Jan 22, 2004
Guidant Announces Agreement to Acquire Surgical Cardiac Ablation Company

Acquisition Positions Guidant to Enter New Therapy Area

Indianapolis, Ind. and Santa Clara, Calif. - Guidant Corporation (NYSE: GDT), a world leader in the treatment of cardiac and vascular disease, today announced that the company has signed a definitive agreement to acquire AFx inc., a privately held company based in Fremont, Calif. The company is a pioneer in the field of microwave surgical cardiac ablation.

Under the terms of the agreement, AFx will receive an up-front cash payment of $45 million with subsequent payments to follow based on the attainment of certain milestones. Guidant expects to record an after-tax charge of approximately $25 million in the first quarter of 2004 to write off in-process research and development (IPRD) in conjunction with the acquisition. The AFx transaction, excluding the IPRD, is expected to be neutral to Guidant''s earnings in 2004. Guidant intends to complete the acquisition in the first quarter of 2004, subject to customary closing conditions.

This acquisition adds FDA-cleared surgical cardiac ablation technologies to Guidant Cardiac Surgery''s broad portfolio. Moreover, AFx has submitted data for U.S. Food and Drug Administration (FDA) clearance for a specific atrial fibrillation indication.

"The agreement to acquire AFx underscores Guidant''s commitment to pioneering treatments for disabling and life-threatening atrial arrhythmias," said Maria Degois-Sainz, president, Cardiac Surgery, Guidant Corporation. "We are enthusiastic about this innovative technology, which expands cardiac surgeons'' options for better patient outcomes."

Atrial fibrillation is a heart arrhythmia that causes the atria to quiver, preventing the atria from effectively pumping blood into the lower chambers of the heart and reducing pumping efficiency. Approximately 2.2 million patients suffer from atrial fibrillation in the U.S. today, and its prevalence is expected to double over the next 40 years. The condition can cause heart failure or complicate its effective treatment, and is also associated with reduced quality of life, higher medical costs, and a five-fold increase in the risk of stroke. In approximately 50 percent of atrial fibrillation patients, drug therapy is ineffective or causes severe side effects, making novel therapies to suppress atrial fibrillation increasingly valuable.

"Ablation procedures have become an increasing part of cardiac surgeons'' practices," said Adam E. Saltman, M.D., Ph.D., associate professor of Surgery & Physiology, University of Massachusetts. "Surgeons are looking forward to the development of minimally-invasive surgical approaches for standalone atrial fibrillation procedures in the future."

"Surgical solutions may be promising for a substantial proportion of patients with atrial fibrillation. Electrophysiologists are increasingly aware of and enthusiastic about surgery as an option for these patients," said David S. Cannom, M.D., director of Cardiology, Good Samaritan Hospital and past president, North American Society for Pacing and Electrophysiology.

The AFx Microwave Surgical Ablation System has been used in over 5,000 procedures, allowing surgeons to safely ablate cardiac tissue, most often in combination with coronary artery bypass surgery (CABG) or valve procedures. Surgeons use the AFx Flex 4(tm) or Flex 10(tm) probe to apply microwave energy to the surfaces of the heart.

About Guidant

Guidant Corporation pioneers lifesaving technology, giving an opportunity for better life today to millions of cardiac and vascular patients worldwide. The company, driven by a strong entrepreneurial culture of more than 11,000 employees, develops, manufactures and markets a broad array of products and services that enable less invasive care for some of life's most threatening medical conditions. For more information visit www.guidant.com.

About AFx inc.

AFx inc. is a privately held company based in Fremont, Calif. Its team of 40 employees has pioneered a proprietary microwave technology for cardiac surgery procedures. The FLEX 2(tm), FLEX 4(tm) and FLEX 10(tm) Microwave Ablation Probes are sterile, single-use, hand-held, surgical devices used exclusively with the AFx Microwave Generator. For more information visit www.afx-inc.com.