Nestlé to Buy Medical-Device Firm -- WSJ

By Saabira Chaudhuri 

Nestlé SA has struck a deal to buy a U.K.-based maker of a device to treat dysphagia, a condition in which people have difficulty swallowing, marking its latest medically focused investment.

Terms of the deal to buy Phagenesis weren't disclosed, but a person familiar with the acquisition said medical-device makers of Phagenesis's size typically sell for GBP100 million ($131 million).

Phagenesis makes an electrical stimulation device designed to restore the neurological control of swallowing by kick-starting the reorganization of the brain. The device is aimed at treating swallowing difficulties commonly experienced by post-stroke patients, but also by elderly patients and people that have been put on mechanical ventilation in intensive-care units.

Nestlé estimates dysphagia occurs in 29% to 55% of stroke patients, with 15 million people world-wide suffering a stroke every year.

The company already sells foods tailored to people with dysphagia as part of its health-science business, which also makes a range of other foods and supplements for conditions including depression and cancer. While Nestlé's focus so far has mainly been on medical foods, it does sell certain medical devices to help patients ingest its food through tubes.

The deal is Nestlé's latest investment in the area of health sciences, a business that investors and employees say could be a game-changer.

Earlier this year Nestlé signed a deal to help U.S. biotech company Seres Therapeutics Inc. develop products aimed at restoring bacteriological balance in the digestive system. It also bought a stake in Pronutria Biosciences Inc., a Cambridge, Mass., startup developing amino-acid-based products to treat muscle loss. Last year, Nestlé said it would collaborate with General Electric Co.'s health-care arm to monitor nutrition for patients in intensive-care units.

The world's largest packaged-foods company recently named Ulf Mark Schneider, chief executive of Germany-based health-care company Fresenius SE to be its next chief executive, a move that has been seen to underscore its focus on health and nutrition.

Nestlé will make an upfront payment to buy Phagenesis followed by funding in stages based on the successful completion of clinical development programs in Europe and the U.S., which it said is expected by 2019.

Manchester-headquartered Phagenesis, which was formed in 2007, said it has developed the only treatment for neurogenic dysphagia based on pharyngeal electrical stimulation, treating the cause rather than just the symptoms. Chief Executive Reinhard Krickl in an interview said traditional treatments for dysphagia that focus on speech therapy take weeks or months to work, while Phagenesis's more revolutionary approach takes days.

The U.K. company's investors include London-based Inventages Venture Capital -- which is largely funded by Nestlé -- and London-based Anglo Scientific.

The device is sold in the U.K., Austria and Germany but not currently in the U.S. Phagenesis's revenue wasn't disclosed, but totals less than GBP1 million a year, according to a person familiar with its accounts. The company's main focus has been on proving that there is a market for its product, which it sells to hospitals.

"Dysphagia is a strategic focus for Nestlé Health Science," said Greg Behar, CEO of the Nestlé unit. "This innovation can bring a new dimension to swallowing rehabilitation that can be transformational from a patient and health-care-professional perspective."

Write to Saabira Chaudhuri at [e-mail]

(END) Dow Jones Newswires

September 02, 2016 02:48 ET (06:48 GMT)

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