It's been a long haul for Guidant Corp. (Indianapolis) since it first became an acquisition target, in December 2004, following a $25.4 billion offer from Johnson & Johnson Inc. (J&J; New Brunswick, NJ). But now, following a sometimes-fractious courtship with J&J and a $27 billion late-entry bid this past December from Boston Scientific Corp. (Natick, MA), the end is finally in sight.
On March 31, shareholders of Guidant and Boston Scientific overwhelmingly approved the merger. Soon after, the companies reached a consent agreement with the Federal Trade Commission (FTC; Washington, DC) and received antitrust clearance from the directorate-general for competition of the European Commission (EC; Brussels). With these hurdles overcome, the companies expect the deal to close later this month, following final FTC review.
According to Paul Donovan, Boston Scientific's senior vice president for corporate communications, the FTC consent agreement “did not require any material changes” to the merger.
In a related action, the EC also cleared the proposed sale of Guidant's vascular intervention and endovascular units to Abbott (Abbott Park, IL). The transaction is one of the divestitures Guidant was required to make as a condition of approval for its merger with Boston Scientific. As part of this $6.4 billion deal, Abbott will pay $4.1 billion in cash, provide a $900 million loan to Boston Scientific, and acquire $1.4 billion in the company's stock.
Throughout the protracted merger period, Boston Scientific has emphasized that restoring Guidant's cardiac rhythm management device business would be one of its top priorities. Evidence of some recovery is already noted in Guidant's preliminary report for the first quarter of 2006. Estimated U.S. and worldwide implantable defibrillator sales of approximately $308 million and $419 million for the quarter represent declines of 16% and 12%, respectively, when compared with the first quarter of 2005. However, implantable defibrillator sales were up 13% from the fourth quarter of 2005 in both domestic and international markets.
Overall, first-quarter sales of $894 million represented a decline of 6% from the first quarter of 2005, but were slightly higher than the company's forecast revenue of $879.4 million.
Capek: Rebuilding for launch.
At the end of the March, however, Guidant announced another setback, this time involving its Xience drug-eluting coronary stent program. According to the company, a small number of the stents—less than 1%—were “not manufactured with strict adherence to its quality standards.” As a result, the company halted enrollment in the Spirit III clinical trials in Japan and the United States. The trials are designed to test the safety and efficacy of the device. Guidant said it plans to resupply clinical investigators with newly manufactured units as soon as they become available.
“To ensure that the product meets Guidant's quality standards, the company will not utilize existing inventories and will rebuild devices for Spirit III and the upcoming European launch,” said John Capek, PhD, president of Guidant's vascular intervention unit. Xience received the CE mark in January 2006.
According to Guidant, the company has fully informed FDA, Boston Scientific, and Abbott about the temporary suspension of Xience's clinical trials.
© 2006 Canon Communications LLC
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