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Inverness Strengthens Its Hand; Cygnus Plays a Card

Inverness Medical Technology's purchase of struggling diabetes testing start-up LXN fits well with the larger company'stwo-pronged strategy of cementing its relationship with J&J's LifeScan Inc. business unit and diversifying into emerging areas of diabetes testing. Inverness also announced that the partners have amended their distribution and marketing agreement to give LifeScan bigger discounts on meters in return for bigger purchase orders.

Inverness Medical Technology Inc. 's purchase of struggling diabetes testing start-up LXN Corp. [See Deal] may have surprised industry analysts because of the hefty price tag—roughly $30 million—but the move fits well with the larger company's strategy to cement its relationship with Johnson & Johnson 's LifeScan Inc. business unit, on one hand, and diversify into emerging areas of diabetes testing, on the other. (See "Two Rising Stars in Glucose Testing," IN VIVO, February 2001 [A#2001800028.) Simultaneously, Inverness also announced that the partners had amended their distribution and marketing agreement to essentially give LifeScan bigger discounts on unit pricing of the meters LifeScan buys from Inverness this year, in exchange for LifeScan's willingness to guarantee higher minimal levels of meters it is buying from Inverness [See Deal].

On the whole, analysts see the news as good for both Inverness and J&J. "The amended agreement with J&J will...

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