Replies to post #96595 on Biotech Values

[DewDiligence]

EVVV:

I always loved their products but never got around to buying their stock.

Neither did I. If I recall correctly, our resident medical-device whiz, bridgeofsighs, spoke highly of them a few years ago.

[jellybean]

How do the PFS and OS numbers for those techniques (chemo em, RF ablation, etc.) compare to the DCTH numbers? Wouldn't those have been the techniques used for best care in the comparator arm of the Delcath trial? Looking at the top-line numbers, they seemed to be a home run but your post suggests otherwise...can you explain why?

[DewDiligence]

More on the COV-EVVV buyout from the Boston Globe.

http://www.boston.com/business/articles/2010/06/02/covidien_buys_device_maker_for_26b/

›Covidien-ev3 Deal Offers Entry into Lucrative Vascular Market

By Robert Weisman
June 2, 2010

In its largest deal since it was spun out of the former Tyco International Inc. three years ago, Covidien PLC yesterday said it will buy vascular device maker ev3 Inc. for $2.6 billion in cash and debt, a 19 percent premium over ev3’s closing stock price Friday.

Covidien, the former Tyco HealthCare division, is incorporated in Ireland but has its corporate headquarters in Mansfield. It has acquired more than a dozen smaller companies in the past three years, as it worked to emerge from the Tyco shadow and build its own brand in the fields of medical devices, hospital supplies, and generic drugs.

“This gives us another avenue of growth,’’ Covidien chief executive Richard J. Meelia said yesterday. “The majority of our growth has come from our surgical and pharmaceutical franchises. We’ve been very interested in building out the vascular market. It’s going to be one of our biggest growth opportunities.’’

Vascular devices are used in surgeries and procedures involving veins, arteries, and nerves. The two market segments served by ev3 — peripheral vascular and neurovascular disease technologies — together ring up annual sales of about $3.5 billion, Meelia said. Ev3, based in Plymouth, Minn., anticipated revenue of about $525 million this year, meaning Covidien will have room to expand sales of its new line of stents, catheters, angioplasty balloons, plaque excision systems, embolization coils, and other devices.

Meelia, who has stuck to what he calls smaller, “bolt-on’’ acquisitions in recent years, hinted in an interview with the Globe last month that he would be open to a larger acquisition if a company became available at the right price with the right products.

Ev3, which has little overlap with Covidien’s own product line, meets those criteria. Until last year, Covidien was only a small player in the vascular space, marketing hospital supplies such as compression sleeves and anti-embolism stockings. Then it acquired VNUS Medical Technologies of San Jose, Calif., last May, paying $440 million to gain a minimally invasive treatment for venous reflux disease. At that time, Covidien set up a vascular device business unit within its medical device group.

That was followed in June by Covidien’s smaller acquisition for an undisclosed sum of Bacchus Vascular Inc., a Santa Clara, Calif., pioneer of interven tional therapies for deep vein thrombosis.

The devices sold by VNUS and Bacchus serve two of the fastest-growing niches in the vascular device business, markets expanding by estimated annual rates of 19 percent and 15 percent respectively, said Harry Glorikian, managing partner at Scientia Advisors, a Cambridge consulting firm that focuses on life sciences.

Those products were “toes in the water,’’ he said, positioning Covidien for a deeper dive with ev3, whose products compete with industry giants such as Natick’s Boston Scientific Corp. and Medtronic Inc. of Minneapolis.

“Covidien is definitely going to be a force to be reckoned with’’ in vascular devices, Glorikian said. “This is a fast-growing market, and a big market. This is the kind of thing you want in your portfolio.’’

Under their agreement in principle, Covidien will pay $22.50 a share for ev3. The acquisition is expected to dilute Covidien’s stock value in the short run because of transaction costs and the repayment of debt used to finance the deal, shaving off 5 to 8 cents in per share profits this year and 10 to 15 cents in 2011, the company said. But starting in 2012, it said, the ev3 operations should begin adding to Covidien’s earnings.

The buyout of ev3 is expected to be completed by the end of July. Covidien expects to keep most of the ev3 management team, sales force, and 1,350 employees, Meelia said in a conference call with health care industry analysts yesterday.

Covidien, which posted revenue of $10.7 billion last year, has about 42,000 employees worldwide, including 1,300 at its sites in Massachusetts, including Bedford and Chicopee in addition to Mansfield.

Its largest business group is medical devices, which generated $6.1 billion in 2009 sales, or about 57 percent of the total. Within the Covidien medical device business, however, vascular devices accounted for less than 10 percent of revenues last year.‹