Gen-Probe (San Diego) said Tuesday it has launched a conditional tender offer to acquire 100% of the outstanding shares, warrants and convertible bonds of Innogenetics (Gent, Belgium), a molecular diagnostics company, for about €215 million ($334 million) in cash. Innogenetics shareholders will receive €6.10 a share in cash, or roughly €188 million ($292 million), the company said.
According to Gen-Probe, the combined entity would be the largest standalone molecular diagnostics company in the world, with pro forma 2008 sales in excess of $500 million. The combined company would offer a broad range of nucleic acid and immunoassay tests to identify bacterial and viral infectious diseases, genetic and neurological disorders, transplant compatibility, and cancer. These tube- and strip-based products could be sold to a customers worldwide, the company said.
"For the last couple of years we have been using a thorough, rigorous process to analyze potential acquisition targets. In fact, we have been talking to Innogenetics since last summer, and believe the company is a very good strategic fit, for a number of reasons," Hank Nordhoff, Gen-Probe's CEO and chairman, said during a company conference call. "We expect acquiring Innogenetics would jumpstart our efforts to expand our sales, marketing, distribution and manufacturing infrastructure in Europe, thereby helping us accelerate commercialization of our own products, increase top-line revenues, and better control our own commercial destiny."
Nordhoff said acquiring Innogenetics would also give Gen-Probe access to complementary products, technologies and instrumental platforms that the company can use to drive longer-term growth.
But Gen-Probe is not the only company trying to acquire Innogenetics. Belgian company Solvay Pharmaceuticals made a conditional €5.75 a share offer for the molecular diagnostics company in April.
Gen-Probe's offer represents a 7% premium to Innogenetics' per share closing price Tuesday of €5.71, a 6% premium to Solvay's offer, and a 41% premium to Innogenetics' unaffected average share price of €4.33 in the three months prior to the announcement of Solvay's offer.
"We are clearly in a counterbid situation, where a lower-value deal has already been proposed to Innogenetics shareholders. With another bidder already in this process, we obviously cannot predict the ultimate outcome of the counterbid we are making today," Nordhoff said. "If Solvay decides to bid more than we believe we can justify for Innogenetics, we would be happy to continue building our core clinical diagnostics and blood screening businesses, which I should mention remain very healthy thus far in the second quarter."
Nordhoff also said that Gen-Probe would continue to look at other potential acquisition targets if it lost the bidding war.
"We believe our offer represents full and fair value for all Innogenetics shareholders, while providing additional value over the offer recently made by Solvay," Nordhoff said. "Moreover, we believe Gen-Probe's well-established expertise and track record in molecular diagnostics would offer Innogenetics' customers and employees the best opportunity for long-term success."
Innogenetics' key diagnostic products include CE-marked genotyping assays for infectious diseases such as hepatitis C and B, and human papillomavirus. The company also sells genetic tests for cystic fibrosis and tests for human leukocyte antigens that are used to establish tissue compatibility in organ transplants. Innogenetics recently received CE marking for its first assay on its 4-MAT microarray platform. Innogenetics holds a PCR license from Roche (Basel, Switzerland) and an xMAP multiplex technology license from Luminex (Austin, Texas). Innogenetics recently reported a restructuring and closure of its therapeutics subsidiary, GENimmune, in order to focus on diagnostics product opportunities.
Gen-Probe has filed a draft takeover prospectus with the CBFA, Belgium's Banking, Finance and Insurance Commission. The proposed acquisition is expected to close in 4Q08, subject to closing conditions, including an acceptance threshold of at least 90% of the outstanding shares of Innogenetics, or 75% of Innogenetics' articles of association are modified to remove voting restrictions and introduce a 'one share, one vote' principle, Gen-Probe said.
Net of cash and other debt, the enterprise value of Gen-Probe's offer amounts to about €219 million ($340 million) and is roughly 4.3 times Innogenetics' diagnostics revenue of €51 million in 2007. Gen-Probe expects to finance the deal with cash currently on its balance sheet.
Gen-Probe expects to record charges for non-recurring cash and non-cash acquisition-related costs, primarily the write-off of in-process research and development, following the close of the tender offer.
UBS Investment Bank is acting as financial adviser to Gen-Probe on this transaction, and Linklaters and Cooley Godward Kronish are serving as legal counsel.
Innogenetics develops diagnostic products intended to improve therapy management and patient health.
Gen-Probe makes nucleic acid tests that are used primarily to diagnose human diseases and screen donated human blood.
A financial analyst with Lazard Capital Markets wrote in a research report that the acquisition is strategic, as Gen-Probe attempts to build out its diagnostic international footprint and that Innogenetics should enhance the company's presence in Europe, "but the U.S. will likely take time."
In other dealmaking news:
• Roche (Basel, Switzerland) and DxS (Surrey, UK) have signed an exclusive distribution agreement for the DxS TheraScreen K-RAS Mutation Test and TheraScreen EGFR 29 Mutation Test. The tests are intended, when considered with other clinically relevant factors, to aid doctors in identifying suitable patients likely to benefit from a specific cancer therapy based on their mutation status.
Roche is granted exclusive world-wide distribution rights for the K-RAS Test, which has CE Mark certification in Europe. For the EGFR test, which also has CE Mark certification, Roche is granted exclusive distribution rights for all global markets except the United States, Canada, Mexico, and Hong Kong.
The TheraScreen K-RAS Mutation Test was the first clinically validated, CE-Mark certified companion diagnostic for tumor-specific mutations in patients with colorectal cancer. The TheraScreen EGFR 29 Test is designed to enable detection of 29 of the most common somatic mutations in the EGFR gene and detects mutations with greater sensitivity than sequencing.
DxS is a UK-based personalized medicine company providing molecular diagnostics to aid doctors and drug companies in selecting therapies for patients.
• Natus Medical (San Carlos, California) reported that it has completed its previously disclosed acquisition of Sonamed (Waltham, Massachusetts) for $9 million in cash.
Jim Hawkins, CEO of Natus, said the company expects Sonamed's Clarity screener "to further fill out our product line in newborn hearing screening. With two-thirds of Sonamed's revenue coming from disposable supplies, combined with their high-gross-profit margin, we believe Sonamed's products will be an ideal fit for our business model."
Sonamed makes supplies that aid medical practitioners in screening for hearing loss in newborns.
The privately held company reported revenue of $3.5 million for its year ended Dec. 31 and had cash of about $2.7 million as of the date of the acquisition.
Natus is a provider of healthcare products used for the screening, detection, treatment, monitoring and tracking of common medical ailments such as hearing impairment, neurological dysfunction, epilepsy, sleep disorders and newborn care.
Roche is a developer of products in the fields of pharmaceuticals and diagnostics.
• Third Wave Technologies (Madison, Wisconsin) reported that it has agreed to acquire Stratagene's (La Jolla, California) Full Velocity family of worldwide patents and patent applications from Agilent Technologies (Santa Clara, California) for an undisclosed sum.
The company said the acquisition of the Full Velocity patents strengthens its intellectual property position for Invader Plus, which couples the Invader chemistry with polymerase chain reaction (PCR). Third Wave said the acquisition also supports the next generation of Invader chemistries, which will amplify and detect DNA, RNA and microRNA on real-time PCR instruments.
Third Wave develops molecular diagnostic reagents for a variety of DNA and RNA analysis applications it offers in vitro diagnostic kits, and analyte-specific, general-purpose and research-use-only reagents for nucleic acid analysis.
• ICx Technologies (Arlington, Virginia), a developer of advanced sensor technologies for homeland security, force protection and commercial applications, reported the acquisition of S3I (Reisterstown, Maryland), a company specializing in biological threat detection. The company will be part of ICx BioSystems.
ICx will pay about $5.3 million, with the potential for additional earn-out payments tied to business performance.
S3I adds the IBAC sensor (Instantaneous Bioaerosol Analyzer and Collector) to ICx's biological-detection product line. When coupled with ICx's BioXC or AirSentinel product families, the resulting integrated solution will give military, first-responder and commercial customers' fast, actionable information in the field and in protected facilities, according to ICx.
ICx develops advanced sensor technologies for homeland security, force protection and commercial applications. Its sensors detect and identify chemical, biological, radiological, nuclear and explosive threats.
• Tenet Healthcare (Dallas) reported that a company subsidiary has completed the sale of the Encino campus of Encino-Tarzana Regional Medical Center (Los Angeles) a 151-bed acute care hospital. The sales price was not disclosed. Both the Encino and Tarzana campuses of Encino-Tarzana Regional Medical Center have been slated for divestiture since the 1Q04.
Separately, the company also reported that Prime Healthcare has entered into definitive agreements to acquire two additional Tenet hospitals in California 167-bed Garden Grove Hospital and Medical Center, and 64-bed San Dimas Community Hospital (California).
The transactions are subject to customary regulatory approvals and are expected to be completed in approximately 30 days.
Tenet through its subsidiaries owns and operates acute care hospitals and related ancillary healthcare businesses, which include ambulatory surgery centers and diagnostic imaging centers.