U.S. invasion by European firms continues with Bracco purchase of Squibb Diagnostics

European contrast suppliers gain top two spots in U.S.

The U.S. contrast agent industry was hit this summer with arapid-fire revolution sprung from Europe. Bracco of Milan reportedlypaid about $500 million last month to Bristol-Myers Squibb forits Squibb Diagnostics business. This sum was a little more thanthe $450 million paid in June by Hafslund Nycomed of Oslo forSterling Winthrop's diagnostics unit (SCAN 7/13/94). Winthropand Squibb hold first and second place respectively in the $1.5billion U.S. medical imaging contrast market. Mallinckrodt ofSt. Louis remains as the only major U.S.-owned x-ray contrastfirm.

European contrast suppliers have long been technological leadersin x-ray imaging enhancement. However, sales in the dominant U.S.market have been achieved in the past through licensing arrangementswith their American partners. The largest selling contrast productsare x-ray agents Omnipaque, formerly licensed by Nycomed to Winthropin the U.S., and Isovue, a Bracco-developed product manufacturedand sold by Squibb.

Two U.S. companies were established by Bracco on Aug. 1, followingcompletion of the Squibb Diagnostics acquisition. Both will continueto be based in Princeton, NJ. Bracco Diagnostics has been givenresponsibility for U.S. clinical development, regulatory activity,sales and marketing. Bracco Research U.S.A. will coordinate basicresearch and development activities. Bristol-Myers Squibb willcontinue to manufacture the major Squibb contrast products, includingIsovue and MRI agent ProHance. The Squibb product name will alsocontinue for the immediate future.

Bracco's major objective in the Squibb acquisition was to increaseits direct worldwide presence in the contrast market, accordingto John Cornille, president of Bracco Diagnostics.

"We are now global," Cornille told SCAN. "Braccohas (venture) arrangements that cover all of Europe, all of Japanand, as of Monday (Aug. 1), direct entrance into the U.S. We nowcover the three major markets."

Cornille comes to Bracco from Sterling Winthrop, where he servedas vice president of the U.S. Sanofi Winthrop Pharmaceuticalsbusiness and, most recently, director of the pharmaceuticals groupof Sterling Winthrop. Bracco Research U.S.A. is led by presidentMichael F. Tweedle, who was formerly director of contrast mediaresearch and diagnostics chemistry for Squibb.

Both Eastman Kodak, which sold Sterling Winthrop to Sanofiof France earlier this year, and Bristol-Myers Squibb are pursuingsimilar strategies in divesting their diagnostics units. At thetime of the Sterling Winthrop sale, Squibb Diagnostics was mentionedas another divestiture candidate (SCAN 7/27/94).

Eastman Kodak and Bristol-Myers Squibb wanted to focus theirresources on areas of greater strategic significance for themthan the very specialized in vivo diagnostics field.

"Bracco, on the other hand, is a company that is 100%dedicated in terms of research resources to diagnostic imaging,"Cornille said.

Bracco is a privately held Italian company, controlled by theBracco family. Diana Bracco serves as general director in Milan.E. Merck, a large German pharmaceutical company, holds a significantminority position in the firm.

European medical companies have taken advantage of bargainacquisition prices in the U.S. -- caused by both the uncertaintiesof health-care reform and a weak dollar -- to increase their U.S.market position and obtain additional technology, according toDavid S. Talbot, an analyst with Arnhold and S. Bleichroeder ofNew York.

"Most European companies are keen on increasing theirAmerican business because, regardless of what comes out of U.S.health-care legislation, the health-care market in the U.S. isa tea party compared with Europe and Japan," Talbot said."They (the Europeans) are adept at dealing with regulatorycomplexities -- more so than American companies. For them to negotiatewith an HMO is no big deal."

Schering, the other large European contrast supplier, has adirect U.S. position through its Berlex Laboratories subsidiary.Berlex, however, has a relatively small sales and marketing force,according to Talbot. How Schering reacts to the moves of its Europeancompetitors will be interesting to watch.

Future strategies. Bracco does not foresee a decline in contrastdemand with more stringent U.S. health-care purchasing. MRI contrastsales should pick up significantly as new agents become more targetedto specific organs, Cornille said.

While European suppliers were traditionally the innovatorsin x-ray contrast development, many new agents are in the pipelineat U.S. firms, particularly in the emerging fields of MRI andultrasound contrast. Bracco's acquisition of Squibb provides agenerally complementary combined stable of contrast products,both under development and on the market, according to Tweedle.

One possible competing product area between the two organizationsis in x-ray contrast. Bracco has launched a new low-osmolar iomeprol-basedcontrast agent in Europe and Japan, while Isovue (iopamidol) isthe main U.S. x-ray agent.

"We have a strong position with Isovue in the U.S.,"Tweedle said. "We will have to sit down and discuss our U.S.strategy for iomeprol."

In MRI, Bracco is developing an agent for hepatobiliary applications.This agent is complementary to ProHance, which has applicationsin the central nervous system, he said.

Squibb Diagnostics licensed manufacturing and marketing rightsfor an oral MRI agent, LumenHance, and an oral ultrasound agent,SonoRx, from ImaRx Pharmaceutical of Tucson (SCAN 12/29/93 and3/10/93). These agents will now pass to Bracco. Bracco has alsobeen developing an intravascular ultrasound agent on its own,Tweedle said.

Squibb had a major presence as well in nuclear medicine, includingits technetium cardiac SPECT agent CardioTec. A unique radiopharmaceuticalthat targets hypoxic tissue is in preclinical development, hesaid.

"The biggest change for us will be an increased richnessof our product pipelines," Tweedle said. "Combiningboth (research efforts) is very exciting."