Antitrust concerns stall Boston Scientific/CVIS merger

February 1, 1995

FTC claims deal would corner IVUS marketOfficials at Boston Scientific and Cardiovascular Imaging Systemsexpressed indignation after the Federal Trade Commission announcedon Jan. 19 that it would block the planned merger between thetwo

FTC claims deal would corner IVUS market

Officials at Boston Scientific and Cardiovascular Imaging Systemsexpressed indignation after the Federal Trade Commission announcedon Jan. 19 that it would block the planned merger between thetwo intravascular ultrasound imaging firms.

Boston Scientific CEO Pete Nicholas responded to the FTC'saction by claiming that the merger is procompetitive and in thebest interests of patient care.

"This merger will enable us to accelerate the developmentof new, improved and lower cost ultrasound imaging devices,"he said.

The companies will vigorously oppose the FTC attempt to blockthe merger,said CVIS chief executive Richard M. Ferrari.

"The FTC case is completely ridiculous when you thinkabout the time and money both CVIS and Boston Scientific are spendingon a market that is quite small and still emerging," he said.

Boston Scientific, of Watertown, MA, and CVIS, of Sunnyvale,CA, are two of the three companies competing in the intravascularultrasound transducer market. By merging, the two firms wouldcontrol an estimated 80% of the IVUS market. The other 20% isleft to Endosonics of Pleasanton, CA.

Ferrari challenged claims that a BSC/CVIS merger would leadto high prices and slower technological advancement.

"It is the complete reverse of that," he told SCAN."BSC and CVIS both were forced to slow down their R&Defforts and their ability to fuel further clinical trials becausewe were embroiled in litigation with each other."

Before the merger agreement, Boston Scientific and CVIS werecaught up with legal challenges to each other's patents. Legalcosts exceeded several million dollars, he said.

"By solving these legal problems through the merger, wecould improve our products, fuel new clinical trials and investigateopportunities for combining intravascular ultrasound and therapeuticsin many other applications outside the coronary vessels -- somethingwe've always believed we should do," Ferrari said.

Endovascular and neurovascular applications are the next stepsfor IVUS, according to Ferrari.

The FTC's actions came as a surprise to some antitrust expertswho noted that the agency rarely looks unkindly at companies inR&D-based industries. IVUS certainly fits that definition.The three catheter manufacturers combined had between $25 millionand $30 million in sales in 1994, Ferrari said. He expects theindustry to grow by about $10 million this year. All three companiesdirect most of their revenue back into R&D.

The merger, which was valued at about $100 million, was announcedlast August (SCAN 9/14/94). At the time, the companies plannedto operate CVIS as a Boston Scientific division handling R&D,manufacturing and marketing for Boston Scientific's intraluminalultrasound program. It was to continue operations in Sunnyvale.Stockholders are expected to approve the deal when they meet inmid-February.

The FTC was scheduled to seek an injunction against the mergerin U.S. District Court for the District of Columbia on Jan. 30.It typically takes about 40 days for a judgment to be renderedin such antitrust cases, Ferrari said.

The acquisition of CVIS is not the only Boston Scientific transactionthat is under scrutiny by federal regulators. Earlier last month,the company said that the FTC has requested more information aboutits proposed merger with catheter manufacturer Scimed Life Systemsof Maple Grove, MN (SCAN 11/23/94). Boston Scientific said theFTC's request was related to the activities of the companies inintravascular ultrasound.