US-based medical technology company CardioNet has pulled out of its previously announced acquisition of cardiac monitoring specialist Biotel, accusing the latter of failing to comply with the terms of the merger agreement.

The announcement came from Biotel and CardioNet has remained silent on the precise reasons for its withdrawal. The US$14 million deal, announced in April, would have been CardioNet’s entry point to the clinical research sector.

Biotel, whose shares dropped more than 50% on the news, believes it has complied with all the terms of the merger agreement and says CardioNet’s claim is “without merit and inconsistent with CardioNet’s representation to Biotel”. The company is now “considering its legal options” over the withdrawal.

Under the merger agreement, CardioNet was set to acquire all of the outstanding shares of Biotel common stock for US$4.82 per share in cash. The transaction was originally expected to close in mid-2009.

CardioNet’s initial focus was on the diagnosis and monitoring of cardiac arrhythmias using its flagship Mobile Cardiac Outpatient Telemetry (MCOT) solution. The company had identified clinical services as “a natural and strategic extension of our business”, both for its existing cardiac monitoring service and for potential new monitoring markets.

"It is unfortunate that CardioNet took this action,” commented Biotel’s president and chief executive officer Steve Sprinrose. “Biotel has developed significant new products in wireless MCT [mobile cardiovascular telemetry] and event recorder applications. These products are of significant value to arrhythmia service organisations, and Biotel believes these products are cost-effective and well positioned for the current medical reimbursement climate.”