Abbott Decides Two Halves Are Better Than One

Abbott Decides Two Halves Are Better Than One

Abbott Laboratories is splitting itself into two publicly traded companies, separating its medical products business from its research-based pharmaceuticals operations.

The medical products company will consist of Abbott’s generic pharmaceutical, devices, diagnostic and nutritional businesses, and will keep the Abbott name. The research-based pharmaceutical firm, on the other hand, will include proprietary pharmaceuticals as well as biologics, and will be given a new name at a later time.

“[This] news is a significant event for Abbott, and reflects another change in our company’s 123-year history, strengthening our outlook for strong and sustainable growth and shareholder returns,” said Chairman and CEO Miles D. White.

The medical products business generates about $22 billion in annual revenue, according to Abbott estimates. The portfolio for this newly formed company will comprise branded generic drugs sold outside the United States, adult and pediatric nutritional products (Similac infant formula and Ensure supplements for adults, which generated $5.5 billion last year), core laboratory diagnostics, point of care and molecular diagnostics, vascular devices (including the top-selling Xience heart stent), vision care products and medical systems that diagnose and treat diabetes. Executives expect the company to generate nearly 40 percent of its sales in “high-growth emerging markets.”

The research-based pharmaceutical company, by contrast, will focus on various specialty drugs in such areas as immunology, multiple sclerosis, chronic kidney disease, Hepatitis C, oncology and women’s health. It also will include the anti-inflammatory drug Humira and Kaletra, an AIDS treatment that generated about $1.26 billion for Abbott in 2010. Unlike the medical products business, most of the revenue in the pharmaceuticals firm will come from developed markets.

White will remain chairman and CEO of the medical products company while Richard A. Gonzalez, currently Abbott’s executive vice president of Global Pharmaceuticals, will become chairman and CEO of the pharmaceuticals business. Gonzalez is a 30-year Abbott veteran who previously served as president and chief operating officer of the Abbott Park, Ill.-based healthcare conglomerate.

Abbott executives said the split will be completed by the end of 2012. The company has posted declining profits in recent quarters due to restructuring and acquisition charges, though lately it has generated stronger revenue. Abbott’s diverse portfolio has shielded the company from some of the common problems plaguing other drug manufacturers, such as patent expirations and competition from generic pharmaceuticals. And while shares have suffered from the firm’s reliance on Humira (analysts estimate the drug’s sales account for about 40 percent of the company’s profit), Abbott has taken steps in recent years to reduce that dependency, most notably through acquisition.

Still, Abbott’s addiction to Humira for profits has taken a toll on shares, claims Jeffrey Bagley, a portfolio manager at Haverford Financial Services in Radnor, Pa. Before the announcement of the split in mid-October, Abbott stock rose less than 1 percent over two years, while the Standard & Poor’s 500 Health Care Index rose 10 percent during that same time period.

Splitting the company into two separate businesses could help raise share value and sales, analysts predict. With Johnson & Johnson’s exit from the stent market earlier this year, Leerink Swann LLC analyst Rick Wise believes Abbott could very well increase Xience stent sales, which in turn, should offset lower pricing for the product.

“[The split] is good news,” Jan David Wald, an analyst at Morgan Keegan & Co. in Boston, Mass., told Bloomberg Businessweek. “You’ll start to see more people interested in the stock, which has languished for years. The two companies each will be more valuable than they are together.”

The deal will take the form of a tax-free distribution to Abbott shareholders of a publicly traded stock for the new pharmaceutical company. The expected stock distribution ratio will be determined at a future date. The two companies each will pay a dividend that, when combined, will equal the current dividend at the point when they split, according to Abbott.

Vention Medical Welcomes ATEK Medical Into the Fold

Vention Medical has acquired the ATEK Medical Group, a move both companies claim will add enhanced manufacturing capabilities for customers and increased scale in Costa Rica, where both firms have manufacturing facilities.

The combined company will include ATEK Medical and ATEK Plastics and feature a suite of capabilities and services that includes product design and development; component technological capabilities such as balloons, shrink tubing, extrusions and injection molding; assembly and packaging; and Lean business processes.

In addition, the merged firm will encompass 175,000 square feet of manufacturing space in Costa Rica as well as a new 85,000-square-foot facility in Grand Rapids, Mich. Before the merger with Vention was announced, ATEK executives said the company would create a “packaging center of excellence” at the Grand Rapids location and dedicate much of the floor space to its specialized barrier packaging operations. The site also will house a Lean manufacturing a “3-P” line—named for “production, preparation and process”—which provides room for a complete mock up of a manufacturing line to fine tune plant layouts before production begins.

“Our partnership with the ATEK Medical Group management team will allow Vention to provide an enhanced customer experience,” said Dan Croteau, CEO of Marlborough, Mass.-based Vention. “With the tremendous pressures our medical device customers are facing, it is an exciting time to offer our comprehensive set of solutions to the market.”

ATEK’s largest shareholder, Christy Orris, and Kay Phillips, ATEK Companies president, will become shareholders of Vention Medical. Phillips also will join Vention’s medical board of directors, according to Croteau.

Based in Minneapolis, Minn., ATEK Medical Group operates facilities in Grand Rapids; Kerrville, Texas; and Heredia, Costa Rica. Since its inception more than three decades ago, the company’s Michigan site has launched more than 400 medical devices. The company estimates it manufactures more than 6 million finished goods units and 150 million medical plastics components annually.

“As a growing company, Vention is a very appealing partner for us in terms of their experience and their complimentary capabilities in design, components and assembly,” said ATEK Medical President Chris Oleksy, who will remain with the combined company. “We are excited to work together to continue to build upon our company’s successes and create the industry leading solutions partner for our customers.”

Boston Sci Begins the Rollout of Promus Element Stent in China

Boston Scientific Corp. has begun what it’s calling a “phased” launch of its PromusElement stent systems in China. The release of the device will be expanded within the country based upon receipt of subsequent provincial reimbursement approvals. The company previously received registration approval for the device from China’s State Food and Drug Administration.

The product is BSX’s third-generation drug-eluting stent (DES) technology. It incorporates a platinum chromium alloy, novel stent design and advanced catheter delivery system. According to the company, these factors combine to offer “greater strength, enhanced deliverability and exceptional visibility, and it is designed for improved conformability, minimal recoil, and uniform lesion coverage and drug distribution.”

With the world’s largest population, China represents one of the fastest-growing DES markets. Boston Scientific estimates the number of coronary drug-eluting stents implanted there in 2011 will be approximately 560,000, with annual market growth exceeding 20 percent, making it the second-largest DES market worldwide after the United States.

“The Chinese government has announced its intention to spend $125 billion on its healthcare system in the next five years, and the launch of our advanced coronary stenting technology in China reflects our intention to tap into its expanding, promising DES market,” said LarryNeumann, senior vice president and president, emerging markets at Boston Scientific. “We are making significant investments in our sales, distribution and clinical infrastructure in China and this important launch reflects our goal to win global market share.

In July, the company initiated a five-year, $150 million investment in China to establish a local, wholly owned manufacturing facility focused on serving Chinese market needs and developing a training center for Chinese healthcare providers. As a result of this increased investment, as well as current and anticipated initiatives, Boston Scientific expects to increase its revenues in China to more than $500 million by the end of 2016. The company also estimated that its target market in China currently exceeds $1 billion and is growing approximately 20 percent annually.

Post-approval trials of the Promus Element are ongoing in China. The stent is an investigational device in the United States. The company expects approval by mid-2012.

FDA Greenlights First Aortic Valve Implanted Without Open Heart Surgery

The U.S. Food and Drug Administration (FDA) has approved the first artificial heart valve that can replace an aortic heart valve damaged by senile aortic valve stenosis without open-heart surgery.

The Sapien transcatheter heart valve (THV) is manufactured by Edwards Lifescience in Irvine, Calif.

Senile aortic valve stenosis is a progressive, age-related disease caused by calcium deposits on the aortic valve that cause the valve to narrow. As the heart works harder to pump enough blood through the smaller valve opening, the heart will weaken, which can lead to problems such as fainting, chest pain, heart failure, irregular heart rhythms or cardiac arrest.

Once symptoms of senile aortic stenosis occur, more than half of patients die within two years, according to the FDA. To restore normal blood flow, patients with severe aortic valve stenosis need open-heart surgery to replace the diseased valve. However, the procedure is too risky for some patients.

“Surgery to replace the aortic valve is an effective treatment for severe senile aortic valve stenosis. The Sapien valve is an example of an innovative new device that will provide some people with this condition who can’t undergo open heart surgery with the option of valve replacement,” said Jeffrey Shuren, M.D., director of the FDA’s Center for Devices and Radiological Health. “The agency remains committed to working with companies who are developing breakthrough treatments that will have a significant impact on patient care in the U.S.”

The Sapien THV is made of cow tissue and polyester supported with a stainless steel mesh frame. To replace the diseased valve, the valve is compressed into the end of a delivery catheter. The delivery catheter, which is slightly wider than a pencil, and the valve are inserted into the femoral artery through a small cut in the leg and threaded to the site. The valve then is released from the delivery catheter, expanded with a balloon and is immediately functional.

The FDA’s approval of the Sapien THV is based on a study of 365 patients not eligible for open-heart surgery. Half of the patients received the Sapien valve. The other study patients received another treatment that did not require open-heart surgery. One alternative procedure involved enlarging the aortic valve opening by stretching it with a balloon (balloon valvuloplasty).

Patients receiving the Sapien valveexperienced two and a half times more strokes and eight times as many vascular and bleeding complications than patients who did not receive the implant; however, they were more likely to survive one year after surgery, according to the company. After a year, 69 percent of the Sapien patients were alive compared with 50 percent of those who received analternative treatment.

Edwards Lifescience will continue to evaluate the outcomes with the Sapien THV through a national Transcatheter Valve Therapy (TVT) registry. The Society of Thoracic Surgeons and the American College of Cardiology have been working with the FDA and the Centers for Medicare and Medicaid Services to facilitate the creation of a national TVT registry that will serve as a platform for continued evaluation of postmarket experience with this and future transcatheter devices and procedures for the treatment of aortic stenosis.

“This is an important milestone forinoperable American patients who have long been awaiting a therapeutic option for the often debilitating symptoms associated with severe aortic stenosis,” said Michael A. Mussallem, Edwards’ chairman and CEO. “We are extremely proud of the dedication of the heart teams and the patients involved in the clinical trial for this therapy, who have paved the way for this therapy to help even more people around the world.”

The most common serious and potentially life-threatening side effects in patients receiving the Sapien valve and the procedure to implant the valve include death, stroke, perforation of the blood vessels, ventricle or valvular structures, damage to the conduction system in the heart, significant bleeding, and leaks around the new valve.

The Sapien THV is approved for patients who are not eligible for open-heart surgery for replacement of their aortic valve and have a calcified aortic annulus (calcium build-up in the fibrous ring of the aortic heart valve). The product label advises that a heart surgeon should be involved in determining if the Sapien THV is an appropriate treatment for the patient.

It is not approved for patients who can be treated by open-heart surgery. Patients who have congenital heart valve anomalies, have masses or an infection in their hearts, or cannot tolerate anticoagulation/antiplatelet therapy should not receive the Sapien THV.

Edwards has sold the valve in Europe since 2007. The company estimated that its U.S. sales of the Sapien valve would total between $150 million and $250 million in the first full year after the product is launched. The device is expected to cost about $30,000.

Vests Expands Silicone Offering With New Acquisition

Vesta Inc. has acquired SiMatrix, a Victor, Mont.-based contract manufacturer specializing in tight-tolerance medical-grade silicone sheeting and dip molding services. Vesta is an ISO 13485-certified medical device contract manufacturer. The acquisition expands Vesta’s existing silicone manufacturing services, which include medical molding, extrusion and assembly, and complements the company’s expertise in manufacturing and engineering support for medical device product development.

Terms of the deal were not disclosed.

The acquisition marks Vesta’s second platform expansion in the past two-and-a-half years. In March 2009, Vesta acquired ExtruMed, a manufacturer of precision thermoplastic tubing for diagnostic and therapeutic medical devices and procedures. Since the acquisition, Vesta has provided

ExtruMed precision medical extrusion solutions for medical device manufacturers looking for comprehensive services and support for their extruded components.

Jan Varner, CEO of SiMatrix, confirmed that “this partnership is the best fit we could imagine for our company. Vesta’s leadership position in silicone contract manufacturing and its culture of taking care of its customers and employees are a perfect combination for SiMatrix. We are excited about this move, and view it as a great benefit for all parties.”

Vesta will provide silicone sheeting and dip molding services from SiMatrix’s locations in Montana, and will provide global support for the business through Vesta’s existing direct sales organization.

Accellent Opens New Facility in Asia to Serve Local Markets

Accellent Inc., a provider of outsourced medical device manufacturing services, has opened a 65,000-square-foot manufacturing plant in Penang, Malaysia. The new facility joins plants in five countries. Accellent currently has 14 manufacturing facilities in 12 U.S. states as well as manufacturing operations in Germany, Ireland, Mexico and the United Kingdom.

“This site will serve as an important hub for our Asia business since several of our key customers are located nearby,” said Donald Spence, president and CEO of Accellent. “We also expect that this new facility will provide cost-effective solutions for our other global markets.” Penang appealed to the company because of the stable politicalenvironment, Spence added.

In addition, Accellent was able to purchase and transform the plant in less than 12 months as a result of support from several economic development organizations.

Accellent is privately owned and based in Wilmington, Mass.