J&J Accepts Platinum Equity’s $2.1B Offer for its LifeScan Subsidiary; Receives Offer for Advanced Sterilization Products Subsidiary
On June 12, 2018, Johnson & Johnson announced acceptance of an offer from Platinum Equity, a private investment firm, to acquire its diabetic monitoring unit, LifeScan, for approximately $2.1 billion. In response to the acquisition, Platinum Equity Chairman and CEO Tom Gores said
We are committed to putting our financial resources and global operating expertise to work in support of the company’s core mission to improve the quality of life for people living with diabetes.
LifeScan offers blood glucose monitoring products to patients for the care of diabetes under the OneTouch brand. According to the press release, LifeScan business earned approximately $1.5 billion in revenue in 2017. Platinum Equity previously reported that LifeScan President Valerie Asbury would continue leading the business.
In February 2018, Bloomberg reported that Johnson & Johnson was seeking to sell off its sterilization products division for as much as $2 billion. The selling price has increased as Johnson & Johnson announced on June 6, 2018, receipt of a binding offer from Fortive Corp. to acquire Advanced Sterilization Products (ASP), a division of Ethicon Inc., for approximately $2.8 billion. If accepted, Johnson & Johnson indicated it expects the proposed transaction to close no later than early 2019.
ASP sells sterilization products under the STERRAD and CYCLESURE brands. ASP’s high level disinfection products are sold under the EVOTECH brand. Johnson & Johnson reported that ASP earned approximately $775 million in revenue in 2017.
DePuy Synthes Acquires Medical Enterprises Distribution LLC’s Orthopedic Assets
DePuy Synthes, a part of the Johnson & Johnson Medical Devices Companies, announced recently that it has signed a definitive agreement to acquire the assets of Medical Enterprises Distribution, LLC, which includes the automated ME1000™ Surgical Impactor tool used in hip replacement surgery. The two companies had previously formed an exclusive agreement to co-market the hip application of the ME1000™. The financial terms of the acquisition are not being disclosed. The transaction is expected to close in the second quarter of 2018.
According to Medical Enterprises, the ME1000™ delivers constant, stable energy that is designed to automate bone preparation, implant assembly and positioning in total hip arthroplasty (THA). DePuy Synthes said that the company plans to develop and broaden the surgical impactor technology for a range of orthopaedic surgery procedures.
“The acquisition of assets of Medical Enterprises Distribution is a key example of going beyond the implant to provide complete solutions to achieve better outcomes.” – Ciro Roemer, Company Group Chairman of DePuy Synthes
The hip replacement global market was $6.5 billion in 2015 and is predicted to reach $9.1 billion by 2025. The global market for all joint replacements is expected to reach $30 billion by 2025. Other companies in the joint replacement markets include Zimmer Biomet, Smith & Nephew, and Stryker.
In the recent press release, DePuy Synthes also announced an exclusive marketing agreement with JointPoint Inc. to co-market a hip navigation system for analysis of implant selection during THA. Earlier this year, DePuy Synthes announced the acquisition of Orthotaxy, a privately-held developer of software-enabled surgery for total and partial knee replacement. In discussing the Orthotaxy acquisition, Ciro Roemer, Company Group Chairman of DePuy Synthes, said “Our goal is to bring to market a robotic-assisted surgery technology that is an integral part of a comprehensive orthopedics platform, delivering value to patients, physicians and healthcare providers across the episode of care.” Other companies in the joint replacement market are likely seeking to create comprehensive orthopedic platforms as well.
Johnson & Johnson Acquires French Surgical Tech Firm Orthotaxy
On February 20, 2018, Johnson & Johnson Medical Devices Companies announced the acquisition of Orthotaxy, a privately-held developer of software-enabled surgery technologies, including a differentiated robotic-assisted surgery solution. According to Johnson & Johnson, this technology is currently in early-stage development for total and partial knee replacement, and the Johnson & Johnson Medical Devices Companies plan to broaden its application for a range of orthopaedic surgery procedures.
Orthotaxy was founded in Grenoble, France, in 2009 by robotics entrepreneur Stéphane Lavallée and has focused on surgical planning software that allows surgeons to plan implant placement on preoperative CT or MRI images. Orthotaxy has also developed patient-specific surgical guides that enable surgeons to insert surgical instruments and perform surgery in accordance with a planned strategy.
Orthotaxy currently has 3 pending published patent applications: U.S. Patent App. Nos. 14/667,623, 15/032,223, and 15/032,225. The ’623 application and the ’223 application are directed to methods for constructing a patient-specific surgical guide (e.g., element 1 in FIG. 4 of the ’623 application reproduced below) based on a patient’s 3-D medical image.
The ’225 application is directed to a method for planning a surgical intervention that comprises computing and displaying a pseudo-radiographic images along with the representation of an implant in a patient’s anatomical structure, as illustrated in FIG. 2 of the ’225 application reproduced below.
Regarding the acquisition, Company Group Chairman Ciro Roemer stated: “Our goal is to bring to market a robotic-assisted surgery technology that is an integral part of a comprehensive orthopaedics platform, delivering value to patients, physicians and healthcare providers across the episode of care. The team at Orthotaxy has significant expertise and passion in developing this platform, and we aspire to bring to market a differentiated technology that helps improve clinical outcomes and increases patient satisfaction.”
According to Johnson & Johnson, financial terms of the acquisition will not be disclosed.
Social Media Success: Trends in Pharma Digital Strategies
According to data published by business intelligence firm Cutting Edge Information, the majority (73%) of pharmaceutical marketing teams expect to use or continue to use the popular social media forum Facebook to facilitate their digital marketing strategies over the next one to two years.
According to Cutting Edge Information, “[i]n these strategy meetings, teams consider several factors, including the target patient population, therapeutic area and geographic region.” For example, “region can affect strategies because each country has its own pharma marketing rules and regulations.”
The survey, which included marketing teams from companies such as GlaxoSmithKline, Johnson & Johnson, Chiesi, Janssen, Mallinckrodt, and Takeda, also revealed that YouTube (64%) was the second most popular among the pharmaceutical marketing teams, while LinkedIn (55%) and Twitter (45%) rounded out the top four.
Not as popular, but still commonly used social networking sites include Instagram (18%) and Vimeo, Google+, Tumblr, and SlideShare each with 9% of pharmaceutical marketing teams utilizing them. Interestingly, additional data from the study show that no surveyed pharmaceutical or medical device companies reported using Pinterest, Vine, Flickr or Reddit.
Johnson & Johnson’s Codman Neuro Announces Acquisition of Neuravi
Codman Neuro, part of Johnson & Johnson’s DePuy Synthes business unit, recently announced its acquisition of Neuravi Ltd., a privately-held Irish medical device company, for an undisclosed amount. The Irish Times reported that the acquisition is the largest price paid for a European venture-backed medtech company since Medtronic’s $700 million buyout of CoreValve in 2009. According to its website, Neuravi focuses on neurointervention therapies for acute stroke treatment.
Neuravi’s sale to Codman Neuro comes after several rounds of fundraising, in which Neuravi secured tens of millions of dollars for the development and commercializing of its EmboTrap Revascularization Device. Neuravi explains that the EmboTrap Revascularization Device is a thrombectomy system designed to restore blood flow to the brain by capturing and removing blood clots. In a 2016 press release, Neuravi CEO Eamon Brady quoted the most recent investment of $16.7 million as important for building a commercial presence in the U.S. and cited the “opportunity due to the under-developed stroke treatment ‘toolbox’ available to stroke clinicians today.” The EmboTrap devices are now commercially available in Europe and are currently undergoing clinical trials in the U.S. Speaking to the Irish Times regarding Neuravi’s acquisition, Justin Lynch, a partner of one of Neuravi’s early institutional investors, said:
This is a company that has knocked the ball out of the park. They have beaten every milestone, earlier and with less money that budgeted, which is almost unheard of in this business.
Neuravi’s revascularization devices appear to have successfully caught the attention of Codman Neuro. Shlomi Nachman, Company Group Chairman of Johnson & Johnson Medical Devices Cardiovascular & Specialty Solutions recently stated:
Rapid restoration of flow is of utmost importance when treating stroke patients . . . . The EmboTrap platform was designed to address this critical need and we are excited to combine Neuravi’s expertise in clot research with Codman Neuro’s global resources to accelerate innovation in acute ischemic stroke treatment.
Codman Neuro describes its portfolio as including medical devices for hydrocephalus management, neuro intensive care and cranial surgery, and endovascular treatment of cerebral aneurysms and stroke, including aneurysm coils and vascular reconstruction devices.
Shortly before Codman Neuro’s acquisition of Neuravi, Integra Lifesciences announced that it plans to purchase Codman from Johnson & Johnson for $1.05 billion. Integra explained that it intends the acquisition to expand Integra’s international presence. Integra markets products in orthopedic extremity surgery, neurosurgery, and reconstructive and general surgery, including wound repair. According to Integra’s press release, Codman Neuros’ neurosurgery business generated $370 million in 2016 from the sale of neuro-critical care and electrosurgery devices. Johnson & Johnson reported to Reuters that the deal with Integra excludes its neurovascular and drug delivery businesses.
Potential Repeal of Medical Device Tax
With the upcoming Republican-dominated Presidency and Congress in 2017, the Affordable Care Act, or at least parts of it, look to be on the chopping block. One of the changes that may be forthcoming is a repeal of the 2.3% medical device excise tax. While currently being suspended through 2017, under the present law the medical device tax would be reinstated in 2018.
Some producers of medical devices hope that the tax is never reinstated. Mark Throdahl, president and CEO of OrthoPediatrics Corp., a northern Indiana based orthopedic company, has said that the suspension of the tax allowed the company to hire new workers and hopes for a full repeal after the Republican transition. According to Throdahl, the tax led to a hiring freeze, and suspension of the tax allowed for them to resume “an aggressive pace of hiring and investment.” Complaints from companies like OrthoPediatrics, as well as medical device associations like AvaMed, were what led to the initial temporary suspension of the tax.
Immediately after Donald Trump‘s election victory, AvaMed President Scott Whitaker wrote in a letter to Vice President-elect Mike Pence:
The medical device tax has been a significant drag on medical innovation, and resulted in the loss or deferred creation of jobs, reduced research, spending and slowed capital expansion.
According to some lawmakers, lobbyists, and industry executives, Trump and U.S. lawmakers will likely repeal the tax which could help some of the larger medical device manufacturers such as Medtronic, Boston Scientific, St. Jude Medical, and Johnson & Johnson. Senate Republican Leader Mitch McConnell has stated that repealing the Affordable Care Act will be one of the first order of business starting in January. Senator John Barrasso (R-Wyoming) has also stated that the medical device tax would likely be repealed.
There are still a number of decisions on how to approach the repeal of the medical device tax, whether in one single bill to repeal the Affordable Care Act or a number of smaller bills removing different parts of the Act. We should be receiving more clarity once President-elect Donald Trump officially takes office.
Repeal of the tax may remove approximately $2.5 billion of annual federal funding.
Johnson & Johnson to Acquire Abbott Medical Optics
Johnson & Johnson recently announced an agreement to acquire Abbott Medical Optics for $4.325 billion. Abbot Medical Optics, a subsidiary of Abbot Laboratories, reported $1.1 billion in sales in 2015. According to the press release, the acquisition will cover products in areas including cataract surgery, laser refractive surgery, and consumer eye health. Johnson & Johnson Vision Care, Inc. currently produces ACUVUE® brand contact lenses.
Ashley McEvoy, Company Group Chairman responsible for Johnson & Johnson Vision Care stated:
With the acquisition of Abbott Medical Optics’ strong and differentiated surgical ophthalmic portfolio, coupled with our world-leading ACUVUE® contact lens business, we will become a more broad-based leader in vision care. Importantly, with this acquisition we will enter cataract surgery – one of the most commonly performed surgeries and the number one cause of preventable blindness.
This acquisition comes shortly after Abbot Laboratories announced the acquisition of St. Jude Medical, Inc., diversifying Abbot Laboratories’ cardiovascular portfolio. Commenting on the sale of Abbot Medical Optics, Miles D. White, Chairman and Chief Executive Officer of Abbot Laboratories, said:
We’ve been actively and strategically shaping our portfolio, which has recently focused on developing leadership positions in cardiovascular devices and expanding diagnostics.
The acquisition is expected to be completed in the first quarter of 2017.
Cardinal Health to Acquire The Harvard Drug Group for $1.1 Billion
Ohio-based Cardinal Health (CAH) has agreed to buy Michigan-headquartered The Harvard Drug Group (THDG) for $1.12 billion. According to press releases, THDG, which is currently owned by Court Square Capital Partners, is a distributor of generic pharmaceuticals and over-the-counter medications to retail and institutional customers. The deal is expected to close in the beginning of fiscal year 2016 and will be paid for using existing cash and new debt.
Cardinal Health predicts the acquisition will enhance Cardinal’s generic pharmaceutical distribution and enable specialized packaging offerings to meet the needs of hospital systems and other institutions. Cardinal Health chairman and chief executive officer George Barrett said:
” The Harvard Drug Group aligns perfectly with our commitment to provide the most comprehensive line of pharmaceutical products for the broadest range of customers… This acquisition enhances our ability to support retail and institutional customers and further utilizes Red Oak, our joint venture with CVS Health to source generics…”
According to the press release, the deal includes THDG’s 450 employees and two distribution facilities. THDG had revenues of approximately $450 million in 2014. Cardinal Health projects the acquisition will add 15 cents to Cardinal’s earnings per share in fiscal year 2016.
The deal is not the first announced by Cardinal Health this year. In March, Cardinal announced it would acquire Johnson & Johnson‘s Cordis business for $1.94 billion cash.
Globus Argues Expert’s Faked Credentials Warrants New Trial
In 2011, DePuy-Synthes, a subsidiary of Johnson & Johnson Inc. sued Globus Medical, Inc. in the United States District Court for the District of Delaware. In that suit, Synthes alleged that Globus had infringed three Synthes patents (U.S. Patent Nos. 7,846,207; 7,862,616; and 7,875,076) all directed to intervertebral implants.
The jury found that Synthes’ patents were valid and that three of Globus’ intervertebral implant products infringed those patents. The jury awarded Synthes $16 million in damages, representing a 15% royalty on Globus’ sales of infringing products.
In December 2014, Synthes learned that its damages expert, Richard Gering, did not have a Ph.D., as he had testified under oath. Synthes notified the court and Globus the following day.
Globus argued in a brief, filed April 24th, 2015, that it should be granted a new trial because it is impossible to quantify how much the discredited expert’s testimony influenced the jury’s decision. Synthes responded that because Globus did not offer evidence that the expert’s testimony itself was factually incorrect, it could not establish that a new trial is warranted. Mr. Gering testified only on damages, and not on validity or infringement. Therefore, Synthes argued that there is no reason to grant a new trial.
Cardinal Health to Acquire Cordis for $2 Billion
(March 2, 2015) Johnson & Johnson announced that Cardinal Health has made a binding offer to acquire Cordis, a Johnson & Johnson company, for $1.99 billion. The press release indicates that the sale price includes $1.944 billion in cash and $46 million in net receivables. According to Cardinal Health’s announcement regarding the acquisition, it expects the deal to close by the end of 2015. Highlights of the deal can be found here.
According to its website, Cordis manufactures cardiovascular and endovascular products, for example stents, catheters, guidewires, and vena cava filters. According to news articles, Cordis was acquired by Johnson & Johnson in 1996 for about $1.8 billion.
According to its website, Cardinal Health is a health care services company that distributes pharmaceuticals and medical products to healthcare providers and pharmacies. Cardinal Health also manufactures various medical products. Last year, Cardinal Health acquired AccessClosure for $320 million.
Medical Device Clinical Trial Data from Johnson & Johnson To Be Made Available
According to MedicalXpress, expansive data from a company’s medical device clinical trials will soon be made broadly available to medical device researchers for the first time. The Yale University Open Data Access (“YODA”) Project will make data from certain Johnson & Johnson (“J&J”) businesses available to outside researchers. YODA will act as an independent gatekeeper to access the data.
Previously, only pharmaceutical data from J&J was available through the YODA program. Under the extended program that now includes data related to medical devices and diagnostics, clinical trial results from the Medical Devices and Diagnostics divisions of J&J will be made available. As with the J&J pharmaceutical data requests, YODA will review the requests for device/diagnostic patient data, which has been sanitized of patient identifying information. However, the agreement only covers products approved since early 2014 and thus excludes many products currently on the market. One device for which data will be available is J&J’s Thermocool Smarttouch catheter, a device used to treat atrial fibrillation that received approval in 2014 .
YODA launched in 2011. According to the YODA website, the Project
“advocates for the responsible sharing of clinical research data” and “is committed to open science and data transparency, and supports research attempting to produce concrete benefits to patients, the medical community, and society as a whole.”
Medical device giant Medtronic, Inc. has also partnered with YODA, albeit currently only with regard to Medtronic’s recombinant human bone morphogenetic protein-2 (rhBMP-2) data. Medtronic has previously shared medical device clinical trial data with the YODA Project for a single product, a bone formation product called “Infuse.” Given J&J’s expansion of its available data, other industry leaders, such as Medtronic, may well follow suit and make available additional data.
More information about the YODA project is available here, including a listing of available clinical trial data and how to make a request. An FAQ on the YODA project is also available here.
Federal Circuit Vacates $176 Million Damages Award to Covidien relating to Ethicon Harmonic Ultrasonic Cutters
The United States Court of Appeals for the Federal Circuit vacated a $176 million district court damages award to Covidien, formerly known as Tyco Healthcare Group LP, in a patent infringement suit against Ethicon Endo-Surgery, Inc., a subsidiary of Johnson & Johnson. Covidien’s lawsuit alleged that Ethicon’s Harmonic ultrasound cutting devices infringed U.S. Patent Nos. 6,682,544; 6,063,050; and 6,468,286. According to the Federal Circuit, “the asserted patents generally disclose a surgical device… that employs ultrasonic energy to cut and coagulate tissue in surgery.” Figure 12 from U.S. Patent No. 6,063,050 is illustrated below:
The Federal Circuit held that the claims Covidien asserted against Ethicon were invalid as obvious. The opinion stated that “the district court improperly held that the Ethicon Prototype could not be considered prior art under 35 U.S.C. § 103, and erred in finding that the… claims would not have been obvious.”
Fighting Fire with Fire – the Medical Device Tax and Outsourcing
Since its passage as part of the Affordable Care Act in 2010, the medical device tax has been hotly debated. The 2.3% excise levied on total revenues may effectively preclude new entrants while hindering the growth of established companies. While industries have turned to outsourcing for a number of years as a way to cut costs, the medical device industry may increasingly consider outsourcing in the coming years as a means to offset the effects of this tax. While outsourcing may help U.S. medical device companies, it may adversely affect Americans currently working in this sector.
J&J Expands Space for Startups
MedCityNews reports that Johnson & Johnson (J&J) recently added space to its San Diego innovation center, a shared laboratory space that gives startups access to lab space without having to commit to additional capital. Startups rent the space and wet lab units they need on a short term basis and can expand when they have the ability to do so.
According to MedCityNews, the open plan design of the “concept lab” is designed to spark interaction between entrepreneurs and help J&J identify opportunities for investment:
Janssen Labs is part of a wider effort by J&J to enlist creative deal making strategies, to position itself to spot opportunities early. It also helps make the medical device and big pharma business appear more welcoming to innovation and early stage companies, who face the daunting challenge of convincing private investors and companies to invest in their business.
J&J reportedly plans to open similar labs for startups in Boston, China and Europe, staffing the centers with experts who will identify early stage innovations.
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