Hefty purchase price sends message to pathologists and clinical laboratory executives
For any pathologist still harboring doubts about the future of digital pathology, yesterday’s surprise news that Roche Holding AG (VTX:ROG.VX) will pay $100 million to acquire BioImagene, Inc., provides compelling evidence that the digital pathology marketplace is ready for prime time.
Roche announced that it will pay $100 million to buy privately-held BioImagene of Sunnyvale, California. The purchase will be handled by Roche’s Ventana Medical Systems, Inc., and the deal is expected to close in just a few weeks. After the acquisition, BioImagene will operate as part of Ventana. BioImagene has emerged as one of the early leaders in selling digital scanners and digital pathology systems.
Some clinical labs use new pathology lab test technologies to deliver added value to physicians, patients, and payers
Clinical pathology laboratories in the United States and other developed countries across the globe face an unprecedented double-whammy. On one hand, the ongoing explosion of genetic and molecular knowledge gives pathologists and clinical laboratories incredible new tools for diagnosing disease and guiding therapy.
On the other hand, funding for government health programs in the United States and other developed countries is failing to keep pace with demand for health services and the need to pay for all the sophisticated molecular diagnostics and complex therapies now coming to market.
When Roche Holding AG (RO) of Basel, Switzerland, announced last month that it had an agreement to buy Genentech Inc. (DNA) of South San Francisco, California, it was big news. Roche had pursued the innovative drug maker since July with the primary goal of gaining access to the drugs in Genentech’s pipeline.
On March 11, Roche got the support of Genentech’s board to pay $95 per share to buy the 44% of the company it doesn’t already own. One intriguing reason why Genentech was so attractive to Roche is that the California company has a line of products and biomarkers that fit almost seamlessly with what Roche already offers, including Herceptin, HER2/neu assays, and biomarkers useful for both companies.
Yesterday, Roche Holdings (SWX: ROG.VX; RO.S) of Basel, Switzerland announced that it would initiate a tender offer to acquire 100% ownership of Ventana Medical Systems (NASDAQ: VMSI) of Tucson, Arizona.
Roche is offering $75 for each share of Ventana Medical. This is a 44% premium over Ventana’s closing price of $51.95 on July 22, 2007. It also represents a total cash purchase price of $3 billion for Ventana Medical Systems. For 2006, Ventana Medical Systems had revenue of $238.2 million. Roche’s offer is thus based on a large multiple of EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization).
Roche’s offer is unwelcome at Ventana Medical Systems. Executives at Ventana have been tight-lipped since news of the Roche tender offer became public. Earlier this morning, Ventana Medical issued a press release recommending that its shareholders take no action in response to the Roche offer. In the press release, it further stated that its board of directors would consult with financial and legal advisors on the situation. Within 10 days, it will make a recommendation to shareholders.
In a conference call yesterday, Roche disclosed that it has approached Ventana Medical Systems numerous times since the first of the year to initiate discussions about acquiring Ventana Medical. These approaches were rebuffed by Ventana’s board and executive team. That is why Roche decided to launch a hostile tender offer to acquire all the shares of Ventana.
Lab directors and pathologists should not be surprised if another company enters the bidding for Ventana Medical Systems. It has a robust product line in histopathology, a worldwide presence, and there is great respect for the quality of its products and its corporate culture. Because molecular diagnostics is growing at twice the rate of the traditional in vitro diagnostics market, a company like Ventana Medical Systems becomes a highly-desirable acquisition candidate.
Stay tuned to Dark Daily. Not only will there be ongoing developments in this hostile takeover action, but it is likely that this story will take some surprising twists before it is resolved.
Roche Makes Offer to Acquire Ventana for $75.00 Per Share in Cash
Roche Offers $3 Billion to Get Ventana Talking
Ventana Advises Shareholders to Defer Taking Any Action in Response to Roche Offer
Roche attempts hostile takeover of Ventana Medical Systems
Earlier this week, Digene Corporation (Nasdaq: DIGE) announced that it would be acquired by Dutch firm Qiagen (Nasdaq: QEN) for a purchase price of approximately $1.6 billion. Digene has been involved in patent infringement lawsuits during the past year in efforts to protect its HPV patents.
It was announced on Monday, June 4, that Digene will be purchased by Qiagen, a Dutch maker of tools for gene research. This gives Quiagen access to Digene’s patented HPV test, and tests for sexually transmitted diseases. Digene’s HPV test is the only one that has been approved in the U.S. and Europe. The purchase gives Qiagen “instantaneous market and technology leadership” in molecular diagnostics and will be “a catalyst for growth,” Peer M. Schatz, CEO of Qiagen, said.
It was announced back in January that Digene was suing Third Wave Technologies (Nasdaq: TWTI) over alleged patent infringement. The suit alleged that Third Wave infringed on a biotechnology patent involving human detection of the human papilloma virus (HPV).
Third Wave countersued Digene in early March by filing an anti-trust suit that alleged that Digene “abused its monopoly power to thwart competition” in the HPV diagnostic market. The current legal action is interesting because Digene and Third Wave had earlier entered into an agreement to dismiss, without prejudice, a declaratory judgment action filed by Third Wave against Digene for the same HPV detection technology. It was January 2006 when both parties agreed to throw out that lawsuit.
Digene has also been pursuing legal action against Ventana Medical Systems (Nasdaq: VMSI) in another patent infringement lawsuit. Last month the U.S. District Court for the State of Deleware denied Digene’s motion for a preliminary injunction against Ventana. “Although we are disappointed with the court’s ruling, the denial of our preliminary injunction request was not unexpected given the pending expiration of the patents at issue in May and June,” said Daryl Faulner, President and CEO of Digene. In the ruling, the court noted that there remains a substantial question as to whether Ventana has a license to the relevant HPV patents.
Digene’s acquisition by a larger in vitro diagnostics (IVD) manufacturer is another example of the ongoing consolidation in the IVD industry. Along with the strong price Qaigen is paying, it demonstrates the high interest investors have in molecular diagnostics. Interestingly, during May, another major IVD company in cervical cancer screening was acquired. Cytyc Corporation (Nasdaq: CYTC) is being sold to Hologic (Nasdaq: HOLX) in a deal valued at $6.2 billion and expected to close during the third quarter.
Should acquisitions continue in the IVD industry at the current pace, it will certainly change the competitive landscape. Further, much of the molecular technology currently finding its way into new clinical assays has been developed by start-up companies. For that reason alone, the established IVD giants will need to scramble to develop or acquire comparable molecular technology that will help them maintain market share.
Digene sues Third Wave over patent
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Digene Files Infringement Suit Against Third Wave Technologies
Third Wave files countersuit vs. Digene in patent case
Preliminary Injunction Denied in Digene’s Case Against Ventana Medical Systems
Qiagen to Buy Digene, Maker of Tests for Cancer-Causing Virus