There are many companies that can be described as "giants" within the European medical devices market. Large companies usually became so, by mergers with and or acquisitions of, other companies. In some cases a company will acquire a small regional player that is active in the same market. This acts to expand the geographic coverage of the larger company. This is a very attractive way of increasing the size of a company, and expanding its coverage. The major benefits include the fact that the regional player should have a reasonable knowledge of the market specific to that country or region, and may already have a good sales, marketing and distribution networks in place. The company making the acquisition will also inherit a ready made client list.

An interesting case in terms of merger and acquisition is that of Baxter Healthcare Corporation spin-off company, Edwards Lifesciences Corporation. Baxter originally acquired Edwards when they purchased American Hospital Supply Corporation in 1985. Because Edwards’ speciality had always been cardiovascular medical devices, Baxter decided to base its CardioVascular Group around the former Edwards organisation. The CardioVascular Group focused on a broad range of products, including medical devices for critical care patients.

In the most countries devices for the management of acute renal failure, ARF, were offered through the critical care division, hence the CardioVascular Group managed these products. This was because the ARF patients are typically be treated in the Intensive Care Unit of a hospital, as ARF would often come in conjunction with the failure of other organs. However, in America, decisions about ARF patients continued to be made by the nephrologists, not the critical care specialists. It was for this reason that in America, ARF products, and more specifically continuous renal replacement therapy, CRRT, devices, were managed by Baxter’s Renal Group.

In 2000, Baxter took the strategic decision to spin-off its CardioVascular Group, calling it Edwards Lifesciences Corporation. This meant that in America, continuous renal replacement devices were being sold by Baxter, yet a similar CRRT portfolio was being marketed to the rest of the world by Edwards. It was only in the United Kingdom where both companies competed in the CRRT market. This however, was where client confusion was initially noticed.

Clients felt uncertain about the origins of CRRT products, as the two companies were offering some identical products and other products which were very similar. One of the issues that were faced by Edwards’ Lifesciences Corporation was that they did not have a full CRRT solution portfolio. This meant that they were unable to offer a compete CRRT package to many customers.

Baxter Healthcare Corporation was facing confusion from its customers over its newest CRRT machine, the Accura. At a glance the Baxter’s Accura and Edwards’ Aquarius machines appeared the same. It was before the spin-off that research and development was being carried out for a new CRRT machine. This R&D was accredited to the CardioVascular Group.

The machines however, had different operating software, designed independently by Baxter for the Accura and by Edwards for the Aquarius, after the spin-off of Edwards had taken place.

At the beginning of 2005, Baxter Healthcare Corporation and Edwards Lifesciences Corporation entered into an "alliance". This is an agreement between the two companies which should ensure that confusion experienced by customers is minimised, and that a full and comprehensive continuous renal replacement product portfolio is available from both companies. The alliance has also been welcomes as it will end any competition between Baxter and Edwards, and will give the two companies a real chance of contending at a worldwide level with Fresenius Medical Care and Gambro, the two giants of the renal replacement therapy market.

The first issue that needs to be addressed is that of the Accura and Aquarius machines. The decision has been taken to modify all the Accura machines, with an up grade kit. Once the relevant requirements have been met for the acceptance of the Aquarius machine in the United States, this will be the only CRRT machine sold by both Baxter and Edwards. To solve Edwards’ issue of CRRT solutions, both companies will now offer the two CRRT solutions formerly sold only by Baxter.

To avoid customer confusion, Baxter and Edwards will not offer products in the same countries. Baxter will sell to China, India, South America and the United States, plus to some countries in Africa and Asia, while Edwards will cover Australasia, Canada, Europe, the Middle East and the remaining part of Asia.

Growth in the market share of the companies, in light of the alliance can be expected over the next 2-5 years. This indicates that even after an acquisition and a spin-off, companies can benefit from considering so called alliances, in order to gain complete geographic or market coverage.

For further information please contact:

Katja Feick
Corporate Communications
+44 (0) 207 915 7856