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NATICK, Mass., and VALENCIA, Calif., June 1 /PRNewswire-FirstCall/--
Boston Scientific Corporation (NYSE: BSX) and Advanced Bionics
Corporation, a privately held company located in Valencia, CA, today
announced the execution of a definitive merger agreement under which
Boston Scientific will acquire 100 percent of the fully diluted equity of
Advanced Bionics for an initial payment of approximately $740 million in
cash, plus earn out payments tied to future performance milestones. The
acquisition will expand Boston Scientific's technology portfolio into the
rapidly growing implantable microelectronic
device market. Advanced Bionics has developed implantable microelectronics
for treating numerous neurological disorders. Its neuromodulation
technology includes a range of neurostimulators (or implantable pulse
generators), programmable drug pumps and cochlear implants.
Neuromodulation devices are used to treat chronic conditions such as lower
back pain, hearing loss, urinary incontinence, Parkinson's disease, tremor
and epilepsy. Other applications are currently under development. The
total worldwide market for neurostimulation devices is estimated to be
$1.6 billion in 2004 and is expected to grow substantially over the next
several years, reaching approximately $3.8 billion by 2010.
Advanced Bionics was founded in 1993 by Al Mann to develop and manufacture
cochlear implants for profoundly deaf children and adults. The Company is
the industry's technology leader and the only American manufacturer of
cochlear implants. Advanced Bionics has invested more than $100 million
during the last five years to develop less-invasive neuromodulation
technology platforms to treat chronic lower back and leg pain, and plans
to use its pioneering micro-bionic technology to enter the urinary urge
incontinence and chronic headache markets, as well as other markets. The
Company has nearly 100
patents and 200 applications pending. Advanced Bionics employs 550 people
in facilities in the United States, Europe and Japan.
Advanced Bionics' neurostimulation devices treat neurological conditions
through the delivery of focused electrical current to targeted nerve
fibers. The implantable devices are wirelessly controlled by the physician
or the patient to deliver the precise timing and amount of electrical
current needed to overcome the patient's disabling condition. Advanced
Bionics presently is organized around three different businesses:
Auditory Business: Advanced Bionics launched its first multichannel
cochlear implant, Clarion(R), in 1996 and currently markets and sells the
HiResolution(TM) Bionic Ear System through a direct sales organization in
the U.S., Europe and Japan. Cochlear implants are the only approved
devices capable of restoring a human sense. The technology consists of an
external sound processor, which captures and processes sound information
from the
environment and transmits the digital information through the skin to the
implant. The implant delivers up to 83,000 digital pulses of electrical
current to precise locations on the auditory nerve, which the brain
perceives as sound. The worldwide market for cochlear implants is
currently $420 million, and is expected to grow 12-15 percent over the
next five years.
Pain Management Business: Advanced Bionics received U.S. Food and Drug
Administration (FDA) approval in April to market its Precision(TM) Spinal
Cord Stimulation System for the treatment of chronic peripheral pain of
the lower back and legs. The Precision system introduces the industry's
first rechargeable battery, allowing longer life than non-rechargeable
systems and requiring fewer replacement surgeries. The Precision is
approximately half the size of other implantable spinal cord stimulators,
and features the first patient-directed fitting system for fast and
effective programming. Advanced
Bionics expects to launch Precision this summer into the $425
million-a-year pain management market with its direct sales force. In
addition, Advanced Bionics recently acquired Medical Research Products,
Inc, which designs and develops an implanted programmable drug delivery
pump that is expected to begin its initial clinical trial for chronic pain
in early 2005.
Microstimulator Business: Advanced Bionics' bion(R) microstimulator was
developed for clinical applications requiring significantly smaller
implants, and to reduce the invasiveness of existing therapies. The bion
microstimulator contains a rechargeable battery, sophisticated electronics
and stimulating electrodes in a cylinder only 3 mm x 28 mm and weighing
only 0.75 grams. It is implanted through the use of a needle-like
instrument, which leaves behind a small puncture that can be covered with
a bandage. The bion has received CE Mark approval for use in urinary urge
incontinence in Europe and is currently
in a U.S. Phase II clinical study for this indication. FDA pre-market
approval is expected in 2007. Enrollment in a Phase I clinical study for
the treatment of chronic headache has recently begun, and the company is
evaluating bion for the treatment of other neurological conditions.
The acquisition has been structured to include a substantial earnout
mechanism. Performance milestones are primarily based on the achievement
of net sales, with certain milestone payments also tied to profitability.
The milestones are segmented by the four principal technology platforms
(cochlear implants, implantable pulse generators, drug pumps and bion
microstimulators), each with a 72-month earnout horizon. Base earnout
payments approximate two and a quarter times incremental sales for each
annual period. There are also bonus earnout payments available based on
the attainment of certain aggregate sales performance targets and a
certain gross margin level.
The transaction is expected to close within days of this announcement.
Boston Scientific expects the acquisition to be modestly dilutive to
earnings per share (approximately $0.04 and $0.06 in 2004 and 2005,
respectively). Advanced Bionics expects to achieve sales of approximately
$82 million in 2004, an annual increase of 45 percent. It also expects to
achieve sales of approximately $128 million in 2005, an annual increase of
56 percent.
Boston Scientific's entry into neuromodulation devices will expand its
ability to reach new clinical markets and may add new therapeutic
technologies for its existing businesses in urology, gastroenterology,
cardiovascular and neurovascular medicine.
"The addition of the Advanced Bionics team to Boston Scientific brings an
expertise in implantable neurostimulation devices that will complement and
enhance our existing less-invasive technologies," said Jim Tobin,
President and Chief Executive Officer of Boston Scientific Corporation.
"Advanced Bionics has a proven product portfolio, an impressive research
and development infrastructure, and an exciting long-term product
pipeline. I am particularly pleased that the Advanced Bionics senior
management team, led by founder,
Chairman and Co-CEO Al Mann and President and Co-CEO Jeff Greiner, will
continue to lead the company. I am looking forward to working with them
and the rest of their talented organization."
"The acquisition by Boston Scientific allows us to build on their global
sales and marketing experience," said Al Mann. "I believe the combination
of Advanced Bionics technology platforms and the Boston Scientific
entrepreneurial philosophy is capable of achieving tremendous outcomes for
physicians and patients."
"The platforms we have been developing over the past 10 years should
enable Advanced Bionics to become a major long-term force in the
multi-billion dollar neurostimulation marketplace," said Jeff Greiner.
Merrill Lynch Global Markets & Investment, Inc. and Citigroup Global
Markets Inc. assisted Advanced Bionics in this transaction. Boston
Scientific and Advanced Bionics officials will be discussing the
transaction with analysts on a conference call today at 11:00 a.m. (ET).
The Company will webcast the call to all interested parties through its
website
http://www.bostonscientific.com. Please see the website for details on
how to access the webcast. The webcast will be archived and available for
10 days on the Boston Scientific website. The transaction will not be
immediately implemented in Germany pending clearance from the German
Federal Cartel Office.
Boston Scientific is a worldwide developer, manufacturer and marketer of
medical devices whose products are used in a broad range of interventional
medical specialties. For more information, please visit:
http://www.bostonscientific.com.
This press release contains forward-looking statements. The Company wishes
to caution the reader of this press release that actual results may differ
from those discussed in the forward looking statements and may be
adversely affected by, among other things, risks associated with new
product development and commercialization, clinical trials, intellectual
property, regulatory approvals, competitive offerings, integration of
acquired companies, the Company's overall business strategy, and other
factors described in the Company's filings with the Securities and
Exchange Commission.
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