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In a final move that seemed (at least in the eyes of some industry analysts) as likely to be designed to increase J&J's price tag for the acquisition of Guidant as it was an actual competitive bid, Boston Scientific had this month upped its bid to $27 billion ($80 per share), and when the midnight (January 24) deadline passed without J&J responding with another offer, it now appears likely that the winner in this bidding war will be Boston Scientific. Guidant has accepted Boston Scientific's offer and terminated the agreement to be acquired by J&J. For its part, J&J issued a statement saying, "it had determed not to increase its last offer for Guidant Corp., because to do so would not have been in the best interest of its shareholders."
Confidence is high in the likelihood of BSX making a success of this, given the related deal with Abbott (to acquire Guidant's vascular business), the fit with Boston Scientific and, at least in general, the relative value of the acquisition price tag and the Guidant revenue streams and balance sheets. But one has to give pause to this and consider several points:
- J&J is as experienced in acquisitions as any monolith out there and it viewed the $27B price tag as too high. Do they know something that BSX doesn't?
- BSX and J&J have been bitter rivals in the DES market and one can't help but wonder if the rivalry hasn't clouded BSX's judgment, making this little more than a pyrrhic victory for BSX. A loss for J&J does not equate with a win for BSX.
- The combined BSX/GDT business now has $12 billion in debt, a hefty burden that can only be lightened by market performance (oh yes, see "Guidant Defibrillator Recalls").
It's very hard not to think back to the Time/Warner acquistion of AOL, and in that case Time/Warner did not have a competitor who balked at the value of the deal, and we all know how well the AOL acquisition worked for T/W.
In the latest turn in the burgeoning bidding war over Guidant between J&J and Boston Scientific, Guidant on Wednesday accepted J&J's $23.2 billion acquisition offer, but Boston Scientific has indicated it is not yet walking away from the deal. Moreover, Guidant has expressed to Boston Scientific that it is willing to consider additional talks and a better offer, and it is entirely likely that Boston Scientific will, given the $14 billion in funding available to them from banks who have agreed to help finance the deal.
Both sides appear prepared to really go to the mat on the deal, which further supports the likely significance of "winner's curse", in which the ultimate acquirer ends up paying more for the deal than they should. Already, J&J has offered to pay $1.9 billion more than it offered in November, when it had then dropped the price to $21.9 billion as a result of the recalls that, in J&J's views, had effectively reduced the value of Guidant. Of course, the $1.9 billion premium does not reflect any added Guidant value, but instead represents the price J&J is attempting to pay to take Boston Scientific out of the game.
One has to wonder, in this high stakes poker game, if one or both players recognizes that the goal is not to acquire Guidant but to make the other pay more than necessary while improving the likely terms to acquire the alternative ICD player, St. Jude.
The bone graft substitutes market, comprised of synthetic bone graft substitutes, demineralised bone matrices (DBMs), and bone morphogenic proteins (BMPs) is the subject of a report we have added from a well regarded U.K. based analyst, Dr. Nelesh Patel. The report details products, applications, companies and the associated markets in the U.S. and in major Western European countries. The report is described here.
In our December '05 issue of MedMarkets, we addressed applications, products and companies developing nanotech and MEMs (microelectromechanical machines) in medicine. There we address applications and companies focused on nanomedicine developments in biosensors, pacemakers, implantable pumps, personalized medicine, drug delivery, cancer therapeutics and diagnostic systems.
From a macro view, it is worthwhile to step back and look at the migration of nanotechnologies from the more purely materials science, in which nanoparticles or nanosurfaces are developed to provide properties intrinsic to such small scale, toward structurally engineered products at the nanoscale, including nano products that provide the more complex sensor-type performance or even beyond, with specialized structural and functional components.
By comparison to a prior analysis that we provided on nanotech and MEMs, this developmental trend has become more pronounced, illustrating the growing sophistication of the science. In our current analysis, a limited, but fairly representative sample of companies suggests the following current distribution of the essential functional characteristics provided by the nanotechnologies being developed, as measured by the simple frequency of companies:
- particle/surface: 64%
- analysis: 8%
- functional structure: 28%
By "particle/surface", we mean products that are nanoparticle, nanoparticle coating or other products based simply on nanoscale materials.
By "analysis", we mean products designed to reveal structure or function at the nanoscale level, rather than products that are themselves nanoscale or that provide analytical (e.g., sensor-based) functions at the nanoscale.
By "functional structure", we mean those products that are themselves nanoscale in simple or complex structure (i.e., beyond surface coating) providing functional performance beyond nanoparticles as materials.
In this, we have seen, even in the past two years, an impressive increase in nanotechnologies in the functional structure category, the most advanced of nanotechnology development. Indeed, the predominant types of nanotech products, both in nanomedicine applications and in the broader applications, fall in the area of particle and/or surface-based nanotechnologies, in which there is little or no performance of nanotech beyond that provided materials science. In nanomedicine, this particle/surface category, even cursorily surveyed, stands at 64% of the nanotech companies.
This is not to say that nanotech development necessarily has as its endpoint (in ultimate market potential) the development of complex nanostructures. Tremendous market potential may well reside in nanotech as surface coatings (let's remember what coatings did to the stent market), whether for devices or for pharmaceuticals. Impirically, there are more challenges in the development and testing of complex nanostructures than in the development of nanosurfaces. But there may also be nanoscale applications of complex nanostructures that we have envisioned neither technologically nor from a market potential.
If there is a take home message (sorry to have taken so long to get here), it is that the survival-conscious device manufacturer has recognized that nanotech is an area that it cannot afford to ignore. Over the next 1-2 years, witness the number of developmental, investment or other deals involving device companies and nanotech companies.
