06.11.12
Layoffs to Come for Medtronic
Medtronic Inc. announced in early May that it would lay off 220 employees across the United States as it “restructured” its cardiac rhythm disease management division, based in Mounds View, Minn. Later in the month, that number jumped to 250 cuts in the Twin Cities, and 1,000 jobs cut across the rest of the country. The company has not yet disclosed exactly what type of jobs will be eliminated.
The company seems to be moving more toward its global footholds. This doesn’t necessarily mean automatic downsizing within the United States, but this block of layoffs could indicate otherwise. In an interview on April 25, Medtronic CEO Omar Ishrak pointed to “huge opportunities” in global markets. “I think there’s plenty of growth available just by addressing the segment that can afford the treatment and is simply not getting it,” he told Minnesota Public Radio. “In fact, that opportunity alone is several billion dollars. If we systematically approach that, we can, I think quite confidently, structure a path to 20 percent-plus growth on a year-over-year basis in most of these emerging markets.
Medtronic executives also have recently been suggesting an effort to diversify from cardiac products and focus more on other device sectors.
Piper Jaffray and Co. analyst Thomas Gunderson told the Star Tribune that the layoffs look like an effort by Ishrak to put his stamp on the company’s largest division, one that has struggled with slumping sales over the last year or so. “This is just ongoing belt-tightening in tough economic times,” Gunderson said.
For its part, Medtronic is trying to make the transition as painless as possible for affected employees.
“Medtronic is supporting employees who are involuntarily separated with benefits and transition assistance, including external outplacement assistance services, access to employee assistance programs, medical benefit subsidies and severance pay,” company spokesperson Chris Garland told Medical Product Outsourcing.
Company officials also said that despite the cuts, Medtronic will actually see a net gain of jobs, as it plans to create 1,500 more jobs over the next year (mostly outside the United States).
Based on revenue, Medtronic is one of the global powerhouses in the medical device industry, and Minnesota’s seventh largest public company. In its home state alone, it employs approximately 8,000 people. The last fiscal year brought in $15.9 billion in revenue for the company.
Johnson & Johnson Makes First Device Co. Purchase in China
Medical device powerhouse Johnson & Johnson (JNJ) has purchased its first Chinese medical device maker, Guangzhou Bioseal Biotech. The deal was finalized after it received all appropriate Chinese government approvals, but terms of the deal were not disclosed.
“This transaction reinforces our commitment to China and delivering innovative medical device solutions to the Chinese market,” said Xie Wen Jian, president of JNJ Medical China. “We are very pleased to add the Bioseal brand to our growing portfolio of hemostasis products in China and we look forward to working with our new Bioseal colleagues to bring their innovative products to more physicians and patients.”
JNJ has been conducting business in China for over a quarter century, and just last year launched a medical device and diagnostics innovation center there.
Bioseal manufactures a porcine-derived fibrin sealant, named Bioseal, currently the only porcine plasma-derived fibrin sealant approved for use in China. Fibrin sealants are used by surgeons alongside hemostasis for use in patients undergoing surgery, when control of bleeding by standard surgical techniques is ineffective or impractical.
JNJ company Ethicon Inc., which produces a line of hemostats, will work closely with Bioseal, company officials said.
“By adding Bioseal to the existing line of Ethicon hemostasis products sold in China, we aspire to shape the broader biosurgery market in Asia by providing physicians and their patients with an even greater variety of innovative and clinical-based solutions to address bleeding, sealing and leaking challenges,” said Michael del Prado, company group chairman of JNJ Medical Asia Pacific.
JNJ has made some important purchases as of late, one of the most notable being last year’s $21.3 billion acquisition of Synthes Inc. JNJ divested its DePuy Orthopaedics Inc. trauma division to receive approval from European regulators for the Synthes purchase.
Johnson & Johnson (China) Investment Ltd., the branch of JNJ that announced and handled the acquisition, is a foreign investment entity established in China by JNJ in 1998.
Ethicon, based in Somerville, N.J., produces surgical care products in the wound closure; general surgery; wound management; biosurgicals; women's health and urology; aesthetic medicine; and ear, nose and throat sectors.
Boston Scientific Allies with Philips Healthcare to Bolster Imaging Equipment Offering; Expands Catheter Product Offering As Well
Boston Scientific Corp. has announced a partnership with Philips Healthcare, the objective of which is to allow Philips to sell Boston Scientific imaging equipment in connection with its Allura Xper catheterization (cath) lab systems worldwide.
The Boston Scientific iLab ultrasound imaging system is a platform for the company’s imaging catheters. The iLab system features heightened image quality and allows physicians the ability to choose from a variety of imaging catheters for coronary, peripheral and intracardiac applications, according to the company. The system is compatible and can be integrated with all major X-ray systems including the Philips Allura Xper system. Their agreement enables Philips to offer customers an integrated imaging solution that is compatible with current and next-generation Boston Scientific imaging catheters.
“Boston Scientific is pleased to collaborate with Philips and establish the foundation for an ongoing relationship,” said Isaac Zacharias, general manager of Boston Scientific’s Imaging business. “As premier providers of medical technology for cardiologists and electrophysiologists, this collaboration is expected to expand the ability of Boston Scientific and Philips to offer integrated solutions that improve ease of use and workflow for our worldwide customers.”
“This collaboration is a further step in Philips’ strategy to offer seamlessly integrated interventional solutions. Philips works with companies like Boston Scientific to continuously enhance the integrated functioning of our cath labs and further enhance the user experience,” said Bert van Meurs, senior vice president and general manager of Interventional X-Ray at Philips Healthcare.
Philips Healthcare is a division of Royal Philips Electronics based in the Netherlands, and has U.S. headquarters in Andover, Mass. The company produces various medical devices and technologies.
Boston Scientific steadily has been expanding its catheter-related products. The company received CE Mark approval for its Innova self-expanding bare-metal stent system (which includes a catheter shaft), and will launch the stent in Europe and other CE Mark countries immediately.
The stent is designed to treat peripheral vascular lesions in arteries above the knee, specifically the superficial femoral artery (SFA) and proximal popliteal artery (PPA). Peripheral vascular disease (PVD) is a circulatory disorder that results from a build-up of plaque in one or more of the arteries of the legs. As the disease progresses, plaque accumulation may significantly reduce blood flow through the arteries, resulting in pain and increasing disability. In Europe, PVD affects 13 million people or one in 20 people older than 40 years of age.
The Innova stent system consists of a nitinol (a metal alloy of nickel and titanium) self-expanding, bare-metal stent loaded on a low-profile delivery system. The architecture features a closed-cell design at each end of the stent for more consistent deployment, and an open-cell design along the stent body for improved flexibility. The stent features a tri-axial catheter shaft designed to provide added support and placement accuracy as well as radiopaque markers to enhance visibility. The stent is 6F compatible and is available in sizes from 5 mm to 8 mm in diameter and 20 mm to 200 mm in length.
“Treating arteries above the knee is difficult because the challenging anatomy can lead to stent fractures and higher restenosis rates,” said Mauro Gargiulo, M.D., physician at Sant’Orsola-Malpighi in Bologna, Italy, who performed the first procedure using the Innova stent in Europe. “The unique design and stent architecture used in the Innova Stent platform provide excellent radial strength, flexibility and durability which are critical to sustaining patency in treated SFA and PPA lesions.”
The stent is not available in the United States yet, but patient enrollment continues in the SuperNOVA clinical trial to support the company’s application for U.S. Food and Drug Administration approval of the device.
The prospective, single-arm, non-randomized trial will evaluate the safety and effectiveness of the Innova Stent in patients with stenosis of the SFA, PPA, or both. Enrollment is planned for up to 300 patients at 50 sites in the United States, Canada and Europe; the expected date of completion is within the first half of 2013.
Boston Scientific is based in Natick, Mass., and its imaging business includes a line of intravascular ultrasound and intracardiac echocardiography imaging catheters. These devices enable physicians to assess diseased arteries and intracardiac structures to aid in appropriate diagnosis and treatment.
The FCC Will Dedicate Spectrum Solely for the Use of Wireless Medical Devices
Whatever people’s varied opinions on the matter, wireless medical devices are becoming increasingly ubiquitous. The Federal Communications Commission (FCC) has announced that it is going to make a significant amount of spectrum available for connecting wireless medical devices as a measure toward more convenient and cost-effective health monitoring. This will, according to FCC chairman Julius Genachowski, make the United States the first country in the world to dedicate spectrum to Medical Body Area Networks (MBANs), which are inexpensive sensors that either can be worn on the body or implanted.
The FCC’s current goal is to designate two spectrum bands, one of which only would be valid for devices used in medical facilities. A second spectrum band could be used for remote monitoring of patients in their own homes. The FCC assigned the frequencies between 2360 and 2400 megahertz, which were part of the spectrum that was returned to the commission when television shifted from analog to digital.
Genachowski and the FCC have been pushing this idea for two years so that doctors could monitor a patient’s vital signs at home or in the hospital via sensors rather than perform more invasive tests or tests that cause discomfort to the patient. Currently, in-hospital monitoring involves wired sensors that are connected to machines, making it difficult for patients to move around or leave their beds. Also, the wires make it more difficult to deliver care to patients, increasing the potential for error, and impeding infection control. At a presentation announcing the MBANs held on May 17 at the George Washington University Hospital in Washington, D.C., Richard Katz, M.D., illustrated the difficulties presented with the mass of wires required to test patients.
“You saw that ICU patient,” Katz said of a slide he presented. “I can barely get my stethoscope on them anymore.” Katz is the director of the cardiology division at the hospital.
Katz went on to give an example of the limits of current wireless monitoring. A diabetes patient, for instance, has to “get the glucometer out, check his blood sugar, write down the number, turn his phone on, go to the diabetes monitoring app, open it, put the number in, then wirelessly get a message regarding his status. Here we have the potential for making that more efficient and seamless, and something patients will use,” he said. “When there are too many steps, we stop using things, when it gets too complicated.”
Genachowski told reporters that a hospital patient monitored with wireless equipment would have approximately a 48 percent chance of surviving cardiac arrest compared with a 6 percent chance for unmonitored patients.
As well as setting aside the spectrum, Genachowski said he will be working toward other ways that could make it easier for medical device makers to experiment with new types of wireless applications and bring such products to the market.
“To maximize the potential, we will consider new rule makings to allow more intensive use of spectrum,” he said.
Overall, according to Genachowski, the expansion of wireless patient monitoring systems will help speed diagnosis, allow earlier intervention, solicit faster clinician response, and ultimately improve patient care and reduce healthcare costs.
MBANs still have a journey ahead of them before they can be used with the spectrum the FCC is providing. There will be a period for public commentary, and then the FCC will be faced with the task of setting up regulations for registration and frequency coordination. The FCC also will have to review and approve all MBAN devices, and because they also are medical devices they will have to be reviewed by the U.S. Food and Drug Administration. It will be at least a year before the devices will hit the market.
Hologic to Acquire Gen-Probe
Medical device maker Hologic Inc. has agreed to buy diagnostic testing firm Gen-Probe Inc. for $3.75 billion in cash. Hologic, which focuses on women’s healthcare and makes diagnostic and breast health products and conducts minimally invasive procedures for women suffering from excessive menstrual bleeding, will gain access to Gen-Probe’s molecular diagnostics products used to screen for blood diseases and test transplant compatibility.
Hologic will pay $82.75 per Gen-Probe share, which is 20 percent higher than Gen-Probe’s closing price of $68.71 per share on April 27. Since the announcement, Gen-Probe share prices have climbed considerably, opening on April 30 at $81.84. Meanwhile, Hologic’s share prices have dropped 10 percent as traders express disapproval of the high buying price for Gen-Probe.
“It’s certainly a good acquisition for them (Hologic), but they definitely paid a lot and the street is probably reacting to the price they paid as well as the weak earnings number they put up,” Cantor Fitzgerald analyst Jeremy Feffer told Reuters.
Disapproval over the merger quickly spread from traders to shareholders. While the per-share price marks a 20 percent premium over Gen-Probe’s April 27 closing price, the deal angered enough shareholders that no fewer than 11 law firms representing them almost immediately announced investigations on May 1 focused on whether the board of Gen-Probe breached its fiduciary duties by failing to maximize shareholder value.
Gen-Probe put itself up for sale almost a year ago, with Novartis AG, Life Technologies Corp. and Thermo-Fisher Scientific Inc. counting among potential buyers. Novartis already had a partnership with the company, but as interest from other buyers fell away and the price per share rose in anticipation, Novartis pulled out of the bidding process citing an inflated price.
It’s clear from the agreed upon sale price that Hologic has no such concerns, confident that the price is fair. “The $3.7 billion proposed acquisition of Gen-Probe by Hologic looks to be at a full but fair valuation; experience over the last year suggests that a competitive bid is unlikely,” said Doug Schenkel, Cowen and Co. analyst.
The only possible roadblock Hologic faces now is approval from U.S. anti-trust authorities, who may view the acquisition as handing too much market share in diagnostics to the company. The Federal Trade Commission recently prevented Cytyc Corporation, now a part of Hologic, from acquiring Digene Corporation, now a part of Qiagen, due to competitive concerns regarding the HPV business. Hologic CEO Rob Cascella is confident the deal will be approved, noting that Hologic and Gen-Probe target different sectors within the HPV (human papillomavirus) market.
Morgan Stanley served as advisor to Gen-Probe on the transaction, while Goldman Sachs Group Inc. and Perella Weinberg Partners advised Hologic. Goldman Sachs also is providing fully committed financing to Hologic. The sale is expected to close in the second half of 2012.
Medtronic Inc. announced in early May that it would lay off 220 employees across the United States as it “restructured” its cardiac rhythm disease management division, based in Mounds View, Minn. Later in the month, that number jumped to 250 cuts in the Twin Cities, and 1,000 jobs cut across the rest of the country. The company has not yet disclosed exactly what type of jobs will be eliminated.
The company seems to be moving more toward its global footholds. This doesn’t necessarily mean automatic downsizing within the United States, but this block of layoffs could indicate otherwise. In an interview on April 25, Medtronic CEO Omar Ishrak pointed to “huge opportunities” in global markets. “I think there’s plenty of growth available just by addressing the segment that can afford the treatment and is simply not getting it,” he told Minnesota Public Radio. “In fact, that opportunity alone is several billion dollars. If we systematically approach that, we can, I think quite confidently, structure a path to 20 percent-plus growth on a year-over-year basis in most of these emerging markets.
Medtronic executives also have recently been suggesting an effort to diversify from cardiac products and focus more on other device sectors.
Piper Jaffray and Co. analyst Thomas Gunderson told the Star Tribune that the layoffs look like an effort by Ishrak to put his stamp on the company’s largest division, one that has struggled with slumping sales over the last year or so. “This is just ongoing belt-tightening in tough economic times,” Gunderson said.
For its part, Medtronic is trying to make the transition as painless as possible for affected employees.
“Medtronic is supporting employees who are involuntarily separated with benefits and transition assistance, including external outplacement assistance services, access to employee assistance programs, medical benefit subsidies and severance pay,” company spokesperson Chris Garland told Medical Product Outsourcing.
Company officials also said that despite the cuts, Medtronic will actually see a net gain of jobs, as it plans to create 1,500 more jobs over the next year (mostly outside the United States).
Based on revenue, Medtronic is one of the global powerhouses in the medical device industry, and Minnesota’s seventh largest public company. In its home state alone, it employs approximately 8,000 people. The last fiscal year brought in $15.9 billion in revenue for the company.
Johnson & Johnson Makes First Device Co. Purchase in China
Medical device powerhouse Johnson & Johnson (JNJ) has purchased its first Chinese medical device maker, Guangzhou Bioseal Biotech. The deal was finalized after it received all appropriate Chinese government approvals, but terms of the deal were not disclosed.
“This transaction reinforces our commitment to China and delivering innovative medical device solutions to the Chinese market,” said Xie Wen Jian, president of JNJ Medical China. “We are very pleased to add the Bioseal brand to our growing portfolio of hemostasis products in China and we look forward to working with our new Bioseal colleagues to bring their innovative products to more physicians and patients.”
JNJ has been conducting business in China for over a quarter century, and just last year launched a medical device and diagnostics innovation center there.
Bioseal manufactures a porcine-derived fibrin sealant, named Bioseal, currently the only porcine plasma-derived fibrin sealant approved for use in China. Fibrin sealants are used by surgeons alongside hemostasis for use in patients undergoing surgery, when control of bleeding by standard surgical techniques is ineffective or impractical.
JNJ company Ethicon Inc., which produces a line of hemostats, will work closely with Bioseal, company officials said.
“By adding Bioseal to the existing line of Ethicon hemostasis products sold in China, we aspire to shape the broader biosurgery market in Asia by providing physicians and their patients with an even greater variety of innovative and clinical-based solutions to address bleeding, sealing and leaking challenges,” said Michael del Prado, company group chairman of JNJ Medical Asia Pacific.
JNJ has made some important purchases as of late, one of the most notable being last year’s $21.3 billion acquisition of Synthes Inc. JNJ divested its DePuy Orthopaedics Inc. trauma division to receive approval from European regulators for the Synthes purchase.
Johnson & Johnson (China) Investment Ltd., the branch of JNJ that announced and handled the acquisition, is a foreign investment entity established in China by JNJ in 1998.
Ethicon, based in Somerville, N.J., produces surgical care products in the wound closure; general surgery; wound management; biosurgicals; women's health and urology; aesthetic medicine; and ear, nose and throat sectors.
Boston Scientific Allies with Philips Healthcare to Bolster Imaging Equipment Offering; Expands Catheter Product Offering As Well
Boston Scientific Corp. has announced a partnership with Philips Healthcare, the objective of which is to allow Philips to sell Boston Scientific imaging equipment in connection with its Allura Xper catheterization (cath) lab systems worldwide.
The Boston Scientific iLab ultrasound imaging system is a platform for the company’s imaging catheters. The iLab system features heightened image quality and allows physicians the ability to choose from a variety of imaging catheters for coronary, peripheral and intracardiac applications, according to the company. The system is compatible and can be integrated with all major X-ray systems including the Philips Allura Xper system. Their agreement enables Philips to offer customers an integrated imaging solution that is compatible with current and next-generation Boston Scientific imaging catheters.
“Boston Scientific is pleased to collaborate with Philips and establish the foundation for an ongoing relationship,” said Isaac Zacharias, general manager of Boston Scientific’s Imaging business. “As premier providers of medical technology for cardiologists and electrophysiologists, this collaboration is expected to expand the ability of Boston Scientific and Philips to offer integrated solutions that improve ease of use and workflow for our worldwide customers.”
“This collaboration is a further step in Philips’ strategy to offer seamlessly integrated interventional solutions. Philips works with companies like Boston Scientific to continuously enhance the integrated functioning of our cath labs and further enhance the user experience,” said Bert van Meurs, senior vice president and general manager of Interventional X-Ray at Philips Healthcare.
Philips Healthcare is a division of Royal Philips Electronics based in the Netherlands, and has U.S. headquarters in Andover, Mass. The company produces various medical devices and technologies.
Boston Scientific steadily has been expanding its catheter-related products. The company received CE Mark approval for its Innova self-expanding bare-metal stent system (which includes a catheter shaft), and will launch the stent in Europe and other CE Mark countries immediately.
The stent is designed to treat peripheral vascular lesions in arteries above the knee, specifically the superficial femoral artery (SFA) and proximal popliteal artery (PPA). Peripheral vascular disease (PVD) is a circulatory disorder that results from a build-up of plaque in one or more of the arteries of the legs. As the disease progresses, plaque accumulation may significantly reduce blood flow through the arteries, resulting in pain and increasing disability. In Europe, PVD affects 13 million people or one in 20 people older than 40 years of age.
The Innova stent system consists of a nitinol (a metal alloy of nickel and titanium) self-expanding, bare-metal stent loaded on a low-profile delivery system. The architecture features a closed-cell design at each end of the stent for more consistent deployment, and an open-cell design along the stent body for improved flexibility. The stent features a tri-axial catheter shaft designed to provide added support and placement accuracy as well as radiopaque markers to enhance visibility. The stent is 6F compatible and is available in sizes from 5 mm to 8 mm in diameter and 20 mm to 200 mm in length.
“Treating arteries above the knee is difficult because the challenging anatomy can lead to stent fractures and higher restenosis rates,” said Mauro Gargiulo, M.D., physician at Sant’Orsola-Malpighi in Bologna, Italy, who performed the first procedure using the Innova stent in Europe. “The unique design and stent architecture used in the Innova Stent platform provide excellent radial strength, flexibility and durability which are critical to sustaining patency in treated SFA and PPA lesions.”
The stent is not available in the United States yet, but patient enrollment continues in the SuperNOVA clinical trial to support the company’s application for U.S. Food and Drug Administration approval of the device.
The prospective, single-arm, non-randomized trial will evaluate the safety and effectiveness of the Innova Stent in patients with stenosis of the SFA, PPA, or both. Enrollment is planned for up to 300 patients at 50 sites in the United States, Canada and Europe; the expected date of completion is within the first half of 2013.
Boston Scientific is based in Natick, Mass., and its imaging business includes a line of intravascular ultrasound and intracardiac echocardiography imaging catheters. These devices enable physicians to assess diseased arteries and intracardiac structures to aid in appropriate diagnosis and treatment.
The FCC Will Dedicate Spectrum Solely for the Use of Wireless Medical Devices
Whatever people’s varied opinions on the matter, wireless medical devices are becoming increasingly ubiquitous. The Federal Communications Commission (FCC) has announced that it is going to make a significant amount of spectrum available for connecting wireless medical devices as a measure toward more convenient and cost-effective health monitoring. This will, according to FCC chairman Julius Genachowski, make the United States the first country in the world to dedicate spectrum to Medical Body Area Networks (MBANs), which are inexpensive sensors that either can be worn on the body or implanted.
The FCC’s current goal is to designate two spectrum bands, one of which only would be valid for devices used in medical facilities. A second spectrum band could be used for remote monitoring of patients in their own homes. The FCC assigned the frequencies between 2360 and 2400 megahertz, which were part of the spectrum that was returned to the commission when television shifted from analog to digital.
Genachowski and the FCC have been pushing this idea for two years so that doctors could monitor a patient’s vital signs at home or in the hospital via sensors rather than perform more invasive tests or tests that cause discomfort to the patient. Currently, in-hospital monitoring involves wired sensors that are connected to machines, making it difficult for patients to move around or leave their beds. Also, the wires make it more difficult to deliver care to patients, increasing the potential for error, and impeding infection control. At a presentation announcing the MBANs held on May 17 at the George Washington University Hospital in Washington, D.C., Richard Katz, M.D., illustrated the difficulties presented with the mass of wires required to test patients.
“You saw that ICU patient,” Katz said of a slide he presented. “I can barely get my stethoscope on them anymore.” Katz is the director of the cardiology division at the hospital.
Katz went on to give an example of the limits of current wireless monitoring. A diabetes patient, for instance, has to “get the glucometer out, check his blood sugar, write down the number, turn his phone on, go to the diabetes monitoring app, open it, put the number in, then wirelessly get a message regarding his status. Here we have the potential for making that more efficient and seamless, and something patients will use,” he said. “When there are too many steps, we stop using things, when it gets too complicated.”
Genachowski told reporters that a hospital patient monitored with wireless equipment would have approximately a 48 percent chance of surviving cardiac arrest compared with a 6 percent chance for unmonitored patients.
As well as setting aside the spectrum, Genachowski said he will be working toward other ways that could make it easier for medical device makers to experiment with new types of wireless applications and bring such products to the market.
“To maximize the potential, we will consider new rule makings to allow more intensive use of spectrum,” he said.
Overall, according to Genachowski, the expansion of wireless patient monitoring systems will help speed diagnosis, allow earlier intervention, solicit faster clinician response, and ultimately improve patient care and reduce healthcare costs.
MBANs still have a journey ahead of them before they can be used with the spectrum the FCC is providing. There will be a period for public commentary, and then the FCC will be faced with the task of setting up regulations for registration and frequency coordination. The FCC also will have to review and approve all MBAN devices, and because they also are medical devices they will have to be reviewed by the U.S. Food and Drug Administration. It will be at least a year before the devices will hit the market.
Hologic to Acquire Gen-Probe
Medical device maker Hologic Inc. has agreed to buy diagnostic testing firm Gen-Probe Inc. for $3.75 billion in cash. Hologic, which focuses on women’s healthcare and makes diagnostic and breast health products and conducts minimally invasive procedures for women suffering from excessive menstrual bleeding, will gain access to Gen-Probe’s molecular diagnostics products used to screen for blood diseases and test transplant compatibility.
Hologic will pay $82.75 per Gen-Probe share, which is 20 percent higher than Gen-Probe’s closing price of $68.71 per share on April 27. Since the announcement, Gen-Probe share prices have climbed considerably, opening on April 30 at $81.84. Meanwhile, Hologic’s share prices have dropped 10 percent as traders express disapproval of the high buying price for Gen-Probe.
“It’s certainly a good acquisition for them (Hologic), but they definitely paid a lot and the street is probably reacting to the price they paid as well as the weak earnings number they put up,” Cantor Fitzgerald analyst Jeremy Feffer told Reuters.
Disapproval over the merger quickly spread from traders to shareholders. While the per-share price marks a 20 percent premium over Gen-Probe’s April 27 closing price, the deal angered enough shareholders that no fewer than 11 law firms representing them almost immediately announced investigations on May 1 focused on whether the board of Gen-Probe breached its fiduciary duties by failing to maximize shareholder value.
Gen-Probe put itself up for sale almost a year ago, with Novartis AG, Life Technologies Corp. and Thermo-Fisher Scientific Inc. counting among potential buyers. Novartis already had a partnership with the company, but as interest from other buyers fell away and the price per share rose in anticipation, Novartis pulled out of the bidding process citing an inflated price.
It’s clear from the agreed upon sale price that Hologic has no such concerns, confident that the price is fair. “The $3.7 billion proposed acquisition of Gen-Probe by Hologic looks to be at a full but fair valuation; experience over the last year suggests that a competitive bid is unlikely,” said Doug Schenkel, Cowen and Co. analyst.
The only possible roadblock Hologic faces now is approval from U.S. anti-trust authorities, who may view the acquisition as handing too much market share in diagnostics to the company. The Federal Trade Commission recently prevented Cytyc Corporation, now a part of Hologic, from acquiring Digene Corporation, now a part of Qiagen, due to competitive concerns regarding the HPV business. Hologic CEO Rob Cascella is confident the deal will be approved, noting that Hologic and Gen-Probe target different sectors within the HPV (human papillomavirus) market.
Morgan Stanley served as advisor to Gen-Probe on the transaction, while Goldman Sachs Group Inc. and Perella Weinberg Partners advised Hologic. Goldman Sachs also is providing fully committed financing to Hologic. The sale is expected to close in the second half of 2012.