Schering purchase of Medradmay spark market realignment

August 30, 1995

Schering strengthened by $180 million acquisitionCorporate alliances that defined the landscape of diagnostic imaging'sCT contrast injector market were shaken last week when marketleader Medrad accepted a $180 million tender offer from ScheringAG

Schering strengthened by $180 million acquisitionCorporate alliances that defined the landscape of diagnostic imaging'sCT contrast injector market were shaken last week when marketleader Medrad accepted a $180 million tender offer from ScheringAG Germany to buy the Pittsburgh-based firm.

The acquisition of Medrad was widely seen as a victory in Schering'seffort to become more prominent in the U.S. x-ray contrast agentmarket. The opening salvo came earlier this year when the Foodand Drug Administration cleared its nonionic agent, Ultravist(SCAN 6/7/95).

By purchasing Medrad, Schering gains direct access to the largeand swiftly growing spiral CT market. Contrast media used in theseand an increasing number of general CT and x-ray angiographicapplications are administered by automated injector. About 60%of U.S. CT suites are equipped with the devices, and the percentageis growing, according to Thomas H. Witmer, chief executive ofMedrad.

Moreover, the nonionic contrast media administered in thismanner are prepackaged using patented syringes and connectorsthat have been licensed to the contrast manufacturers. The marketis split between Medrad and Liebel Flarsheim in Cincinnati.

Medrad dominates the two-company field, with alliances withBracco (Isovue nonionic contrast) and Nycomed Imaging (Omnipaquenonionic contrast). It has a worldwide installed base of 17,000injectors, Witmer said.

Mallinckrodt Medical in St. Louis -- the third largest makerof nonionic contrast -- is not licensed to prepackage its contrastagent for administration with this equipment. It is allied withLiebel Flarsheim.

Publicly traded Medrad reported sales of $78.3 million fromits contrast injector and MR coil businesses in the year endedJan. 31. Sales rose 15% to $40 million for the first half of fiscal1995. Net earnings for the period were $3 million, a 30% gainfrom the first half of 1994.

Schering will pay cash for all outstanding Medrad stock, accordingto Witmer. Shareholders have 20 days from August 23 to tendertheir shares, he said.

The benefit of synergy. Why would Medrad risk its comfortableposition to become a subsidiary of Schering of Berlin?"Themain interest here is synergy of technologies and projects,"Witmer said.

He is banking on the relationship with Schering to propel Medradto additional sales in Europe and Japan. With worldwide salesof $2.9 billion, Schering is a formidable player in both regions.

Witmer envisions a large market developing for MR contrastinjection in the U.S. Through its Berlex licensee, Schering isby far the predominant force in MR contrast. Spectris, Medrad'snew MR contrast injector, will be introduced late this fall, Witmersaid.

Automated injection is a new concept for MR, but Witmer contendsthat it will catch on quickly, especially in MR angiography andcomplex procedures requiring multiple contrast administrations.

"There has been tremendous customer interest in Spectris;we could sell a bundle of them, if we had them now," he said.

With the deal with Schering only days old, it remains to beseen if Bracco and Nycomed Imaging officials can work with Medradunder Schering ownership.

Witmer had yet to break the news of the Schering purchase toBracco and Nycomed when he talked with SCAN. He conceded thatdelicate negotiations lay ahead.

"We will with complete ethics uphold our end of the bargainfor development programs relating to prefilling our syringes withtheir contrast. We will honor the contracts completely,"he said.