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.

Despite its attraction, diabetes glucose monitoring remains a tough field for newcomers, who face competition from four major-league, entrenched players. But two of the newer entrants appear to be succeeding--not because of revolutionary technology, but because of partnering savvy, efficient execution, and technological competence. Analysts expect Inverness Medical's symbiotic relationship with LifeScan to help Inverness's diabetes sales grow 30% a year as LifeScan pushes Inverness-made products as a major part of its fight to regain its market leadership. Home Diagnostics Inc.'s success with co-branding raises the prospect that discounting, until now not a significant factor, will become much more common in the field.

In Vivo presents another installment of our quarterly review of dealmaking--in this case November 2000-January 2001. Our data comes from Windhover's Strategic Transactions Database. We include medical device financings by industry segment and by deal type; medical device M&A; diagnostic financings and alliances by product category; pharma and biotech alliances by technology segment; pharma and biotech alliances by deal type, and pharma and biotech financings by market segment and therapeutic category.

Cygnus is one of 1999's few great turnaround stories. A year ago, it was on the verge of collapse, but now it is about to get FDA approval of the first non-invasive glucose monitor for diabetes. Next, Cygnus needs to find a corporate partner without giving up too much, and to determine the true market potential of its device, the GlucoWatch Biographer, which got approved as an adjunct to, not a replacement for, traditional blood-glucose testing.