Medical devices maker CardioTech International Inc. plans to acquire Gish Biomedical Inc. for about $7.6 million in stock.
The move significantly will expand Woburn, Mass.-based CardioTech's presence in the heart surgery, vascular access and orthopedic product markets, according to the company.
The deal, which probably will not close until the first quarter of 2003, includes Gish Biomedical's 52,000-square-foot factory.
The pact calls for CardioTech to pay 4.82 million shares for the firm. Each Gish Biomedical share of common stock will be exchanged for 1.34 shares of CardioTech stock, according to Michael Szycher, CardioTech founder and chief executive officer.
``CardioTech will now have the capability of producing finished medical devices to create additional value and increased market share,'' he said.
Gish Biomedical makes medical devices used in open-heart surgery, and CardioTech is developing a polyurethane-based vascular graft for the treatment of heart disease. ``This will work out very well for both companies,'' Szycher said.
Gish will become a division of CardioTech and remain in Rancho Santa Margarita, Calif., where it also produces orthopedic surgery and vascular-access products.
The company's facility has an 8,500-square-foot, Class 10,000 clean room that CardioTech hopes to use to produce its patented artificial arteries.
Kelly Scott, currently CEO of Gish Biomedical, will continue to head the operation, and the 113-member work force will remain on the job, Szycher said.
``This is an important part of the acquisition,'' Szycher said. ``Kelly Scott turned that company around and their management team has done an incredible job.''
The deal also gives CardioTech an inroad into major accounts, because Gish Biomedical has an experienced sales force of 20 with direct contacts at 300 hospitals globally.
That should be especially beneficial for CardioTech's artificial arteries and advanced hydrophilic PU wound dressing, which received Food and Drug Administration approval in July.
CardioTech also makes other medical devices as an original equipment manufacturer along with medical-grade PU for implants.
The medical-grade PU and other products primarily are made at its plants in Woburn and Plymouth, Minn.
Production of its wound dressing is outsourced to a firm in England, but Szycher indicated the manufacturing could shift to Gish Biomedical's facility during the next few years.
Gish Biomedical currently does not use medical-grade PU with its products, although it does use other polymers. Once the acquisition is concluded, the company probably will begin coating its large line of cardiopulmonary goods with CardioTech's patented elastomeric polymers, Szycher said.
``This will be a joint development project,'' he said. ``We'll custom-synthesize something to their requirements or use something off the shelf.''
A key element of the transaction is the opportunity to create an infrastructure that gives CardioTech critical mass and sets a clear line of succession in the company, Szycher said.
``When I decide to retire, we will now have people who run divisions, have been involved in making strategic decisions and are well-prepared to step in and run the company,'' Szycher said.
CardioTech's sales jumped more than twofold to $3.2 million in the fiscal year that ended March 31, while Gish Biomedical's sales fell about 8.9 percent to $16.4 million for the year ended June 30.
Both companies had net losses for the past two fiscal years. However, CardioTech's chief financial officer said he expects the combined firm to be profitable during its first year.