ABBOTT CATCHES RISING GLUCOSE MONITORING STAR MEDISENSE under an $876 mil. deal announced March 29. The definitive agreement, expected to be completed within the next five weeks, would give Abbott entry to the blood glucose monitor market with Waltham, Massachusetts-based MediSense's line of biosensor-based blood glucose systems for diabetes patient self-testing.

Abbott, which had more than $10 bil. in total 1995 sales, is the worldwide leader in diagnostic products with an estimated $2.4 bil. in annual revenues. However, the company has not had a presence in the $1.5 bil. to $1.6 bil. glucose monitoring segment of that market. By acquiring MediSense, Abbott gains a firm which generated all of its $141 mil. in fiscal 1995 (ended March 31) sales from glucose monitoring products.

The MediSense product line is headed by its Precision Q.I.D. third-generation glucose monitoring system. The hand-held system and its accompanying disposable strips were launched in the U.S. in June 1995 ("The Gray Sheet" June 19, 1995, p. 31). The Precision Q.I.D. incorporated some enhancements into MediSense's first and second generation products, the ExacTech and MediSense II, respectively.

In the first three-quarters of fiscal 1996 (ended Dec. 30), MediSense earned $22.5 mil. on $129.7 mil. in sales. The sales represented a 26.1% increase from the same period a year ago. Earnings were ahead 53.6% from 1995 levels.

MediSense, which employs 1,000 people worldwide, claims that its systems are the smallest and fastest available. The firm has posted strong sales growth in the blood glucose monitoring market despite competition from much larger players such as Johnson & Johnson, Boehringer Mannheim, and Bayer. MediSense says it holds a 12-13% share of the U.S. glucose monitoring market. In a recent report, Piper Jaffray analyst Arch Smith says the firm is on the verge of passing Bayer for the number three domestic market share position. Smith projects that MediSense's fiscal 1996 and 1997 sales will come in at $176 mil. and $207 mil., respectively.

MediSense's rapidly accelerating sales likely are particularly attractive to Abbott, which has experienced some flattening in its diagnostic revenues.

In its January report of 1995 results, Abbott said that its AxSym and IMx automated immunoassay instruments had turned in strong performances in 1995, helping lead to a 4.2% gain in hospital and laboratory product sales ("The Gray Sheet" Jan. 22, p. 11). But the firm's worldwide diagnostic division's sales were flat in the fourth quarter. Alex. Brown analyst Jonathan Osgood attributed the flat sales to "pricing and utilization pressures in the overall diagnostic market."

Abbott officials say MediSense provides a "cornerstone" for a product line in the rapidly growing area of glucose monitoring. Abbott's only current offering in the diabetes realm is its Glucerna nutritional beverage product.

"This important strategic step, combined with other internal and external initiatives to secure industry-leading technology in glucose monitoring, will position Abbott very favorably in this market," Abbott said in a press release. "In addition to providing immediate access to the fastest-growing segment of the diagnostics market, MediSense's research and development program will augment our existing work to develop and commercialize future non-invasive monitoring technologies."

Abbott's considerable marketing strength in both the retail and professional segments could boost sales of MediSense products. MediSense said the "combination of the two organizations will accelerate market growth and will ensure continued development and availability of therapies to improve the care of people with diabetes."

Abbott's diagnostic products include the TestPack and TestPack Plus tests sold to physicians for diagnosing pregnancy, strep throat, and chlamydia. In a January 1995 prospectus for a secondary offering, Medisense said it was interested in expanding sales of its products to physician office labs.

According to terms of the deal, approved by the boards of both companies, Abbott will commence a tender offer to buy all outstanding shares of MediSense stock for $45 each. The tender offer price represents a 48.8% premium over MediSense stock's March 28 closing price of $30.25 per share.

MediSense, founded in 1981, was supported for much of the 1980's by debt and equity investments from Baxter Healthcare and several other investors. The firm went public in 1994 in an offering priced at $12 per share. Baxter, which held a 24% stake after the IPO, sold its stake in a secondary offering completed in 1995.

Once the acquisition is finalized, MediSense will operate from its Waltham headquarters as a wholly owned subsidiary of Abbott, with current president and CEO Robert Coleman, PhD, remaining as president.

Abbott Labs entering blood glucose monitoring market with $876 mil. MediSense buy.

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