Guidant Hints at Trend Shift

In January 2004, Abbott announced its acquisition of TheraSense, an Alameda, California based device company with promising product lines in diabetes. The year closed with a bang on the news that Johnson and Johnson acquired Guidant. Small, medium and large, the pressures to merge are being felt across the device landscape – and that landscape may be fundamentally altered as a result.

Guidant Additive for Johnson and Johnson

By far the largest device deal in years, the Guidant sale drew mediocre reviews from analysts in all walks of life. Headquartered in Indiana, with significant investments in Minnesota, California and elsewhere, Guidant is immediately additive to Johnson and Johnson in people, innovation, discovery and product.

Guidant spun out of Eli Lilly in 1994, a mere decade before its acquisition by J&J for $25.4 billion. Critics emerged early and often. The Federal Trade Commission was expected to draw up serious questions regarding the potentially anti-competitive portions of the deal. Meanwhile, astute columnists Anthony and Christensen have been among those drawing on the history of J&J itself to cast the Guidant deal into doubt.

Acquired by Abbott Becoming Household Expression

Abbott’s aggressive deal-making in the last several years makes the TheraSense acquisition another in a long line of additions to the family. From spinal injury to vascular devices to TheraSense’s own blood monitoring systems, Abbott continues to build.

The strategy employed by Abbott in the TheraSense case is much more akin to the Johnson and Johnson pattern with small, promising innovators life LifeScan.

To date, Abbott has left TheraSense up and running in Alameda, while adding its powerhouse capabilities in manufacture, assembly, distribution and sales to the mix for TheraSense. In addition, complementary product lines already within Abbott offer even greater cross promotional opportunity.

Locally Meaningful

The presence of these players, Johnson and Johnson, Abbott and Guidant, is unmistakable in the Bay Area. Guidant’s iconic logo rises proudly above the 101 in Santa Clara. Beyond TheraSense, Abbott maintains Bay Area facilities from Abbott Diagnostics in Santa Clara to the former Perclose headquarters in Redwood City.

Johnson and Johnson stands head and shoulders above these. ALZA remains in Mountain View. LifeScan remains in Milpitas. Scios remains in Fremont.

For those most concerned about jobs in the Bay Area, the pattern of medical device mergers is pleasantly distinct from pharmaceutical mergers. The last round of drug mergers left a steady supply of empty buildings in their wake. Sugen and COR were wiped from existence at the height of biotech markets. There have been exceptions, of course. Aviron survived following its sale to MedImmune. A slimmed down Amgen bares a research resemblance to Tularik in South San Francisco. Then there are the Roche investments around California.

Early returns in 2005 suggest a continued hot pace to mergers and acquisitions. Already this year, Genencor International has changed hands. Northern California innovators will likely continue to witness the change in marquee of their employers. Northern California companies will continue to make headlines over merger news.

While the changes will be cause for concern to some, we must all be mindful of the fact that these headlines are driven by the years invested by and tireless efforts of our innovators and entrepreneurs.