Diagnostics & Imaging Week

Cyberkinetics Neurotechnology Systems (Foxborough, Massachusetts), a company developing implantable products to treat neurological diseases and injuries, and NeuroMetrix (Waltham, Massachusetts), a developer of neurological diagnostic and therapeutic products, have formed a joint venture to accelerate development of therapies for peripheral nerve damage based on Cyberkinetics' Andara oscillating field stimulator (OFS) therapy platform.

The goal of the j-v is to utilize the Andara OFS technology to develop a product, or series of products, for peripheral nerve injuries.

NeuroMetrix has purchased $2.5 million of Cyberkinetics common stock (5.4 million newly issued shares), or about 13% of the company's shares, at 46 cents a share.

NeuroMetrix also received a warrant to purchase another 2.7 million shares, exercisable at 46 cents a share with a term of five years. NeuroMetrix will be required to exercise the warrant if Cyberkinetics receives FDA approval of the humanitarian device exemption for the Andara OFS system for acute spinal cord injuries.

In a conference call, Shai Gozani, president/CEO of NeuroMetrix, said the company is interested in the application of electrical stimulation not just in the activation of nerves for the diagnostic purposes but also to promote neurological tissue repair and regeneration.

"The strategic partnership we announced today potentially positions us to enter this arena with a near-term commercialization of a product for acute spinal cord injury and in the longer term, with neurostimulation devices for peripheral nerve and chronic spinal cord injury," Gozani said during the call.

The proposed terms include: The contribution by Cyberkinetics of intellectual property, know-how and scientific expertise; NeuroMetrix funding up to $1 million annually for the first two years of the j-v; the companies sharing further development costs equally; NeuroMetrix obtaining an option to negotiate for exclusive rights to commercialize any products that are developed within the j-v.

NeuroMetrix also received the right to first negotiation for the acquisition of Cyberkinetics, or any other change of control, and a right of first negotiation for the commercialization of the Andara OFS system for the treatment of acute spinal cord injuries.

In addition, NeuroMetrix received a seat on the Cyberkinetics board, filled by Gozani.

The Andara OFS system, which uses electrical stimulation to promote the growth of nerve fibers, is currently under review by the FDA for HDE approval for treating acute spinal cord injuries. Results from a Phase Ia, 10-patient clinical trial of the therapy in patients with recent spinal cord injuries were published in the January 2005 issue of the Journal of Neurosurgery: Spine, and indicated statistically significant improvements in sensory and motor function at 12 months after treatment. Four additional patients were subsequently enrolled in a Phase Ib trial.

NeuroMetrix said it has commercialized a neuron-diagnostic product, the NC-stat system, that has been used to test more than 1 million patients. It has additional products in development for the diagnosis, monitoring and treatment of nervous system diseases and pain, including the Advance system for the diagnosis of neuropathies and a nerve localization system for the treatment of neuropathies and pain control.

Ventana Medical Systems (Tucson, Arizona), potentially moved a step closer to forging a merger with Roche Holdings (Basel, Switzerland) with its agreement to open its books to Roche, giving it access to non-public information. Ventana said it believes this move will allow Roche to better understand the company's prospects and the value in companion diagnostics, and that it could break up the logjam that has been Roche's ineffective tender offer that values the company at $75 a share, or about $3 billion.

Ventana shareholders have been cool to Roche's offer, first disclosed at the end of June), after months of what Roche said were fruitless private advances.

Since June, Roche has been through four tender offer extensions. After the last extension offer was made by Roche at the end of October, the company noted that less than 0.2% of its roughly 35 million outstanding shares of Ventana were tendered into the Roche offer after the third extension. At the close of business Oct. 29, Roche said about 63,711 Ventana shares had been tendered.

While opening its books Ventana's board in a statement reiterated that Roche's $75 offer "is grossly inadequate and not an appropriate starting point for negotiations as reflected by that fact that Ventana's share price has consistently traded well above Roche's offer and our stockholders have overwhelmingly rejected that offer four times."

Some analysts have said Ventana could be worth up to $90 per share as a stand-alone business and that Roche may have to significantly raise its bid — possibly above $100.

In a note to clients, RBC Capital Markets analyst Bruce Jackson said he thinks Ventana is worth $90 per share as a stand-alone company. "A buyer should offer up a premium above that price to compensate Ventana for its superior technology and a comprehensive pipeline of companion diagnostic tests for every major class of cancer drug," said Jackson.

Jackson said he believes the company could ultimately be offered $100 a share or higher, depending on how the buyer values Ventana's companion diagnostics pipeline. Jackson wouldn't be surprised if the bidding process takes a while, but nonetheless thinks Ventana will still end up in the hands of Roche.

In other deal making activity:

• PerkinElmer (Waltham, Massachusetts) reported that it has completed its acquisition of ViaCell (Cambridge, Massachusetts), a biotechnology company specializing in the collection and preservation of umbilical cord blood stem cells.
  Earlier this week PerkinElmer reported completing its tender offer to acquire all outstanding shares of ViaCell's common stock for $7.25 a share in cash. Based on ViaCell's 38.8 million outstanding shares as of Aug. 7, the deal is worth about $281.6 million. The deal was first disclosed last month.
  The company has said it is buying ViaCell to expand its product line in the neonatal and prenatal markets. ViaCell makes ViaCord, which preserves umbilical cord blood.
  "PerkinElmer is committed to protecting the health of mothers and babies from pregnancy through birth and beyond," said Robert Friel, president/COO of PerkinElmer. "The addition of ViaCell marks another step in our efforts to become a leading provider of innovative prenatal, neonatal and maternal healthcare solutions. We will continue to look for opportunities to build our product portfolio and provide the most comprehensive and accurate assessment of newborn and maternal health to families and their healthcare providers."
  PerkinElmer provides newborn screening systems, offering the only tandem mass spectrometry (MS/MS) kit cleared by FDA as an aid to screening for inborn errors of metabolism.
  PerkinElmer offers Ultra-Screen^, a first-trimester prenatal screening protocol designed to provide patient-specific risk assessment for certain chromosomal abnormalities, through its clinical test subsidiary, NTD Laboratories.
• Beckman Coulter (Fullerton, California) reported that it will acquire the research flow cytometry business of Dako (Glostrup, Denmark), a developer of cancer diagnostics. Dako's flow cytometry unit is based in Fort Collins, Colorado.
  Financial terms were not disclosed.
  Scott Garrett, president/CEO of Beckman Coulter, said, "We are enthusiastic about the opportunity to add Dako's MoFlo XDP high-performance sorter, the gold standard for cell sorting, and the highly capable nine-color CyAn research flow cytometer to our existing portfolio of cytometry instruments. This transaction allows us to offer a more comprehensive range of research solutions to our customers."
  Flow cytometry is used to analyze cells in blood and other fluids for both research applications and diagnosis of diseases such as leukemia, lymphoma and HIV. Dako's flow cytometry instrument business workforce of almost 200 people includes sales, marketing, research, manufacturing and administrative personnel.
  The transaction is expected to close by the end of the year.
  Beckman Coulter said that more information about the deal will be made available during its 2007 business review meeting Dec. 11.
  Dako develops instruments, reagents and software designed to reduce the time from biopsy to diagnosis, improve the quality and reliability of diagnosis, and increase efficiency in the lab.
• Inverness Medical Innovations (IMI; Waltham, Massachusetts) reported completing its acquisition of Alere Medical (Reno, Nevada) for $302 million, consisting of about $128 million in cash and $174 million in IMI common stock and assumed options.
  Alere provides health and care management services and programs to healthcare organizations helping patients with chronic illnesses to manage their conditions.
  IMI is a developer of rapid point-of-care diagnostics.