June 1, 2004
Boston Scientific to buy microelectronics business
From: Forbes - USA - Jun 1, 2004
By Toni Clarke
NEW YORK, June 1 (Reuters) - Boston Scientific Corp. (nyse: BSX - news - people) said on Tuesday it agreed to acquire Advanced Bionics Corp., which makes tiny implantable electronic devices to treat pain, hearing loss and neurological disorders, for about $740 million.
Advanced Bionics, whose products include cochlear implants to help restore hearing and a device that stimulates the spinal cord to reduce pain in the lower back and legs, is also developing products to treat urinary incontinence and chronic migraine headaches.
This is the first major acquisition that Natick, Massachusetts-based Boston Scientific has made outside its traditional businesses of catheters and stents, which keep heart arteries open after being cleared surgically.
Analysts said the deal may help put to rest fears about whether Boston Scientific can sustain growth through 2006, when competitors are expected to enter the U.S. market for drug-coated stents.
"Boston Scientific is building a very powerful pipeline," said John Calcagnini, an analyst at CIBC World Markets.
The transaction will reduce the company's earnings per share by about 4 cents in 2004 and about 6 cents in 2005. At the moment the company said analysts' estimates of about $1.75 a share seems "reasonable" for 2004.
Boston Scientific's shares rose 39 cents, or nearly 1 percent, in mid-afternoon trading on the New York Stock Exchange. Advanced Bionics is privately held.
The combined market for neurostimulators, programmable drug delivery pumps and cochlear implants, which help restore hearing in people who don't respond to hearing aids, is expected to be $1.6 billion in 2004 and to grow to about $3.8 billion by 2010, the company said.
Boston Scientific made its first step into the area of implantable microelectronic devices when it invested in Cyberonics Inc. (nasdaq: CYBX - news - people). Cyberonics makes the Vagus Nerve Stimulator which is inserted into the neck and issues shocks to the Vagus nerve to treat epilepsy. It is also in development for depression.
Advanced Bionics has a greater range of products and technology. In addition to its cochlear implants, spinal cord stimulator and drug pumps, the company is developing a microstimulator known as the bion which has potential to be helpful in a broad range of conditions.
The bion contains a rechargeable battery that means patients do not have to have surgery to replace it. The first condition it is being developed for is urinary incontinence.
The company has also begun clinical studies of the technology for the treatment of chronic migraines and it is evaluating the bion for other neurological conditions.
Advanced Bionics expects sales of $82 million in sales in 2004 and $128 million in 2005. Boston Scientific said it expects sales could reach $1 billion by 2010.
Calcagnini suggested the transaction may be the company's way of moving into the big market for devices that stimulate the heart, known as implantable cardioverter defibrillators.
Boston Scientific now leads the multibillion-dollar market for drug-coated stents. Last week rivals Medtronic Inc. (nyse: MDT - news - people) and Guidant Corp. (nyse: GDT - news - people) announced news that cast doubt on their stent development programs. (Additional reporting by Julie Steenhuysen in Chicago)
Copyright 2004, Reuters News Service