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J & J to Purchase Biopsys Medical for $310 Million

Merger: The chief product of Irvine-based company is a device for detecting breast cancer.


Health products giant Johnson & Johnson, seizing a chance to enter the growing market for breast cancer detection devices, said Thursday that it agreed to buy Irvine-based Biopsys Medical Inc. for a tidy $310 million in stock.

Johnson & Johnson would pay $27.55 per share in stock for Biopsys shares, adding a device for detection of breast cancer to the New Jersey company's already extensive line of minimally invasive surgery products.

And for early investors in Biopsys, which was started only four years ago, the deal is a rare dream come true.

"This is a home run in our business," said Biopsys Chairman David Chonette, a venture capitalist. Chonette is general partner of Brentwood Venture Capital, an Irvine-based firm that invested roughly $2 a share to acquire a 1.3-million-share stake in Biopsys before the company went public last year at $15 a share. Brentwood still holds more than half of that stake, he said.

Johnson & Johnson would pay about 7% more for Biopsys than the stock's Wednesday closing price of $25.75 a share. Biopsys reached a high of $34.75 in March.

Biopsys stock rose 93.8 cents a share to close at $26.69 in Nasdaq trading Thursday. Johnson & Johnson closed at $59.50 a share, up 12.5 cents, on the New York Stock Exchange.

Biopsys, founded in 1993, racked up millions in losses before posting its first profit, for the three months ended Dec. 30. It lost $3.5 million, or 43 cents a share, on sales of roughly the same amount for the fiscal year ended Sept. 30.

Analysts said Johnson & Johnson has a history of snapping up development-stage companies with the potential of growing into businesses that generate hefty annual sales.

Biopsys' key product is its Mammotome device, which has been approved by federal regulators for sampling breast tissue for diagnosis. The company says the device eliminates the need for a large surgical incision, is less damaging to the patient and can be done on an outpatient basis in a doctor's office using only a local anesthetic.

In addition, analysts said, the purchase of Biopsys will give Johnson & Johnson an entry in the breast cancer detection market, which is already served by its competitor, U.S. Surgical Corp.

In February, the U.S. Food and Drug Administration warned Biopsys that it hadn't received approval to market the device for treatment of breast cancer and also criticized it for promoting the device as an instrument to remove breast cancer. At the time, the company said it had approval for marketing the device but that regulators had changed the rules and required special clearance for its use in breast cancer biopsy.

Johnson & Johnson studied Biopsys' past regulatory troubles and concluded that they have been resolved, said Robert V. Andrews, a Johnson & Johnson spokesman. He noted that last month Biopsys received regulatory approval to sell its device.

New Brunswick, N.J.-based Johnson & Johnson, a world leader in health-care products, sells drugs, medical products and such consumer items as Band-Aids and Neutrogena soap.

Both companies' boards have approved the deal. Johnson & Johnson said shareholders who own about 3.2 million shares of Biopsys--or a third of those outstanding--have agreed to vote for the acquisition. The deal is still subject to approval by all Biopsys shareholders, however.

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