Johnson & Johnson to buy Mentor; its Madison unit is making Botox competitor
Health care products company Johnson & Johnson said Monday it will buy cosmetic-product and breast-implant maker Mentor Corp. for $1.07 billion in a move to boost its presence in cosmetic and reconstructive medicine.
Santa Barbara, Calif.-based Mentor has a unit in University Research Park in Madison that is developing a drug to compete with the well-known and hugely successful Botox. The local unit's "PurTox" drug has successfully completed the first of three Phase 3 clinical trials. Phase 3 is the final level of trials before a drug is submitted for U.S. Food and Drug Administration approval -- assuming the trials produce successful results.
The development of PurTox stems from Mentor's 2003 deal for an exclusive license from the Wisconsin Alumni Research Foundation for botulinum toxin technology developed at the University of Wisconsin-Madison.
Under the deal announced Monday, New Brunswick, N.J.-based J&J will start a cash tender offer for $31 per share, which is nearly double Mentor's Friday closing stock price of $16.15. In early trading Monday, Mentor's stock had nearly doubled to $30.68 per share.
"The addition of Mentor, a market leader and one of the most respected companies in the aesthetic space, expands our capacity to provide physicians with products that can restore patients' appearance, self-esteem and quality of life," said Alex Gorsky, company group chairman at J&J with responsibility for the Ethicon unit.
J&J plans to run Mentor as a stand-alone business under its Ethicon division.
The deal is expected to shave between 3 and 5 cents per share off of J&J's 2009 earnings. Both companies' boards of directors have approved the deal, which is expected to close during the first quarter.
"I think it's a good deal for (Mentor)," Stanford Group analyst Jan Wald said, Reuters reported. "It's at a pretty good price for them. J&J buys for the long term, so they probably saw value in the company longer term. It fits well with the consumer segment and in the direction J&J often said it wants to go, which is to combine consumer products with prescription products."
The Mentor deal is the second buyout in as many weeks for J&J, as most sectors tighten their belts while the economy slips deeper into what is almost certainly a recession.
On Nov. 24, J&J bought biotech company Omrix Biopharmaceuticals Inc. for $438 million in a move to expand its surgical product unit. The deal, which is expected to close at the end of December, will add Evithrom and Evicel, products used to control bleeding during surgical procedures.
Overall, portions of the health care sector with cash-heavy balance sheets, such as big drugmakers, have been more open to acquisitions during the economic downturn. On Nov. 24, Indianapolis-based Eli Lilly & Co. closed its $6 billion buyout of New York-based cancer drug maker ImClone Systems Inc.
Mentor has about 1,300 employees and posted $373 million in sales in its most recent fiscal year. J&J, which sells an array of prescription drugs, consumer products and medical devices, is expected to post nearly $65 billion in revenue this year.
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Mentor has a unit in University Research Park that is developing a drug to compete with Botox. The local unit's "PurTox" drug has successfully completed the first of three Phase 3 clinical trials.
