Innovative Firm Catches Conglomerate’s Eye : Big League Looms for Tiny Luther Medical
With but a dozen employees and 1985 revenues of just under $400,000, Luther Medical Products Inc. is not yet even a little league player in the $500-million-a-year market for catheters.
But the big leagues may be just a step away if BOC Group PLC, a British medical products and industrial gas conglomerate, exercises its option to buy the Santa Ana maker of catheters and needles.
Preliminary negotiations have been under way since November, when the BOC Group first approached Luther Medical, said Ron Luther, founder and chairman of the 5-year-old company. In addition to a 60-day option, ending May 24, to purchase all or part of the company, the British firm has an option on rights to sell Luther’s products even if there is no acquisition, Luther said.
Despite its small size, Luther is widely regarded as an innovator. Its unique “peel away” needle and its recent acquisition of the exclusive rights to a new plastic material that softens and expands when inserted into the body, have resulted in strong reviews from industry experts.
BOC, already a major supplier of health care products in Europe, is attempting to boost its share of the U.S. market for home health care infusion equipment. In 1985 BOC had net earnings of 117.9 million, or about $174.5 million at current exchange rates, on revenues of more than 2 billion, or about $2.96 billion.
On Acquisition Binge
In recent years, BOC has been on an acquisition binge in the United States, sometimes to the tune of two mergers a month, according to Pieter Halter, editor of Biomedical Business International magazine.
Although BOC officials refuse to comment on the possible deal with Luther, Halter and other industry experts suggest a merger of the two would mix Luther Medical’s innovative product line with BOC’s clout--resulting in both getting a bigger slice of the highly competitive market.
“I think the fit is that BOC needs technology to position its products for wider distribution and to get an edge over the competition,” Halter said. If an acquisition were to occur, he said, “Luther could become a much larger company than it is today.”
Luther Medical has never posted a profit. Net losses during the first half of fiscal 1986 have increased substantially to $211,000 from $67,000 a year earlier.
However, product sales, mostly to competitors under private label agreements, appear to have increased during the third fiscal quarter ended Monday, and company officials hope to break even during the current quarter, which ends June 30.
Among Luther Medical’s brightest prospects is a new plastic material that is rigid when inserted into a vein, but expands and softens when wet. Approved by the Food and Drug Administration late last year for use in catheters, the company is the sole U.S. firm licensed by the manufacturer to use the plastic in catheters.
Because it expands to fit the hole made by the needle, the new material reduces bleeding and the risk of infection during infusion, Halter said. The new material, coupled with the company’s patented “peel away” needle, could “position Luther to take a bigger piece of the business,” he added.
Traded over-the-counter, with a a bid price of $1.125 Tuesday, Luther Medical’s market value is only about $7.8 million. So far, Luther said, neither party has suggested what the company would be worth in an acquisition.
“Right now, we’re waiting for them to call us and tell us when their negotiators will arrive,” he said. “Then it’s wait and see.”
