Cardinal to Spin Off Medical Device Business
According to Modern Healthcare’s daily IT e-newsletter today, Cardinal Health announced it will, “spin off its clinical and medical products business into a separate, publicly traded company.”
In what looks like a tussle between Cardinal’s traditional supply chain services business and the young upstart CTS (clinical technologies and services) the two groups have decided to go their own way. With the retirement of Cardinal chair and CEO, Kerry Clark, the two vice chairs, George Barrett for supply chain services and David Schlotterbeck for CTS, are going separate ways. Barrett will take Clark’s position and Schlotterbeck will head the $4 billion global company to be headquartered in San Diego.
The new business’ offerings will include product lines in the areas of infusion care, medical and supply dispensing, respiratory care, infection prevention, diagnostics and surgical procedures.
The press reports the spin off is intended to deliver more stockholder value than the current company.
Analysts said the spinoff would allow a slimmed-down Cardinal Health to focus on turning around its underperforming drug distribution business, while potentially attracting a higher stock valuation for the publicly traded stand-alone med-tech company.
“The clinical technology side is really the crown jewel,” said Jeff Jonas, portfolio manager at Gabelli Health and Wellness Trust Mutual Fund, which owns Cardinal shares. “So that would presumably get a much higher multiple in the market as a stand-alone company.”
Apparently, declining revenue growth in the supply chain business is holding down the full valuation of CTS. The spinoff’s stock price should reflect the full value of the higher margin medical device business.
Cisco Changing to Support Health Care
Many things have changed at Cisco since they were visited by the FDA in 2006. Awhile back Kent Gray, global lead for Healthcare Solutions at Cisco, explained to me that the FDA was responding to a brochure produced by Cisco that included a photo of a 7921 handset displaying a patient monitor alarm and associated waveform. The FDA observed that the photo represented labeling of a Class III medical device for which Cisco did not have regulatory approval. Thus began a crash course in the health care school of hard knocks for Cisco.
To Cisco’s credit they have since made many substantive changes to their traditional approach to vertical market marketing in response to the special requirements of health care. During the AAMI conference this week in San Jose, I had a chance to meet with Erik Petersen, the Global Healthcare Solutions & Technology Partnerships Manager, to talk about what Cisco’s been doing in health care.
Health care has strategic importance to Cisco. After their run in with the FDA – a rite of passage for health care vendors – Cisco’s commitment to the market was confirmed by no less than CEO John Chambers.
As a corporation that has experienced enviable growth, the company is grappling with the transition from a $40 billion company to one doing $60 billion. “Cisco wants to offer a strong proactive value proposition in health care,” said Petersen, “rather than just providing a piece of infrastructure that the customer has to deal with for an overall project.” To meet their growth objectives, the company is shifting from a horizontal market company to one focused on vertical markets and applications. To us in health care, this means responding to the unique requirements of our vertical market.
Hospira Acquires Sculptor
Today Hospira announced they have acquired Sculptor Developmental Technologies (press release). A subsidiary of St. Clair Health Corporation, Sculptor was a software engineering company formed by St. Clair Hospital in 1993 to create solutions that St. Clair couldn’t buy from vendors. Sculptor’s solutions include a barcode meds administration system, an enterprise report print management application, advanced printing for Eclipsys, fax distribution software and similar tools. Sculptor has an installed base of more than 125 hospitals in North America. The deal includes St. Clair Hospital serving as a development and test site for Hospira medication management products.
Obligatory chest thumping:
“This acquisition brings together two leaders in healthcare IT — Hospira has led the industry in barcoding medications and infusion technology; and St. Clair, through Sculptor, was the first hospital in the country to combine barcoding and RFID in a single mobile device for the real-time workflow needs of clinical staff,” said Richard Schaeffer, vice president and chief information officer, St. Clair Hospital.
Note the emphasis on workflow. Given the greater experience of Sculptor, this may end up being a better acquisition for Hospira than CareFusion was for Cardinal.
Mindray Acquires Datascope Patient Monitoring
Today Chinese medical device manufacturer Mindray announced that they reached agreement with Datascope to acquire Datascope’s patient monitoring business (PMB). The acquisition will launch Mindray into the ranks of leading international medical device vendors and create the third-largest player in the global patient monitoring device industry.
Mindray is paying Datascope $202 million cash, plus Datascope retains approximately $38 million of receivables generated by the patient monitoring business for a total of $250 million (I’m not sure about that extra $10 million, but these are Mindray’s numbers). The Datascope PMB did $161.3 million in sales in 2007. Mindray expects around $30 million of run-rate synergies in manufacturing, SG&A and R&D within 3 years. Mindray has rights to the Datascope brand until 2015.
Philips to Acquire VisICU
Philips announced yesterday that they reached a merger agreement to acquire VisICU for $12 per share, $3 over the current share price. From HIStalk, “Visicu earned $9 million on sales of $36 million over the past year. In
the 20 months since its IPO, Visicu shares have dropped from nearly $25
to below $9. Its board has approved the acquisition and recommends that
its shareholders approve it.” VisICU also had $130 million in cash on their balance sheet at the time of the agreement. The value of Philips’ offer totals around $300 million.
The Philips’ press release describes their rationale for the purchase.
By integrating VISICU’s remote patient monitoring and clinical
decision support technology with Philips’ patient monitors, both
companies expect to accelerate growth by offering products that provide
more effective clinical decision support to hospital staff, while
allowing them to monitor far greater numbers of critically ill patients.
Sounds like an extension to the old “proprietary end-to-end solution” strategy. The VisICU service would seem a natural extension for their ICU monitoring business. Tighter integration could probably improve performance and usability. Whether that would translate into better patient outcomes is questionable.
Rumor has it that Philips has one more acquisition to announce before the end of the year.
LiveData Advances Medical Device Interoperability
Great news in Healthcare IT News:
LiveData has been awarded a $70,000 Small Business Innovation grant in order to
develop a plug-and-play feature to implement standards for OR workflow
and medical device interoperability. The plug-and-play feature will enable devices to work together, to
create safety interlocks, and help ensure that clinicians make
decisions based upon all available information.
LiveData’s provides data integration, mostly in the surgical suite. Unlike video systems from Stryker and many others, LiveData combines real time medical device data with IT systems (EMR, PACS, etc.) and video.
LiveData will team with Draper Labs, Massachusetts General Hospital and CIMIT to do feasibility work in the medical device plug-and-play architecture called the Integrated Clinical Environment or ICE. LiveData will provide the software foundation for the grant project.
