Diagnostics & Imaging Week

Medco Health Solutions (Franklin Lakes, New Jersey), a pharmacy benefit management firm, yesterday reported acquiring PolyMedica (Wakefield, Massachusetts), a provider of blood glucose testing supplies and related services, for $1.5 billion in cash, or about $53 a share.

Joanne Reed, CFO of Medco, during a conference call said Medco will fund the transaction “through a combination of cash on hand and bank loans through our existing $2 billion revolving door credit facility. The transaction has been unanimously approved by the boards of directors of both companies and is subject to approval by Polymedic stockholders and normal closing conditions.”

The company is saying the PolyMedica purchase brings 1 million members into its business and creates the nation’s most advanced large-scale practice focused on diabetes-related pharmacy care. Medco reports currently managing more than $6.5 billion in drug spending related to its 2.8 million patients being treated for diabetes.

The two companies began collaborating in 2006, with Medco fulfilling more than 50,000 prescriptions each week for PolyMedica’s patients. Earlier this year, PolyMedica began providing Medicare Part B administration services and supplies to certain Medco clients.

“It quickly became apparent through our collaboration that PolyMedica’s senior team had built a strong business with complementary strengths,” said David Snow, CFO and chairman of Medco.

Medco is allowing PolyMedica to retain its Liberty brand, a patient engagement and service model.

Late last year, PolyMedica disclosed the pricing of $150 million principal amount of convertible subordinated notes, due 2011, through an offering to institutional buyers, PolyMedica estimated that the net proceeds from the offering would be about $174 million, after deducting discounts and expenses.

At the time, the company said net proceeds from the offering would be used to repay about $118.6 million in outstanding bank debt and to repurchase roughly $29.6 million of its common stock.

In 2004 PolyMedica reached a single-payment settlement of $35 million following a U.S. Department of Justice investigation regarding Medicare practices and charges of over billing that agency.

Lazard served as Medco’s financial advisor and Sullivan and Cromwell acted as Medco’s primary external legal counsel; Deutch Bank Securities represented PolyMedica in the transaction and Weil, Gotshal & Manges acted as PolyMedica’s legal counsel.

Inverness Medical Innovations (IMI; Waltham, Massachusetts) has been busy in the acquisitions department as of late.

In what is becoming a common practice for IMI, the medtech company yesterday reported entering into yet another purchase agreement, this time to acquire the assets of Matritech (Newton, Massachusetts), a developer of protein-based diagnostics, for about $36 million, payable in shares of IMI common stock.

In addition, IMI would pay Matritech up to $2 million in cash and/or IMI common stock as milestones, based on achieving revenue targets for the 12 month period following deal closing.

“We are excited about the addition of Matritech’s bladder cancer technology to the Inverness portfolio, and look forward to realizing the market opportunities available to us through combining the Matritech products with our global distribution capabilities,” said Ron Zwanziger, president/CEO of IMI.

The board of Matritech has approved the dissolution of the corporation in accordance with Delaware law, subject to stockholder approval, after the closing of the asset sale. Matritech expects that the complete dissolution process may take several years.

In order to obtain the cash necessary to satisfy Matritech’s obligations and preserve the value of the consideration received at closing, Matritech said it expects to sell all of the shares of IMI stock received as consideration in the sale “as promptly as practicable after the closing of the asset sale. “

Before distributing any amounts to its common stockholders, Matritech said it must first satisfy all of its obligations to its existing creditors and preferred stockholders, as well as paying certain employee costs including change of control payments to management personnel not transferring to IMI and transaction costs related to the asset sale and the dissolution.

After payment of these obligations and fees, Matritech estimates that the net proceeds available for distribution to its common stockholders will be in the range of $10 million to $12 million, or about $0.16 to $0.19 a share.

The asset sale and dissolution are dependent on approval of Matritech’s stockholders and the asset sale is conditioned on the satisfaction of other closing conditions, and is expected to close in 4Q07.

IMI has been hot and heavy on the M&A trail for diagnostic companies. Earlier this month, the company reported a stock deal to acquire handheld blood coagulation monitoring systems developer Hemosense (San Jose, California) for $165 million.

In May, IMI beat out rival Beckman Coulter (Fullerton, California) for the right to acquire Bioste (San Diego) for $92.50 a share. Prior to the Biosite purchase the company unveiled plans to acquire Cholestech (Hayward, California) for $326.3 million. And two months ago it unveiled plans to acquire Cholestech (Hayward, California) for $326.3 million. IMI’s late last month reported expiration of the US. Antitrust waiting period for its purchase of Cholestech).

IMI makes rapid diagnostic products for the consumer and professional markets

In other dealmaking news: Zyvex Labs (Richardson, Texas) reported spin-out of a new company, NanoMed, its first.

The new company was started by Rob Burgess, PhD, former VP of R&D at Zyvex Instruments, and Gareth Hughes, PhD, former group leader of life sciences at Zyvex.

NanoMed is focused on the application of nanotechnology in life sciences. The company seeks to apply nanoparticle technologies for the development of research grade reagents and cutting-edge therapeutics. In addition, NanoMed possesses a strong collection of nanotechnology platforms that are currently available for licensing. The new company leverages Zyvex’s existing Life Science patents, methods, and core technologies, the company said.

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