How is it possible that a giant corporation that acquired an Israeli start-up for more than $100 million after due diligence, decides after only a few years that it no longer wants the company, and will either sell it or close it down? That is the question that should be directed at Johnson & Johnson (NYSE: JNJ), which acquired human collagen-based products developer ColBar Ltd for $159 million in late 2006.
Sources inform ''Globes'' that Johnson and Johnson wants to sell the business for $20 million. Either that, or close it down.
Many of ColBar's employees are aware of the company's condition and are looking for new jobs. The company has scores of employees in Israel. It will be the third Israeli start-up, acquired by a large corporation for more than $100 million, to close in the past two years.
ColBar developed and produces two human collagen-based products for tissue regeneration. OSSIX targets the dental sector. It is a resorbable bovine-sourced collagen dental membrane used to fill gaps left from tooth extractions until new bone is regenerated. The second product, Evolence, is an injectable collagen for filling in wrinkles. ColBar became the basis of Johnson & Johnson’s aesthetic products line.
Both marketing and operational factors apparently brought ColBar down. Sales of Evolence amount to only $25 million a year, far below Johnson & Johnson's expectations. There are several reasons for this. First, Johnson & Johnson does not specialize in aesthetic products, so its sales network, known as a powerhouse in other fields, is weaker in this one.
Secondly competition in the wrinkle removal market is fierce and steadily intensifying. In addition to other biological treatments, such as botox and hyaluronic acid, there are surgical procedures, which have become simpler, new filling treatments, and creams with far-reaching promises.
As far as ColBar's investors are considered, the sale of the company is meaningless. However, it is a sad tale for the company's employees and managers, but they had the opportunity to work at a major corporation with a product in the advanced stages. It therefore appears that the risk of closure of the Israeli R&D centers is insufficient reason to oppose exits under similar conditions in the future. In any event, there may be few alternatives.
Published by Globes [online], Israel business news - www.globes-online.com - on October 7, 2009
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