Advanced Neuromodulation Systems, Inc. - Early 1990s Acquisitions
Early 1990s Acquisitions
Part of Quest's difficulties in finding suitable acquisitions were the high prices medical companies were seeking, but in the early 1990s Quest was finally able to buy appropriate assets at a desirable price level. In the fall of 1990 Quest bought certain assets of Clini-Therm Corp. out of bankruptcy. Also based in Dallas, Clini-Therm developed and manufactured hypothermia systems used to treat cancer and other diseases with heat. Quest was especially interested in Clini-Therm's Prostek 3000 system, a prostate treatment that relied on disposable catheters, an item that Quest was well suited to mass produce. Three more acquisitions followed in 1991 and 1992: the $2.3 million purchase of American Omni Medical and the $2 million purchase of Delta Medical Industries, both makers of heart surgery devices; and the addition of assets related to McGaw, Inc.'s activated clotting time instrument.
It was in 1995 that Quest became involved in the spinal cord stimulation (SCS) field with the acquisition of Neuromed, Inc. for $15.2 million in cash plus stock. It fit in well with Quest's competencies in medical device manufacturing, and was an attractive acquisition because of the key patents it held in a fast growing niche. Moreover, it would be difficult for other companies to enter the market, providing Quest with some assurance that it would not be easily nudged aside by larger players as had been the case with infusors a decade earlier.
Integrating Neuromed into Quest proved problematic, however. Neuromed's devices were not easily manufactured, forcing Quest to make a major investment in reengineering the products. The sales infrastructure also had to be beefed up in order to properly market the line. Quest experienced problems with some of its other units as well. The introduction of the company's Myocardial Protection System of hardware, software, and disposable products designed to offer protection to the heart during open-heart surgery was met with ongoing delays. By the time the $11 million project was ready for launch, the market had changed, with hospitals no longer interested in buying such systems, preferring instead to rent them. But such an arrangement offered little payoff to Quest. The company posted sizable losses in 1995 and 1996, leading to a drop in the price of the company's stock and pressure from some investors for Quest to seek a merger or sale.
In March 1997 Quest retained Smith Barney and Rauscher Pierce Refsnes to help it sort out strategic alternatives, whether it be a sale, merger, or joint venture. While management weighed the options, Quest rebounded somewhat in 1997, recording revenues of more than $14.7 million and returning to profitability, netting nearly $725,000. The main reason for the improvement was the performance of its Advanced Neuromodulation System business. It was no surprise that after a year of deliberation management decided to divest its cardiovascular and intravenous fluid delivery products division, selling the business to Atrion Corporation for about $23 million in January 1998. Quest kept the Advanced Neuromodulation Systems product and also changed its corporate name to Advanced Neuromodulation Systems, Inc. in June 1998.
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