DSM sees big future in regenerative medicine, resorbable plastics

DSM, the Dutch plastics giant, is making a $360 million bet that biomaterials and regenerative medicine will play an important role in future medical care. The acquisition continues a trend at DSM away from commodities and toward specialties, particularly in the life sciences.

Kensey Nash Corp. (Exton, PA) announced today that it has entered into a definitive agreement in which DSM will acquire all of its stock for $38.50 per share in cash.

"We are very pleased to have entered into the merger agreement with DSM, as the transaction will deliver significant value to our stockholders. The price to be paid to our stockholders represents a premium of 33% over our closing price on May 2, 2012," said Joe Kaufmann, president and CEO of Kensey Nash, which develops devices based on resorbable materials such as collagen, synthetic polymers, and extracellular matrices.

Kaufmann continued: "When completed, the transaction will also be a great event for our strategic partners, customers and employees. DSM is a global Life Sciences and Materials Sciences company with sales around €9 billion and 22,000 employees worldwide. Their presence in biomedical materials markets comes from a unique convergence between their expertise in life sciences and materials sciences. Our employees will benefit from the growth and expansion that DSM envisions will occur from this combination of capabilities and resources."

Over 25 years ago Kensey Nash developed what is now considered the leading arterial closure device in the world using resorbable collagen, synthetic polymer technologies and device engineering expertise.

Emerging businesses

DSM Biomedical is one of the company's three emerging business areas.  Its goal is €1 billion ($1.3 billion) in sales by 2020 in its combined emerging business areas.  Earlier this year DSM established a joint venture for cellulosic bio-ethanol with POET in another growth platform, DSM Biobased Products & Services.

An important strategic reason for the Kensey Nash acquisition is that it gives DSM access to the company's U.S. customer base. Its key customers include St. Jude Medical, Arthrex, Orthovita (now part of Stryker), Synthes, Johnson & Johnson, Medtronic, Devicor Medical Products, and Zimmer.

But the real motivation is to fast track DSM's technology development in regenerative medicine—the ability to heal through use of a patient's own stem cells. One of Kensey Nash's specialties is biomaterials that treat, augment, or replace tissue, organs or body functions.

Feike Sijbesma, CEO and Chairman of the DSM Managing Board, said: "As life expectancy continues to increase and people want to remain physically active, growth in the biomedical materials market is expected to remain high. Biomedical is one of the key areas where DSM is able to fully leverage its unique science-based expertise."

Vascular closure device

Kensey Nash dates to 1984 and is a pioneer in the field of arterial puncture closure, as the inventor and original developer of the Angio-Seal Vascular Closure Device (Angio-Seal), which is exclusively licensed to St. Jude Medical. Today, the Angio-Seal device is considered the leading arterial puncture closure product in the world with approximately 17 million units having been sold since its market introduction. Kensey Nash has manufactured key resorbable components for the Angio-Seal device and received an approximate 6% royalty on end-user sales.

Kensey Nash is building a pipeline of proprietary products in the soft tissue and orthopedic markets. Its first extracellular matrix (ECM) products,  Medeor Matrix, made from porcine dermis (pig's skin), received 510(k) clearance from the U.S. Food and Drug Administration in 2009 and CE Mark approval in 2010.

Medical device OEMs are increasingly looking at the potential for  resorbable biomaterials' products in cardiology, orthopedic, urological, cosmetic and dental applications. A major reason is that they allow for the regeneration and remodeling of natural tissue as the resorbable biomaterial implant resorbs over time. They also provide the potential for staged and sustained release of biologically active agents, including drugs, cells and growth factors and biologics.

Biomaterials' manufacturing powerhouse

Kensey Nash describes itself in SEC filings as one of the largest manufacturers of biomaterials in the world. Some of the biomaterials are based on cow and pig tissue, while others are synthetic plastics, such as polylactic acid (PLA), polyglycolic acid (PGA), poly-lactic-co-glycolic acid (PLGA) and others.

There is significant technology in controlling the molecular architecture of resorbable plastics, both through synthesis and processing.

Resorbable biomaterials-based products can be very challenging to consistently manufacture on a large scale. Variations in materials and material properties require tight control. That's one specific area where DSM could play an important role in future development.