A BB&T

The diagnostic sector of med-tech, already heavily consolidated, saw a flurry of completed and proposed mergers in April, the total value of those deals potentially topping $5 billion.

In what will be the biggest of these consolidations, Quest Diagnostics (Lyndhurst, New Jersey) agreed to buy AmeriPath (Palm Beach Gardens, Florida) for about $2 billion, including about $770 million in debt at closing. AmeriPath, a company controlled by Welsh, Carson, Anderson and Stowe (New York), provides dermatopathology, anatomic pathology and esoteric testing, and has annual revenues of more than $800 million.

Bob Hagemann, CFO of Quest, said in a conference call that cost synergies were not the primary drivers for the purchase and that there would be very little integration of the companies. AmeriPath will continue to operate as usual, he said, with Quest not planning to close any of AmeriPath’s major facilities. “We’re doing this because it’s a growth opportunity . . . . With that said, though, there are some synergy opportunities: overhead costs, purchase logistics, and potentially some bad debt. We’ll realize some of that in the first year with the rest of that realized in the second year,” Hagemann said.

Surya Mohapatra, PhD, CEO and chairman of Quest, emphasized the value of the deal as establishing “our leading position in cancer diagnostics with a focus on dermatopathology, anatomic pathology and molecular diagnostics. AmeriPath is respected for its leadership in dermatopathology and anatomic pathology, two of the fastest growing segments in diagnostic testing. Additionally, its Specialty Laboratories will further strengthen our hospital and esoteric testing business.”

AmeriPath operates three divisions. Dermpath Diagnostics has a team of more than 80 board-certified dermatopathologists who interpret 2.4 million biopsies a year. Its anatomic pathology division, which operates under the AmeriPath brand, has expertise in gastroenterology, urology, oncology and women’s health. Specialty Laboratories, its esoteric testing business, is a full-service clinical laboratory serving hospitals, reference laboratories and physicians nationwide. AmeriPath has about 400 pathologists and clinical scientists and nearly 4,000 employees.

The companies said they expect to complete the transaction this quarter.

Shaping up — another battle royal?

What is beginning to look like the next largest deal in the sector is the acquisition of Biosite (San Diego) which has received two bids, thus suggesting a looming auction reminiscent of last year’s bidding by J&J and Boston Scientific for Guidant. The winning bid could run in the $1.6 billion-$1.7 billion.

Biosite, developing proteomics for new medical diagnostics, first received an offer from Beckman Coulter (BC; Fullereton, California), followed by a higher offer from Inverness Medical Innovations (IMI; Waltham, Massachusetts). At press-time for this issue, BC’s proposal had cleared antitrust approvals, but the Biosite board said it was mulling IMI’s offer, based, it said, on opinions from its financial and legal advisors. IMI’s offer of $90 a share is about a 5.9% premium over the BC offering price of $85 a share (about $1.55 billion).

Scott Garrett, president/CEO of BC, expressed confidence that its bid is superior, even at the lower price, and remained committed to acquiring Biosite. “The conditional and uncertain terms of the Inverness offer should give the Biosite board and its stockholders enormous pause,” said Garrett. “In our view, the fact that Inverness has not proposed a tender offer, which could be concluded relatively quickly, speaks volumes about the firmness of its financing. Inverness’ financing ‘commitments’ contain remarkably broad conditions and contingencies. It is not surprising, therefore, that Inverness instead is suggesting a one-step transaction — one that would take months to complete.”

At the time of IMI’s initial offer, Ron Zwanziger, company president/CEO and chairman, said that his company had made “repeated attempts over the past 10 months to engage the Biosite management team and board in a meaningful dialogue about a potential combination of our two companies.” He said that as recently as Feb. 20, IMI had submitted a proposal to acquire Biosite and subsequently entered into a confidentiality agreement to work to enhance its offer. “We were therefore extremely surprised and disappointed by your announcement on March 25 of an agreement with Beckman Coulter.” In his letter, Zwanziger also indicated that his company was prepared to bring its proposal directly to Biosite’s shareholders” if they didn’t hear back from Bosite by April 8, a deadline the Biosite board let expire without a reply.

Roche to buy BioVeris

Roche (Basel Switzerland) has agreed to acquire BioVeris (Gaithersburg, Maryland) for $21.50 a share in cash, or about $600 million. Roche said the purchase will allow it to expand its immunochemistry business from human diagnostics into new segments such as life science research, patient self-testing, veterinary testing, drug discovery, drug development and clinical trials, the company said. By acquiring BioVeris, Roche will own the complete patent estate of the electrochemiluminescence (ECL) technology deployed in its Elecsys product line which gives Roche Diagnostics the opportunity to fexploit the entire immunochemistry market, the company said. The transaction is expected to close in 3Q07.

“In comparison with other detection technologies ECL offers distinct advantages such as enhanced sensitivity, short incubation times and broad measuring ranges,” said Severin Schwan, CEO of Roche Diagnostics. “This acquisition ensures that Roche will be able to provide unrestricted access to all customers and therefore represents a significant growth opportunity for our immunochemistry business.”

“The field we were in was routine testing. We would have offered our test in a hospital, but if the same hospital wanted to do a clinical trial, we could not sell our tests for such a clinical trial,” Schwan added.

Roche has been on a bit of a buying spree lately. Last month, it purchased antibody research group Therapeutic Human Polyclonals (Sunnyvale, California) for $56.5 million, while Roche Diagnostics recently acquired 454 Life Sciences (Branford, Connecticut), part of Curagen (New Haven, Connecticut), for $155 million.

Cytyc unit completes buy of Adeza

Cytyc (Marlborough, Massachusetts) reported that its Augusta Medical subsidiary completed its $452 million merger with Adeza Biomedical (Sunnyvale, California), with Adeza to become a wholly owned subsidiary of Cytyc and its name changed to Cytyc Prenatal Products.

All remaining outstanding shares of Adeza common stock were converted into the right to receive $24 a share in cash, other than shares held by Cytyc or any of its subsidiaries or shares held by Adeza stockholders who perfect their rights to appraisal in accordance with Delaware law.

“This acquisition represents another significant milestone for Cytyc as we expand our leadership in women’s health to include maternal-fetal care,” said Patrick Sullivan, Cytyc president/CEO and chairman. “The FullTerm fetal fibronectin test offers clear clinical and cost benefits for the assessment of preterm birth and provides another excellent. We welcome Adeza’s employees to the Cytyc family and look forward to working with our new colleagues to continue to deliver best in class products and service to Adeza’s and Cytyc’s customers.”

Cytyc develops diagnostic and surgical products for cancer and women’s health applications.

Agilent to buy Stratagene

Agilent Technologies (Santa Clara, California) agreed to acquire specialized life science research and diagnostic products maker Stratagene (La Jolla, California) for about $245 million. Each share of Stratagene common stock will be converted into the right to receive a cash payment of $10.94.

Stu Matlow, a spokesperson for Agilent’s life sciences solutions unit, told Biomedical Businesss & Technology that the acquisition expands the company “into the life sciences area and a lot of the reagents that Stratagene makes are very complementary to the kinds of workflows that Agilent instruments are used in, it just seemed like a natural fit.”

He added that Agilent’s genomics business “fits in nicely” with Stratagene’s reagent business. “Stratagene has a strong R&D team as well as excellent presence in the important academic and government markets,” added Nick Roelofs, VP and general manager of Agilent’s Life Sciences Solutions Unit.

Stratagene, which has 400 employees, will be a division within Agilent’s life sciences unit. The acquisition is expected to close within 90 days. Stratagene has locations in Garden Grove, California; Cedar Creek, Texas; Edinburgh, Scotland; Tokyo; and Amsterdam.

Stratagene’s products are used in molecular biology, genomics, proteomics, drug discovery and toxicology. Its portfolio includes reagents for life science research and instruments. The company also offers a range of diagnostics products, including applications for allergy testing and urinalysis.

Dr. Joseph Sorge, CEO, chairman and founder of Stratagene and its largest stockholder, also reported that he has formed a new company to pursue molecular diagnostic applications. The new company will purchase for $6.6 million certain assets of Stratagene from Agilent immediately following the close of the transaction and will license from Agilent certain of their molecular diagnostic technologies.

Qiagen unit buys eGene

Qiagen (Venlo, the Netherlands), a provider of sample and assay technologies for research in life sciences, applied testing and molecular diagnostics, reported that its subsidiary Qiagen North American Holdings (Valencia, California) agreed to acquire eGene (Irvine, California). The company will offer 65 cents in cash and 0.0416 common shares of Qiagen stock per share of eGene stock, a deal value of about $34 million.

eGene, to be a subsidiary of Qiagen North American, has developed a multi-channel sample separation and analysis technology for nucleic acids that includes an affordable and robust instrument, software analysis package, and a selection of consumable cartridges specifically designed for specific applications in the molecular diagnostic and research markets. The HDA-GT12 genetic analyzer is a multi-capillary system which incorporates many capabilities into one platform, integrating automatic sample loading, separation, and data analysis.

Peer Schatz, Qiagen CEO said: “With the eGene system, we are adding a consumable and instrument line which provides quality control capabilities following the use of sample technologies as well as a readout system for our assay technologies in one platform. The eGene solutions leverage and seamlessly combine with Qiagen sample and assay technologies and create novel and highly attractive molecular diagnostics solutions to our customers in research in clinical research, applied testing and molecular diagnostics.”

Invitrogen sells off BioReliance

In a spin-off move in the sector, Invitrogen (Carlsbad, California), a provider of life science technologies for disease research and drug discovery, reported completing the sale of its BioReliance (Rockville, Maryland) business to Avista Capital Partners for $210 million.

Invitrogen acquired BioReliance in 2004 for $48 a share, giving it an entry into the biologic testing marketplace, and the decision to sell the company comes as somewhat of a surprise.

Greg Lucier, CEO and chairman of Invitrogen. “This divestiture allows us to focus on our core platform of tools and technologies and to grow our position as the premier consumables company in the marketplace.”

BioReliance is a contract service organization that provides biological safety, testing, toxicology, viral manufacturing and laboratory animal diagnostic services.

NightHawk grows teleradiology

NightHawk Radiology Holdings (Coeur D’Alene, Idaho) reported acquiring The Radlinx Group (Irving, Texas), billing Radlinx as the third largest provider of teleradiology services in the country with doctors located solely in the U.S. NightHawk paid $53 million for Radlinx.

NightHawk said that the acquisition of Radlinx and its 303 hospitals expands its customer base to more than 1,300 hospitals, representing 24% of all U.S. hospitals and expands NightHawk’s presence in key areas of the U.S., including Texas, the second largest market in the U.S.

Dr. Paul Berger, NightHawk CEO and chairman, said that the purchase “significantly expands our core off-hours business, strengthens our partnerships with radiology groups to help grow our final interpretation and sub-specialty business and extends our capability of providing radiology solutions and improving patient care with such a strong presence of doctors located domestically.”

NightHawk noted that it purchased Teleradiology Diagnostic Service (Arcadia, California) in February, and, combined with that, the buy of Radlinx expands its position as a leader in providing radiology solutions across the U.S.

“The strategic acquisition of The Radlinx Group, with their doctors located across the U.S., should help alleviate concerns the industry may have about Medicare interpretations being performed outside the U.S.,” said Tim Mayleben, NightHawk’s executive VP and COO. “While we continue to capitalize on the efficiencies of our centralized approach to interpreting radiological procedures, we are also able to utilize our proprietary workflow to seamlessly distribute images to our U.S.-based doctors.”

NightHawk services medical groups 24/7 at more than 1,300 hospitals in the U.S. from facilities in the U.S., Australia and Switzerland.