Vincent A. Forlenza, Chairman, President and CEO
Gary M. Cohen, Exec. VP and President, Global Health
Christopher R. Reidy, Chief Financial Officer, Exec. VP, and Chief Administrative Officer
William A. Kozy, Exec. VP and Chief Operating Officer
Thomas E. Polen, Exec. VP and President, Medical
Linda M. Tharby, Exec. VP and President, Life Sciences
Ellen R. Strahlman, M.D., Exec. VP, Research and Development and Chief Medical Officer
Stephen Sichak Jr., Exec. VP and Chief Integrated Supply Chain Officer
Alexandre Conroy, Exec. VP and President, Europe, EMA and the Americas
James Lim, Exec. VP and President, Greater Asia
Richard J. Naples, Exec. VP and Chief Regulatory Officer
Patti E. Russell, Sr. VP and Chief Ethics and Compliance Officer
NUMBER OF EMPLOYEES: 49,517
GLOBAL HEADQUARTERS: Franklin Lakes, N.J.
Quick pop quiz: Name the medical device OEM that owns GenCell Biosystems Ltd.
Hint: It’s the same company that purchased CRISI Medical Systems and Cellular Research Inc. last year.
Here’s a final clue: This OEM was one of several that announced major, game-changing megadeals in 2014.
The correct answer is Becton Dickinson and Company. The firm created quite a stir 21 months ago with its $12.2 billion bid for San Diego, Calif.-based CareFusion Corp., a manufacturer of patient safety-focused medical devices like smart infusion pumps and automated medication administration cabinets. The merger, in fact, was so consequential to the medtech industry that it overshadowed the company’s other acquisitions, which were equally as poignant to BD’s future as the CareFusion deal.
The GenCell Biosystems merger had virtually no chance of garnering any stage time, as it occurred merely a week after BD and CareFusion announced their union in October 2014. Nevertheless, the deal was a sound strategic investment for BD because it gave the company passage to the next generation sequencing (NGS) market, a sector slated to grow 20.8 percent annually over the next five years to reach $10.3 billion by 2021. The global NGS market currently is dominated by Illumina Inc., Thermo Fisher Scientific Inc., and Pacific Biosciences of California Inc., who together, claim a 94 percent stake in next generation sequencing platforms, according to online market research reports library ReportsnReports.com.
NGS is a new method for sequencing genomes at high speed, low cost, and great accuracy. “Next generation sequencing is a fast-growing space that represents a great opportunity for BD,” Becton’s Chairman, President, and CEO Vincent A. Forlenza told investors in an earnings conference call in November 2014. “As the NGS market moves to the clinic, BD is well-positioned with relevant experience in bringing products from research to clinical markets, pre-analytical sample collection, and sample preparation in Diagnostic Systems. BD will combine this experience with GenCell’s proprietary technology to meet unmet needs with upfront NGS workflow.”
GenCell’s Composite Liquid Cell (CLC) technology allows for open architecture microfluidics and smaller sample sizes, and eliminates plastic consumables, while being adaptable to various instrument configurations and applications.
At the time of its sale—the terms of which were not disclosed—the 3-year-old Irish firm had incorporated CLC on its fully automated genotyping platforms. GenCell won the 2013 Society for Laboratory Automation and Screening’s new product award for its Genotyper GT-Series, a device designed to enable continuous genotyping in miniaturized reaction volumes, sub 300 nL total volume with sample volumes of less than 100 nL (1 billion nanoliters equals one liter, or 1.06 quarts), allowing researchers to perform automated low-cost, high throughput applications.
“We want to build a capability that makes genomics a routine and easier-to-perform model. We have capabilities in the sector to enable researchers to acquire the exact type of cell they want to analyze,” Forlenza noted to India’s LiveMint blog in December 2015. “This [GenCell acquisition] provides an excellent platform to get into the genomics space.”
More of a foundation, really. BD followed the GenCell merger with the August 2015 purchase (terms undisclosed) of San Francisco Bay Area startup Cellular Research, a move that generated slightly more noise than its previous genomics deal, but still well below the decibel of the CareFusion acquisition.
Founded in 2011 by Stanford University and Silicon Valley entrepreneurs, Cellular Research created tools for massively parallel single-cell genetic analysis based on its proprietary molecular indexing technology. Similar to DNA barcoding techniques, molecular indexing encodes individual mRNA molecules within single cells at the time of reverse transcription, enabling the generation of highly multiplexed gene expression profiles.
The company’s molecular indexing science was not lost on BD—the two companies had collaborated for nearly a year before the merger on single-cell analysis workflows that operated with both entities’ tech platforms. The purchase, however, diversified BD’s integrated sample prep workflow offering for quantifying and studying individual gene cell expression.
Prior collaboration also prompted BD’s scantly-hyped takeover of Surgical Site Solutions Inc. and CRISI Medical Systems Inc. in the winter of 2015. Becton partnered with CRISI in June 2013 to jointly develop a medication management solution (dubbed Intelliport) for manual IV bolus injections. Surgical Site Solutions, contrarily, had teamed up with CareFusion (pre-BD merger) to create the ClipVac pre-surgical hair removal system. The device—an attachment to CareFusion’s surgical clippers—vacuums up 98.5 percent of hair and airborne contaminants, reducing the need for secondary cleanup measures in surgical and/or ancillary settings.
“While much of the spotlight this past year was on...the CareFusion acquisition, we also made strategic investments in life sciences, which remains an important growth driver as we aim to improve lab efficiency and outcomes from sample to diagnostic result,” Forlenza reminded shareholders in his annual letter. “During the [fiscal] year, we advanced our chronic disease management strategy, expanding our impact in diabetes management beyond products for insulin injection. By all measures, fiscal 2015 was a historic year for BD, unlike any other in our 118-year history.”
Indeed, the historic milemarkers were plentiful in FY15. The CareFusion deal was easily BD’s largest, most momentous purchase, doubling the size of its Medical segment and propelling total revenue past a record $10 billion. In addition, the company began the year with more products than ever in its pipeline, and it landed a spot on Fortune magazine’s inaugural “Change the World” list, which acknowledged companies that make a considerable impact on major social or environmental problems as part of their competitive strategy.
The company’s historic fiscal year haul resulted directly from the CareFusion acquisition. The deal—finalized on March 17, 2015—bumped up total revenue 21.7 percent to $10.28 billion and boosted the company’s gross margin 9.1 percent to $4.7 billion, according to BD’s fiscal 2015 annual report.
U.S. sales prospered from the merger as well—proceeds jumped 48.4 percent to $5.07 billion due to a virile flu season, growth in research reagent revenue and instrument placements, and the strength of BD’s overal medical product portfolio. International sales were somewhat stymied by volatile exchange rates, but still climbed 3.6 percent to $5.21 billion.
“We delivered strong growth in the U.S. region, and because CareFusion revenues are predominantly derived from developed markets, we will continue to see more balanced top-line contributions from the U.S. and international markets going forward,” Forlenza said in his shareholder letter. “Overall, our financial results for fiscal 2015 were very strong...”
Particularly in the Medical segment, the main beneficiary of the CareFusion inheritance. Expanding from three business units to five (Diabetes Care, Medication Management Solutions, Medication and Procedural Solutions, Pharmaceutical Systems, and Respiratory Solutions), segment revenue surged 41.3 percent to $6.46 billion and operating income swelled 18.5 percent to $1.53 billion. Executives attributed the increases to $1.5 billion in CareFusion’s U.S. product sales during the second half of FY15 (year ended Sept. 30) as well as strong demand for flush and safety-engineered devices.
The Medication and Procedural Solutions unit posted the largest financial gain in fiscal 2015, rising 23.5 percent to $2.85 billion. Revenue from the two new units, Medication Management Systems ($1.03 billion) and Respiratory Solutions ($419 million), helped offset losses in Diabetes Care and Pharmaceutical Systems. Diabetes sales slid 2.4 percent to $1.01 billion, while Pharmaceutical proceeds fell 5 percent to $1.16 billion.
Diabetes revenue may very well recover in FY16, as BD and Medtronic are jointly developing a new insulin infusion set with the novel FlowSmart technology, which was previously approved by the U.S. Food and Drug Administration (FDA) in May last year. The new set, designed for use with insulin pumps sold in the United States, features a smaller needle (30 gauge) that causes less insertion site trauma. Studies have shown that the technology has significantly fewer flow interruptions and blockages than regular sets.
BD’s Life Sciences segment will similarly benefit in fiscal 2016 from the late-year (2015) launch of the FACSseq high-throughput cell sorter, a device designed to solve “significant” unmet needs in single-cell analysis, and FDA approval of the MAX Enteric Parasite Panel. The latter product is the latest assay in the MAX suite that helps diagnose infectious gastroenteritis. It is a qualitative in-vitro test that detects DNA from Giardia lamblia Cryptosporidium (C. hominis and C. parvum), and Entamoeba histolytica in both unpreserved and 10 percent formalin-fixed stool specimens.
The BD MAX system automates sample preparation, extraction, nucleic acid amplification, and detection. The new panel, combined with the MAX Enteric Bacteria Panel, can detect the pathogens responsible for up to 95 percent of the bacteria that cause gastroenteritis.
“The BD MAX Enteric Parasite Panel addition to the menu will further streamline our workflow, improve turnaround time, and free up staff that were previously running EIA [enzyme-linked immunosorbent assay] testing manually,” Annette Monterrubio, microbiology and molecular biology system technical coordinator at St. Luke’s Health System in Boise, Idaho, said upon the product’s approval. “I believe this will greatly benefit patient care.”
So will the BD MAX CT/GC/TV and CT/GC assays, which received CE mark clearance in March 2015. The assays are used to detect sexually transmitted diseases like chlamydia, gonorrhea, and trichomonas vaginalis from a single specimen in one run. Urine samples can be used for testing, as well as self-collected vaginal swabs. Once loaded onto the BD MAX platform, results can be generated in less than three hours. The system, according to BD, combines automated extraction, real-time PCR amplification, and detection.
Though BD’s MAX platform proved popular with customers, it failed to significantly boost sales. Life Sciences revenue remained essentially flat, shrinking $50 million (1.3 percent) to $3.82 billion. Diagnostic Systems proceeds flatlined at $1.3 billion, though BD executives boasted of global sales growth in analytical platforms like Veritor, Kiestra, and BACTEC. Likewise, Preanalytical Systems revenue declined 1.5 percent to $1.39 billion despite solid gains in safety-engineered product sales. Segment operating income fell 2.5 percent to $839 million due to volatile exchange rates.
Despite Life Sciences’ sagging sales, Forlenza remained confident of BD’s future.
“With our progress in fiscal 2015 and our growth strategies for fiscal 2016 and beyond, we are very well positioned to become a more customer-centric provider of quality, innovative healthcare products and solutions,” he said. “A company focused on increasing access, improving outcomes, mitigating healthcare system cost pressures, and protecting patients and healthcare workers.”