Baxter Spends Big on ApaTech to Join Orthobiologics Fray

Article preview from IN VIVO -  February/March, 2010

Baxter International Inc. brought its full and considerable weight to bear to the orthobiologics market by paying handsomely for Apatech Inc., a privately held start-up with a silicate substituted calcium phosphate synthetic bone graft material.

Baxter Spends Big on ApaTech to Join Orthobiologics Fray

Article preview from IN VIVO -  February/March, 2010

Baxter International Inc. brought its full and considerable weight to bear to the orthobiologics market by paying handsomely for ApaTech Ltd., a privately held start-up with a silicate substituted calcium phosphate synthetic bone graft material. Baxter paid $240 million up front for the right to take on Medtronic Inc., Orthovita Inc. and other companies selling bone graft materials to the spinal market. Ultimately, Baxter will likely pay more than five times the company's 2009 revenue of $60 million, having agreed to kick in an additional $90 million if the bone graft products hit sales milestones.

The acquisition gives Baxter immediate entry into the orthobiologics market, an area it's been circling slowly for the past five years after it first entered into a research and development program with Kuros Biosurgery AG. Through that agreement, Baxter is matching its own Tisseel sealant with Kuros' biologics and fibrin-based binding technology. ( See "Market in Focus: Surgical Sealants and Glues," Medtech Insight , June 1, 2009.) The combination is expected to yield products that attach growth factors and other bioactive agents to fibrin, thereby enhancing the regeneration of bone and soft tissue. Baxter expects the partnership to bear fruit, but executives simply couldn't wait, having identified regenerative medicine as a potential growth engine to help drive the bioscience business, which is Baxter's largest. "[Regenerative medicine] has been a double-digit grower for us as we look forward into long-range plans there," CFO Rob Davis told attendees at this year's JP Morgan conference. "We'll continue to grow in the 13% to 15% range. This is a very high-margin business for us, one of the higher-margin businesses in the company and it's one where we are making a lot of investments, whether it be through business development or through our own internal pipeline, to continue to enhance and grow this." Baxter sells the majority of surgical sealants and glues in the US, according to our Medtech Insight report, " US Markets for Current and Emerging Would Closure Technologies," published in April 2009.

Davis, speaking at the RBC Capital Markets Healthcare Conference last month, said the ApaTech acquisition delivered both short-term and long-term benefits to the company's growth in biologics. First, "it allows us access into a channel where we really have not promoted our products," Davis says. Second, Baxter intends to combine ApaTech's synthetic bone graft material with future potential products resting in Baxter's research and development pipelines. "So it plays both near-term to help accelerate our business and long-term to really match up well with our pipeline so there's more to come on that."

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Companies mentioned in this article

ApaTech Ltd.

Baxter International Inc.

Baxter AG

Kuros Biosurgery AG

Medtronic Inc.

Nycomed International Management GMBH

Nycomed Danmark APS

Orthovita Inc.

Stryker Corp.

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