Diagnostics & Imaging Week Executive Editor
General Electric (Fairfield, Connecticut) reported following market close last Wednesday that its deal to acquire two diagnostic units of Abbott Laboratories (Abbott Park, Illinois) will not be completed.
While both companies issued press statements saying that they had "mutually" agreed to walk away from the deal, at least one analyst said that the situation was a case of "buyer's remorse" on the part of GE.
The potential acquisition was first disclosed in January, with GE planning to acquire Abbott's primary in vitro and point-of-care diagnostics businesses for $8.13 billion.
Failure of the deal probably comes as a mild surprise to many since it had been approved by both U.S. and European regulators and was in line with GE Healthcare's long-term intent to pursue earlier diagnostics of disease.
GE's stated strategy has been to combine its large-hardware offerings in imaging with the less macro position in cellular diagnostics for broader range in the healthcare continuum of care. And deal failure would appear to be a fairly large speed bump along that path.
But the companies said in their statements that they were unable to reach a final agreement on deal terms and conditions.
Larry Biegelsen, med-tech analyst with Wachovia Capital Markets, issued a report saying that both sides may have considered the initial deal terms unsatisfactory: Abbott's shareholders not happy with GE's offer and GE perhaps feeling "buyers' remorse" and attempting to reduce its offer.
Biegelsen said that the original $8.13 billion offer "appeared high." Plus, he and other analysts suggested that GE probably was concerned about the FDA warning letter sent to Abbott's diagnostics division in Irving, Texas, in March, concerning problems with its instruments testing.
Several analysts also were in agreement that the apparent extended timeline in reaching a deal conclusion indicated that GE was attempting to renegotiate the terms downward.
In its statement, Abbott said that deal termination would have no impact on its EPS guidance for the full year 2007 or the second quarter, and that its earnings outlook for 2008 would remain unchanged.
Biegelsen, however, said that termination of the deal reduces Abbott's "growth profile" and financial flexibility.
And he projected potential offers for the diagnostics units could come in the future.
"Although [Abbott] indicated they will manage the diagnostics business for the long-term, we believe there were other bidders leading up to the time of the original agreement with GE and these bidders may re-emerge," Biegelsen wrote in his report.
He noted also that the Dallas facility has been cleared by third-party inspectors, and that the FDA letter doesn't prevent launch of new products by Abbott and does not impact any other of its units.
In other acquisition news:
• Microchip Biotechnologies (MBI; Dublin, California) reported acquiring what it called "key" patent rights from Pathwork Diagnostics (Sunnyvale, California) for sample injection structures in microfluidic separations. Financial terms of the transaction were not released.
The pending patent relates to sample injection structures and methods for defining accurate volumes of material for microfluidic separations.
"The addition of this intellectual property to our patent portfolio builds upon our strong patent position in microfluidic devices for life science, applied sciences, and diagnostic products," said Dr. Stevan Jovanovich, president/CEO of MBI. MBI is an early-stage company developing nanofluidic sample preparation and analytical instrumentation for life sciences, applied sciences and diagnostics markets, based on its NanoBioProcessor platform and associated Microscale-on-Chip-Valves.
The acquired pending patent was held previously by Predicant Biosciences, which in a 2006 merger became Pathwork, a genomics-based company focused on oncology diagnostics. Pathwork combines microarray technology with proprietary informatics to provide clinically actionable information in a robust and reproducible manner.
The company's first test — the Pathwork Tissue of Origin Test, under FDA review — is expected to aid in the diagnosis of patients with uncertain primary cancers, in which a tumor's origin cannot be readily identified.
• Quidel (San Diego), a provider of rapid point-of-care diagnostic tests, reported gaining exclusive, worldwide licenses to the antiviral resistance microarray-based influenza detection technology (AVR-Chip) and to the microarray-based influenza B detection technology (BChip), developed by scientists at the University of Colorado at Boulder (CU-Boulder) in collaboration with the U.S. Centers for Disease Control and Prevention (Atlanta). Terms of the licensing deal were not disclosed.
Caren Mason, president/CEO of Quidel, said, "Exclusive access to molecular-based technologies for influenza B diagnostics, and for detection of antiviral resistance, greatly complements our ongoing progress with our MChip technology for influenza A, which was licensed in December 2006 from CU-Boulder. These licenses also reinforce our commitment to market leadership in rapid point-of-care influenza diagnostics."
The AVR-Chip is used to identify mutations that may confer resistance to antiviral reagents and facilitate proper influenza treatment decisions. The ability to identify antiviral susceptibility is important for global monitoring of influenza patterns, and for directing physicians toward better treatment decisions.
Quidel's portfolio includes tests that aid in the diagnosis of several disease or condition states, with a focus on the physician office lab and acute care markets. Its Specialty Products Group develops research products in the fields of oncology and bone health with potential future point-of-care applications.
• Qiagen (Venlo, the Netherlands) and Digene (Gaithersburg, Maryland) reported expiration of the Hart-Scott-Rodino Antitrust waiting period, thus completing the preclosing antitrust review process, a key condition required for deal close.
The companies on June 3 disclosed the agreement for Qiagen to acquire Digene in a deal valued at $1.6 billion, 55% in cash and 45% in Qiagen stock. The deal will carry Qiagen into sectors for testing of cervical cancer and sexually transmitted diseases.