Monday, March 1, 2010

So, What's the Rationale Behind This Acquisition?

Many of you are aware of the buzz that has been circulating throughout the industry since Baxter announced that it had acquired Apatech for $330 million. This consists of an upfront payment of $240 million with an additional payment of $90 million when certain milestones are met. Many of our readers, and those that TSB has spoken with are totally aghast that Baxter would pay this much for Apatech. But you know what TSB says, who cares what we think, all that matters is that Apatech accomplished its objective.

But you know what they say, when one door closes, another one opens. So how long will it be before all those Stryker distributors and reps are calling NovaBone (the closest competitor), or for that matter someone else? Having been involved in numerous acquisitions and integrations, TSB can report, that as we write this post, salespeople are brainstorming about the potential scenarios that will develop over the next few weeks and months.

As with any acquisition, Baxter has evaluated the business distribution model and has not rendered any decision as to what will happen until their game plan is in place. This will leave distributors and salespeople apprehensive as to how long they will continue to sell this product. Of course, the cost of sales with their current distributors will be evaluated, along with those contracts. With that in mind, Baxter bought this portfolio to enhance their ortho-biologic portfolio, especially since their reps have been attacked by Orthovita over the past four years with the introduction of Vitagel to their armamentarium.

But does this mean that Baxter is finished with anymore acquisitions? Knowing that this company has a direct sales force, it is a matter of time before they start eliminating some of the current distributors. Why would you pay high commissions when you can get your direct sales people to distribute this product? Is it a matter of time before we hear of Baxter buying a hardware company to compliment this acquisition? TSB wants to know what our readers think?

PS: Companies in Orthobiologics should build a shrine and pay homage to the CEO of Baxter, he couldn't of set a better precedent than what he paid for Apatech. Put your hand under the radio, can you feel Jesus?


  1. not surprising to me, orthobiologics will become the nugget in future, especially when combination products will become more and more available
    baxter was looking for a long time for a decent cerrier to its core technology

  2. If they were looking for a decent carrier, why spend this ridiculous amount of money on an inferior product that has gained some traction through obscene commissions, smoke in mirror studies and the all to common 'surgeon incentives'? There are so many better carriers out there that could be had for equal or less money. Attach a protein to these rocks, and they will never have any biological effect. Why did they not ask their R&D department to work for 3 months and create their own? In the future, Baxter will not pay the same commissions, and cannot afford to play the surgeon incentive game, so the Actifuse franchise is certain to start a steady decline. You have to hand it to the Brits, they got one back on US.

  3. Baxter is thinking about their biologic future position. They are already into adipose tissue processing. Autologous stem cells harvested from adipose combined with their scaffold biologic will take them into regenerative medicine. This was the reason for the Apatech purchase. There is nothing superior about their scaffold, it’s not the scaffold, nor the protein, it’s the stem cells.

  4. It was interesting to see Baxter buy this technology. Stryker also bid on Apatech, but fell short. They will now focus their attention on pursuing Orthovita. They need something to fill their bag since OP-1 was shot down again by the FDA.

    There will be several winners in this as a result of the Baxter purchase, mainly ISTO Technologies. They have the best and most innovative product on the market right now. They also have some IP centered around cartilage repair and spinal disc regeneration.

    I could also see products like Gene X and Novabone picking up some market share as well. The problem with all of these Bioglass silicate products are that they are still salt based calcium products that still have limitations. Just because a product has a negative charge does not mean it can recruit, differentiate, and proliferate MSC's into osteoblasts. The Silicate story is tired and played out. It is all a bunch of smoke and mirrors.

    It will be interesting to see who makes the big jumps in 2010. The orthobiologics field will continue to change and evolve. It will be fun to see who is snatched up next.

  5. Adding stem cells to Apatech will just ensure that 99% of them are dead 3 days after implantation, instead of just 90%. Amazing how few of these corporate decision makers understand true science. But then, that so far has never been a requirement for success in spine.

  6. The problem with Actifuse being a carrier is that is it heavy Hydroxyapetitie and will hang around too long for bone to remodel. I have been in revisions that are over two years post-op and you can see that stuff in the guters and it looks like beach sand.

    Baxter will turn it over to their biosugery reps soon and they will find a way to lose a lot of that business. The Stryker Spine distributors already see the writing on the wall and they will begin to look for alternatives.

    You can't continue paying high commissions to distributors and also keep all that overhead with all of the Apatech direct managers and then pay the direct Baxter reps on top of all of that. They will tell these managers and distributors what they want to hear, but then they will yank the rug underneath them once they feel like their direct biosurgery reps have their hands around the business. This is not going to end well for the distributors or the Apatech Managers.

  7. BAX will need a complementary product to sell with Actifuse. Biosurg doesn't have enough to sell in the spine space. They could combine stem cells with Actifuse, but they'll still lose out to a full portfolio player (even if you believe in the science of bioactive glass).

    Current Apatech distributors are on a short road to nowhere with Actifuse--their time with product is bound to be limited, given that BAX has a stem cell trial, an existing deal with Kuros, and a full sales force that already spends its time in the OR. Milestone payments or no, I'm not confident that BAX can hold the business together until some of their pipeline products come on-line.

  8. As a Stryker Distributor with a healthy Apatech business, our organization has never questioned that our time with this franchise is on borrowed time with the acquisition by Baxter. In spite of personal assurances by the top Apatech executives that we will be retained for years to come, we have no doubts that Baxter will turn over the responsibility of Apatech sales to their direct salesforce.

    That is okay. We have gone through this before with Apatech's main competition, where we were one of their top distributors. They chose to move to a direct salesforce in our area in spite of denying that they were considering such a move. We simply moved all of our business to Apatech. Our relationship with the user base was stronger than their commitment to the product. We will simply do it again. We have known for years that this day would come and it has. It will prove to be nothing worse than a minor inconvenience in the transition of the business from Apatech to a similar product. The good thing about these situations is that they provide you with the opportunity to lean back and reassess current technology and gives you the chance to make a change if better technology exists in the market. There will always be excellent opportunities for strong sales organizations with a proven track record. However, it should be said for the record that the Apatech organization has been a solid partner and very dependable in their support of the field. They have been a class organization from the moment we became associated with them.