Tissue Regenix May Attract Suitors After Covidien Deal

Tissue Regenix Group Plc (TRX), a British maker of products to repair skin and other tissues, would be an attractive acquisition target, given its tax and structural advantages, Chief Executive Officer Antony Odell said.

Deal activity will persist, especially in the wound-care sector of the medical-device industry, following Medtronic Inc.’s $42.9 billion purchase of Covidien Plc, Odell said today in a phone interview. Tissue Regenix, which has a market value of 181 million pounds ($307 million), is split into three operating units, orthopedic, wound care and cardiac products, making it easier to sell them individually, he said.

“If a wound-care company approaches us and says we want your wound-care business, we can sell it with all the tax benefits that go with that as a unit,” Odell said. “Generally within wound care, it’s been quite an acquisitive area.”

The company isn’t currently in talks with potential acquirers, according to spokeswoman Stephanie Dobbs.

Tissue Regenix said last week it started selling its first product, DermaPure for venous leg ulcers and diabetic foot ulcers, targeting a $1.4 billion market in the U.S. The product has an advantage over competitors that require as many as eight applications, while DermaPure can produce benefits in one usage, Odell said.

Donor Skin

DermaPure works by taking human donor skin and removing the DNA and cells, using the company’s dCELL process to create a biological scaffold that can be placed in the wound to aid healing by attracting the patient’s own cells to the injured area. Tissue Regenix is also developing products for meniscus and ligament repair, and heart-valve replacements, among others.

The shares rose 13 percent to close at 27.75 pence in London, extending the gain this year to 17 percent.

Ongoing clinical studies and initial sales of DermaPure over the next year or two could lead to Tissue Regenix becoming a takeover target, Martin Brunninger, an analyst at Jefferies International Ltd. in London, said in a note to investors on June 12.

The U.K.’s lower corporate tax rate makes its companies attractive for U.S.-based companies. Britain has a corporate tax rate of 21 percent, which is dropping to 20 percent next year, compared with the 35 percent federal rate in the U.S.

Before settling on Covidien, Medtronic was also evaluating a takeover of London-based Smith & Nephew Plc, people familiar with the matter said earlier this month. Smith & Nephew remains a target for companies such as Stryker Corp. and Johnson & Johnson, Sanford C. Bernstein analysts said in a note to investors today.

To contact the reporters on this story: Allison Connolly in London at aconnolly4@bloomberg.net; Makiko Kitamura in London at mkitamura1@bloomberg.net

To contact the editors responsible for this story: Phil Serafino at pserafino@bloomberg.net Kristen Hallam, David Risser

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