Snow wasn’t the only thing to swirl in New York this holiday period: rumours were roiling as well. Nearly a year ago Johnson & Johnson said it was considering selling off its diagnostics business, and signs are now emerging that a deal is close, and could be worth around $4bn.
Also in diagnostics, Myriad Genetics’ woes intensified with a cut in the rate at which Medicare reimburses its BRACAnalysis breast cancer test. Even if its legal challenges against competitors succeed, the company could be looking at a lean 2014.
Regulatory and data
Myriad Genetics was always going to suffer from the Supreme Court’s decision to open the breast cancer genetic testing space to its competitors, but the Centers for Medicare and Medicaid Services delivered a stinging blow by saying it would slash in half the rate at which the tests are reimbursed. Citing increased competition, the CMS intends to pay $1,438 per test compared with the current $2,795.
There is now a month-long consultation period so this might not be the final judgement, but the company has much to lose. Medicare payments account for around 10% of Myriad's total BRACAnalysis gene test sales, but commercial insurers are likely to follow the CMS’s lead, exposing around 85% of Myriad's revenue. The pricing will also affect the newer entrants; Ambry Genetics and Quest Diagnostics, for instance, sell their BRCA tests for around $2,000, a figure that may now come down significantly if they wish to remain competitive.
Shares in Carmat spiked 27% after the French company said a patient implanted with its artificial heart was doing well a week after the procedure. Should further trials go to plan, the product could reach the European market as early as 2015.
Unlike left ventricular assist devices (LVADs) such as those manufactured by HeartWare and Thoratec that provide support for a failing heart, Carmat’s product is designed to take over from the native organ entirely. It is made of a combination of bovine tissue and artificial materials and is – unlike most LVADs – pulsatile. The company hopes to complete human trials by the end of 2014 and immediately seek approval in Europe. But with a potential price tag of $220,000, its performance on the market is hard to predict.
Stryker is to pay just under $120m to acquire Patient Safety Technologies, maker of software designed to prevent doctors leaving surgical sponges in patients' bodies after surgery. Around 300 US hospitals use the Safety-Sponge System as a way of reducing medical errors – sponges are the most commonly retained foreign object, with about 2,300 incidents reported each year in the US – and the subsequent litigation.
The technology comprises barcoded surgical sponges, a barcode scanner and a programme that tracks sponges usage. Surgical staff scan the sponges before and after use to be sure they have been removed from the patient's body. Patient Safety often levies no charge for the scanner, instead making its money from sales of the sponges, which cost around $10 per surgery; whether Stryker will also pursue this model is not known.
Johnson & Johnson appears to be close to the long-rumoured divestiture of its testing arm, Rochester, NY-based Ortho Clinical Diagnostics, in a deal which could be worth $4bn.
J&J is in negotiations with Carlyle Group to complete the transfer within the next two weeks, according to Reuters. The private equity concern seems to have outbid a reported joint offer from Danaher and Blackstone Group. The rumour runs that Carlyle has until mid-January to complete due diligence, after which exclusivity expires.
AtriCure is to buy the surgical ablation specialist Estech in a front-loaded deal. AtriCure will pay $34m up front in the form of 2.1 million of its shares and a potential $26m in milestones. The acquisition is expected to close in the next month or two.
AtriCure says that the transaction will not be accretive to earnings until 2015; this is not ideal as the company is currently loss-making.