in the space.

"Medtronic estimates that up to five million patients worldwide are impacted by atrial fibrillation," said Pat Mackin, president of the Cardiac Rhythm Disease Management business and senior VP at Medtronic. "Medtronic and physicians are interested in procedures that are safer, faster and less complex so that more patients can benefit from treatment."

Jan Keltjens, president/CEO of CryoCath, said he considered the offer an endorsement of his company's cryoablation technology and the role that the Arctic Front device will play in treating AF patients around the world.

"This offer delivers significant value. Joining forces with Medtronic at this stage in our development will dramatically expand our reach and accelerate innovation to the benefit of patients today and tomorrow," Keltjens said.

AF is considered the most common form of chronic heart arrhythmia, but the current "gold standards" for treating the heart rhythm disturbance are not working well. Medical management – primarily the use of pharmaceuticals – is the first line of treatment for AF but it has proven to have poor efficacy and difficult side effects for the majority of patients. Drug therapy fails to work for up to 50% of AF patients, so device and surgical approaches such as catheter ablation have become increasingly seen as potential solutions.

So far none of these devices have been approved specifically to treat AF – but that hasn't kept companies from trying. The list of companies making products for this erratic heart condition continues to grow. In addition to CryoCath and Medtronic, that list includes Ablation Frontiers (Carlsbad, California); Cardima (Fremont, California); St. Jude (St. Paul, Minnesota); Atricure (West Chester, Ohio); Stereotaxis (St. Louis); Symphony Medical (Eden Prairie, Minnesota); Medical CV (Inver Grove Heights, Minnesota); eCardiodiagnostics (The Woodlands, Texas); Estech (San Ramon, California); Atritech (Plymouth, Minnesota); Sorin Group (Mannheim, Germany); ProRhythm (Ronkonkoma, New York); Lechnologies Research (Milwaukee); Siemens Medical Solutions (Malvern, Pennsylvania); and PDSHeart (Conyers, Georgia).

Asanté Partners is the financial advisor to CryoCath and legal counsel is Davies Ward Phillips & Vineberg. Stikeman Elliott is representing Medtronic.