Cardiac Science Inc.’s pending combination with Quinton Cardiology Systems Inc. of Washington is aimed at ending trash talk, according to Raymond Cohen, Cardiac’s chief executive.
Rivals have “counter-detailed,” or made bad comments about Cardiac Science’s viability in a bid to win business, said Chad Suggs, an analyst with CIBC World Markets.
Irvine-based Cardiac’s stock has given them ammunition. It’s gone from about $5 to $1 in the past year.
As for other measures, the maker of heart defibrillators lost $1.8 million in the fourth quarter, down from a $5 million loss a year earlier. Sales were up 17% to $21 million.
The company had about $14 million in cash on hand as of Dec. 31, down from $15 million at Sept. 30.
Cohen said competitors have raised issues about the company’s viability for their own gain.
“They just simply do not have a great response for the technology,” he said during a recent conference call. “So what they do instead is they just beat on us about the fact that we’re small and we’re not profitable. And they try to scare the customer into not wanting to buy from Cardiac Science.”
Joining forces with Bothell, Wash.-based Quinton “mitigates that story and will give us and our sellers a very strong counterbalance to those kind of comments,” Cohen said.
Cardiac’s rivals include some big names: Medtronic Inc.’s emergency response systems unit and Zoll Medical Corp. The fiercest competitor,Royal Philips Electronics NV, which has mounted an aggressive push in the defibrillator market.
Cardiac and Quinton agreed to combine in late February.
Quinton’s shareholders are set to get about three-quarters of a share in the combined company for each share of Quinton stock. Cardiac investors are set to get about a tenth of a share in the new company for every share of Cardiac stock.
After the deal, 51% of the company will belong to Cardiac Science shareholders, with the remaining 49% going to Quinton. Both boards have approved the deal, which is expected to close in the third quarter.
The combined company plans to keep the Cardiac Science name.
Cardiac Science sought Quinton, which makes heart monitoring devices, as a partner because of the track record of John Hinson, Quinton’s chief executive who’s set to head the combined company, Cohen said.
“The bottom line was that I was impressed with his ability to combine previously unprofitable companies and enable them to successfully grow and achieve profitability,” Cohen said.
Quinton is profitable, reporting earnings of $15.1 million on sales of $89.6 million last year.
When the deal is done, Orange County will lose a corporate headquarters,Cardiac’s Alton Parkway office will be cut, with the majority of those activities going to Washington.
Cardiac does plan to retain its current research and development team in Lake Forest and will move sales and marketing functions to that office.
“We will be required to reduce both facilities and head count in certain areas,” Hinson said on the conference call.
Cardiac employs some 280 people companywide.
Also, Cardiac’s plant in Minnesota is set for closure. Work is slated to move to a Quinton plant in Wisconsin, Hinson said.
The companies said that the combined company’s management team would be made up of people from Cardiac and Quinton. But two of the top jobs,Hinson’s and that of Chief Financial Officer Mike Matysik,come from Quinton.
The board is set to include nine directors, including all of the five current Quinton members and four current Cardiac members, including Cohen, who’ll serve as chairman.
Bits and Pieces:
The California Medical Association’s House of Delegates met last week at the Hilton Anaheim. Some 700 doctors, including 400 delegates, attended. The delegates debated issues such as universal healthcare coverage, doctor-assisted suicide, curbing obesity and altering emergency room regulations to treat more patients I-Flow Corp., Lake Forest, said Blue Cross Blue Shield of Texas issued a revised coverage policy that affects payments for the device maker’s On-Q pain relief system. The Texas health plan’s policy said that the infusion of anesthesia through infusion pumps might be considered medically necessary to relieve post-operative surgical pain InSight Health Services Corp., Lake Forest, made a presentation at the Lehman Brothers 2005 High Yield Bond and Syndicated Loan conference in Orlando, Fla., last week The American Cancer Society’s Orange County region presents its annual colon cancer awareness conference April 9 in Irvine. Pre-registration deadline is April 1. Continuing education units are available for health educators and allied professionals. Information: (949) 261-9446 UCI Medical Center, Orange, was recognized as one of the nation’s top 100 hospitals by Solucient, an Evanston, Ill.-based information services company that serves the healthcare industry.
