Diagnostics & Imaging Week Executive Editor

Cytyc (Marlborough, Massachusetts), a provider of surgical and diagnostic products targeting women’s health and cancer diagnostics, has agreed to acquire Adiana (Redwood City, California), a private company that has developed a non-incisional alternative to tubal ligation for permanent contraception for women.

Cytyc will make an initial up-front $60 million cash payment, plus milestone payments — including a payment when Adiana’s system wins FDA approval — and a four-year earn-out based on sales growth.

Cytyc said the acquisition will be funded out of existing cash and its existing credit facility. According to the terms of the agreement, total payments, including the four-year earn-out, will not exceed $215 million.

In a conference call yesterday to discuss the deal, Patrick Sullivan, Cytyc president/CEO and chairman, said that the purchase offers “an outstanding growth opportunity for the company” by providing “the best-in-class hysteroscopic permanent birth control alternative for women.”

He noted that besides providing large opportunities for stand-alone tubal ligation procedures, Adiana’s system offers synergies with Cytyc’s NovaSure system which is used for endometrial ablation, since women selecting the NovaSure procedure require a follow-on contraceptive procedure as well.

Sullivan explained that Adiana’s ligation system involves the placement of what it terms a “matrix,” made of polymer material, in the woman’s fallopian tubes via catheter insertion, directed by hysteroscope. After the catheter is correctly placed, 2 watts of radio frequency energy are delivered to the tissue to create a lesion. Subsequently, as the lesion heals, the fallopian tubes are blocked.

Sullivan emphasized the procedure’s ease of use, “comparable to the Novasure product,” and that it is also compatible with all other endometrial ablation procedures.

He noted that reimbursement is “already in place.”

Adiana’s product, according to Cytyc, is an alternative for the roughly 700,000 women who have tubal ligations each year. And Cytyc estimates that market opportunity for the product in the U.S. alone as in excess of $1 billion.

Adiana’s tubal ligation product is not yet FDA-approved, but Sulllivan predicted its regulatory submission to the agency in the second quarter of this year, with “possible approval by the end of the year.”

Due to this transaction, Cytyc is narrowing ‘07 diluted EPS guidance to the range of $1.30 - $1.35. Because of what it termed “significant sales synergies,” Cytyc expects the business to break even in terms of EPS within three quarters after receiving FDA approval.

MDS (Toronto) reported concluding the sale of its Canadian laboratory services business, MDS Diagnostic Services, to Borealis Infrastructure Management (Toronto) in a deal valued at CAD$1.325 billion. The deal was first unveiled late last year.

From the CAD $1325 billion, MDS said it will realize net proceeds of about CAD$1.052 billion, made up of $977 million in cash and $75 million in an unconditional note, payable in March 2009.

The laboratory services business will continue to operate under the name MDS Diagnostics Services until later this year.

The MDS board has authorized a CAD$500 million one-time share buyback of its common shares through a Dutch auction-type substantial issuer bid. The company said it expects to repurchase up to 16.5% of the common shares in the range of CAD $21 to $23.50 a share through the issuer bid which will expire on April 5, 2007.

“With this transaction, we have closed a chapter in our company’s history by completing our transition to a global life sciences company,” said Stephen DeFalco, president/CEO of MDS.

“With our recently announced plans to acquire Molecular Devices Corporation [Sunnyvale, California], we have begun a new and exciting chapter focused on growth.” MDS reported plans to acquire Molecular Devices for $615 million late last month.

MDS develops products and services used to develop drugs and diagnostics. It said that with these deals it now will be “a pure play, global life sciences company,” generating 95% of its revenues from global markets in its three business units, MDS Pharma Services, MDS Nordion, and MDS Sciex.

In other dealmaking activity:

Rosetta Biosoftware (Seattle) reported that the University of California, Los Angeles licensed its Resolver system to support research at the UCLA Jonsson Comprehensive Cancer Center (JCCC). Financial terms of the licensing were not disclosed.

UCLA’s JCCC is designated by the National Cancer Institute as a comprehensive treatment facility whose physicians and scientists develop new cancer therapies, including the breast cancer drug, Herceptin.

The Resolver system — a high-capacity data storage, retrieval, and analysis solution for gene expression data — will be used as a gene expression analysis framework to investigate potential new therapies.

“The Resolver system will be an important asset to our research because of its data management and analysis capabilities for gene expression profiling,” said Richard Finn, MD, a member of the JCCC Signal Transduction and Therapeutics Program Area.

UCLA’s Jonsson Comprehensive Cancer Center comprises more than 240 researchers and clinicians engaged in disease research, prevention, detection, control, treatment and education.