As expected, Cleveland Clinic neuromodulation spinoff Intelect Medical has been acquired for $78 million. The buyer: current investor Boston Scientific (NYSE:BSX).
Because Boston Scientific was already an investor, holding equity and debt positions in Intelect, the deal contains $60 million in “new” money, which BSX paid in cash, according to a statement from the company.
MedCity News reported the impending sale of Intelect on Dec. 24, but whiffed on the buyer. Three sources that week confirmed that Intelect would be sold, but early indications were that the buyer was another of the big medical device firms. Intelect would be attractive to pretty much any big device company — the rapidly growing neuromodulation market has captured the attention of firms like Medtronic, St. Jude Medical, and Boston Scientific. But in the end Boston Scientific, a current investor, simply makes the most sense.
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Intelect is developing an implantable neuromodulation system that works by using deep brain stimulation, which involves electrically stimulating the brain to reorganize its electrical signals. The company’s GUIDE system enables doctors to visualize stimulation fields in the brain and provide more precise targeting of therapy, according to the statement.
BSX estimates the current worldwide market for deep brain stimulation at $400 million, and projects it to grow to more than $1.5 billion by 2020.
“Deep brain stimulation has enormous potential, and it is an important part of our neuromodulation business growth plans,” Boston Scientific CEO Ray Elliott in his statement. “We will continue to pursue additional [initiatives] to strengthen our company by buying or building products we understand, to be sold through sales forces we already have.”
For BSX, the purchase represents a doubling down of sorts on neuromodulation, and a sign of its newfound commitment to the business.
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BSX spent much of 2010 trying to find a buyer for its neuromodulation unit, reportedly hoping to pull in between $1.5 billion and $2 billion, the Boston Globe reported last month. Johnson & Johnson was willing to pay a little more than $1 billion. Other would-be acquirers were interested, but only for a price less than $1.5 billion. With no buyer willing to meet its threshold, Boston Scientific gave up on a sale and is now hoping to grow its neuromodulation portfolio.
Revenues in BSX’s neuromodulation unit grew 6 percent to $219 million through the first nine months of 2010.
Intelect spun out of Cleveland Clinic and Cornell University in 2005 and has been been under the radar in recent years. It hasn’t issued a press release since 2008 and the company never publicly announced its move from Cleveland to Boston.
Intelect’s exit is a gigantic win for Cleveland Clinic Innovations, the hospital’s commercialization arm, as well as anyone at Innovations who might have a stake in the company. Intelect’s sale marks the third exit for a Cleveland Clinic Innovations company but it’s by far the biggest. Its first was Cleveland BioLabs (NASDAQ: CBLI), which happened through a $14 million initial public offering in 2006. A second company, ReVasc, was sold in 2007 to Micrus Endovascular Corp. (NASDAQ: MEND) in San Jose, California, for $1 million, with the potential of $5 million more in future milestone payments.
BSX led Intelect’s $11 million investment round in 2008.
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- Cleveland Clinic neuromodulation device spinoff close to acquisition (medcitynews.com)