Getinge Resumes Cardiovascular Shopping Spree With Datascope Purchase
Full article reprinted from "The Gray Sheet" - September 22, 2008
Find out how Getinge is continuing to solidify its position in the cardiovascular device market with its $865 million acquisition of intra-aortic balloon pump maker Datascope, announced Sept. 16.
Full article reprinted from "The Gray Sheet" - September 22, 2008
Getinge is continuing to solidify its position in the cardiovascular device market with its $865 million acquisition of intra-aortic balloon pump maker Datascope, announced Sept. 16.
The $53-per-share offer represents an almost 8% premium to Datascope's Sept. 15 stock price close of $49.23. After accounting for Datascope's $247 million in cash on hand, the deal values the company at $618 million, or roughly 2.7 times Datascope sales of $231 million.
Datascope is the leading player in the global cardiac assist counterpulsation market with about a 70% market share, followed by Teleflex and Abiomed, according to Getinge.
Stockholm-based Getinge currently sells cardiopulmonary perfusion devices through its Maquet Medical Systems division.
After the acquisition, Getinge's cardiovascular business will have total annual revenues exceeding $650 million, according to the company.
Getinge's purchase of Montvale, N.J.-based Datascope builds on the Swedish firm's 2007 acquisition of Boston Scientific's cardiac surgery and vascular divisions for $750 million (1"The Gray Sheet" Nov. 12, 2007, p. 19).
Shortly after that deal closed, "we expressed that our intention was to continue to build on that position, and that there were in particular three areas that we were interested in - cardiac surgery, vascular surgery and also the cardiac assist market," Getinge CEO Johan Malmquist said during a Sept. 16 investor call.
The Datascope deal "follows very logically on from that intended direction," the exec said.
Datascope Got A Second Look After Slimming Down
Getinge is getting a pared-down company in Datascope, which sold off its vascular closure device business in August to St. Jude Medical for about $24 million.
More significantly, in March Datascope divested its patient monitoring business to China-based Mindray Medical for $202 million (2"The Gray Sheet" March 17, 2008, p. 3).
The latter divestiture piqued Getinge's interest in Datascope roughly five years after it first considered an acquisition of the company.
Back then, Getinge decided against a merger after concluding the firm likely could not become a number one or two player in the patient monitoring market.
"We were delighted when we learned that Datascope had [sold the patient monitoring business] because we now had a pure-play cardiovascular company that was very in line with our strategy and very complementary" to Getinge's Maquet division, Malmquist explained.
Datascope's intra-aortic balloon pump line anchors its cardiac assist business and accounts for about 75% of company sales. The firm also has an intervascular division which makes vascular grafts and patches as well as peripheral stents.
At the time of the Mindray deal, Datascope indicated a desire to focus on its high-margin cardiac assist and intervascular units. In June, however, the firm reported it was weighing strategic alternatives, including a possible sale of the company (3"The Gray Sheet" June 9, 2008, In Brief).
Synergies To Come From Cross-Selling Opportunities
According to Getinge, synergies from the Datascope purchase will be realized largely through product and geographic cross-selling opportunities.
Malmquist pointed out that the company gained a sizeable U.S. sales force in the Boston Scientific deal, and Datascope will further strengthen that position. "We have technologies both on the cardiac surgery side and in the emerging cardiac assist market ... that we think ... are very suitable" for these sales forces to promote, the exec said.
For example, Datascope "is expected to significantly support the launch of Getinge's new cardiac assist product CardioHelp," slated to occur in early 2009, the firm said. CardioHelp is "the world's first transportable heart-lung machine," according to Getinge.
Furthermore, "looking in the other direction, we have some very good sales outlets both for [Boston Scientific] and for Datascope [products] now in other parts of the world," Malmquist added.
Currently, about 43% of Datascope sales come from North America, 40% from Europe, the Middle East and Africa, and 17% from the rest of the world.
Interventional Cardiology Is Top IABP Growth Area
Datascope's cardiac assist counterpulsation therapy is used to improve blood circulation during both surgical interventions and cardiology procedures.
The firm has "a growing market in interventional cardiology (for example, high-risk stenting patients), and it is a technology that hasn't been fully exploited," Malmquist maintained. "Right now, the fastest growth is achieved in interventional cardiology."
Datascope's cardiac assist devices include its Sensation 7 French intra aortic balloon catheter and CS300 balloon pump system.
"Our ambition, as far as cardiac assist is concerned, is to, in due time ... offer a full spectrum of cardiac assist devices from very short-term, which one could say ... Datascope's product represents, to potentially very long-term, which could go as far as implantable ventricular assist devices," Malmquist said.
Getinge's Maquet cardio division markets a number of products for off-pump heart surgery, such as the Heartstrong clampless proximal sealing line, as well as on-pump devices, such as the Rotaflow centrifugal pump.
Its vascular unit is much smaller by comparison; the firm's major products include Exxcel and Hemashield grafts.
The bulk of Datascope's intervascular business is similar to Getinge's, according to Malmquist. "That is to say, synthetic surgical grafts and patches to replace diseased or damaged vessels in the body through open surgery procedures." Datascope's intervascular products are marketed by Gore.
Further down the road, Getinge expects to benefit from Datascope's peripheral stent offerings and "emerging opportunities in the stent graft market," Malmquist said.
Datascope announced in June it had exercised an option to acquire Sorin's peripheral vascular stents, which it has marketed in Europe since early 2007 (4"The Gray Sheet" June 16, 2008, p. 12).
The Sorin products were not expected to make a significant contribution to the firm's top line; the company said it expected sales of the devices to reach an annualized rate of $6.6 million by year-end.
However, Malmquist called the addition of Sorin's Carbofilm carbon film-based peripheral stents an "attractive expansion" to Datascope's portfolio.
Peripheral intervention is a "rather sizeable market today, about [$700 million] and growing nicely in the double-digit numbers."
The experience of sales reps gained from Boston Scientific should help Getinge extend its reach in that market, the exec indicated. While the firm sees vascular devices as a growth area, it will be up against formidable competition, including Johnson & Johnson's Cordis division.
In addition to Maquet Medical Systems, Getinge comprises Infection Control and Extended Care divisions. The latter unit acquired Huntleigh, a manufacturer of patient beds, for $800 million in 2006 with the aim of expanding its hospital reach (5"The Gray Sheet" Dec. 18, 2006, p. 13).
Vessel Harvesting Business May Be Sold
Datascope and Getinge have overlapping endoscopic vessel harvesting businesses, and Getinge said it is prepared to divest Datascope's EVH division, which is about a $10 million business, if needed, to gain Federal Trade Commission clearance for the acquisition.
Malmquist noted he is reasonably confident no competing bids will emerge for Datascope, but that Getinge is in a position to raise its offer if necessary.
Getinge reported 2007 corporate sales of about $2.5 billion and notes that its previously-set goal of 10% annual revenue growth will not change with the addition of Datascope.
Getinge expects the deal to close by year-end and add to earnings per share in 2010, excluding the impact of "acquisition related intangible amortization and financing costs."
- Brooke McManus
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