By Tom Henderson
Small Times Senior Writer
MAY 31, 2001 — Small tech is at the heart of a major acquisition of a medical device maker announced this week.
Medtronic Inc. of Minneapolis announced it would buy MiniMed Inc. of Northridge, Calif., and an allied company, Medical Research Group Inc. (MRG), of Sylmar, Calif., for a total of $3.7 billion in cash and stock.
MiniMed makes insulin pumps for diabetics and is testing small-tech sensors for an implantable device that will monitor and regulate glucose levels. In ongoing tests with human subjects as part of the federal regulatory process, a tiny intravenous sensor has shown that it is able to continuously and accurately read glucose levels. The next generation of insulin pump will use the sensor to automatically control the delivery of medicine.
MiniMed owns 8 percent of MRG, which does the basic sensor research and licenses its technology to MiniMed. The goal, say company officials, is to one day market a sensor-controlled implantable artificial pancreas.
“The growth potential of implantable pumps and sensors [and] the artificial pancreas create a platform that provides real near-term benefit with significant long-term growth,” said Art Collins, Medtronic chief executive officer, in a teleconference Wednesday to announce the deal.
“This is undoubtedly the best way to enter the large and growing diabetes market,” he said. “We will also be able to access core technologies and physiologic sensors, as well as external and implantable pumps. And we gain invaluable intellectual property.”
The company will pay MiniMed’s shareholders $48 a share, pending regulatory and stockholder approval, which officials expect in 90-120 days. It will pay $420 million in cash and stock to MRG, which is privately held.
Medtronic’s shares, which had fallen 29 percent since the beginning of the year, closed Thursday at $42.98, up three cents from Wednesday’s opening.
By Thursday afternoon, MiniMed had gained $2.77 on news of the deal, about 6.3 percent, to $46.77.
The acquisition continues Medtronic’s growth strategy of buying companies in nonoverlapping medical areas. It has spent more than $8.3 billion in recent years to branch out from its core business of producing pacemakers and defibrillators into spinal and neurological stimulators and equipment for ear, nose and throat surgeries.
The MiniMed deal lessens Medtronic’s reliance on the sale of large-scale medical equipment, which is mostly a one-time event, and helps shift it to product sales that are rapidly growing and ongoing.
Currently, about 16 million Americans suffer from diabetes, a number that grew 33 percent between 1990 and 1998, according to federal statistics.
Diabetes “is the size of the market we like,” said Collins.
It’s a market Johnson & Johnson Inc. likes, as well. Last week, the medical giant bought the diabetes division of Inverness Medical Technology Inc. for $1.3 billion.
People with diabetes have trouble maintaining sufficient numbers of what are called beta cells in the pancreas. Those cells produce insulin, a hormone responsible for allowing cells to absorb glucose.
Diet and exercise can control the diabetes in most cases, but about 4.6 million Americans are dependent on insulin to control the blood-sugar levels.
MiniMed says it currently supplies about 120,000 patients with its external, pager-sized insulin pump, including pumps worn by Nicole Johnson, Miss America 1999, and professional golfer Scott Verblank.
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CONTACT THE AUTHOR:
Tom Henderson at [email protected] or call 734-994-1106, ext. 233.