A Diagnostics & Imaging Week

Ventana Medical Systems (Tucson, Arizona) on Sunday reported that it will not increase the price offered under the Vision Systems (Melbourne, Australia) scheme of arrangement in an attempt to trump Cytyc's (Marlbough, Massachusetts) cash offer of $374M announced last Thursday.

Ventana also said it will "immediately" begin to file patent litigation against Vision Systems in U.S. federal court.

Cytyc, maker of the ThinPrep cervical cancer screening system, offered to pay what Cytyc called a "premium" for Vision Systems, a manufacturer of instruments and reagents used to detect cancer. The company's offer represented a 10.3% increase over Ventana's bid of A$2.13 per share (about $346 million).

In keeping with the terms of the merger implementation agreement with Vision, Ventana said it expected to "receive shortly" a notice from Vision providing it with a right to match the price offered by Cytyc in the takeover offer announced Sept. 14, Australian time. If it does not match the offer, Ventana expects the Vision board will terminate the merger agreement.

Ventana said it "reserves its right to take any other action, at any time, that it deems appropriate in connection with its transaction with Vision."

The company also said it intends to file suit against Vision to protect its intellectual property. Ventana had deferred filing this suit pending the outcome of the Vision scheme.

Ventana reaffirmed that its outlook for 2006 and 2007 remains unchanged excluding any charges associated with this transaction.

Cytyc said Monday it had lodged a bidder's statement for an all cash tender offer for the Australian company totaling A$497 million, or US$374 million.

Cytyc said the cash offer represents a "significant premium" for Vision Systems shareholders and is "substantially unconditional."

Cytyc said it was seeking "early dispatch" of the bidder's statement from Vision's board due to its "superior offer."

In the bidder's statement to be sent to Vision Systems shareholders, Cytyc said that its offer also: provides certainty of value today and quick payment to be made upon Vision Systems shareholders accepting the offer; is not subject to regulatory approval; and has no risk of antitrust issues because, unlike Ventana, Cytyc is not a direct competitor with Vision Systems.

Cytyc said its offer represents a "significant premium to the highest daily closing price of Vision Systems' shares at any time during the three years prior to the announcement of the Ventana proposal." Ventana's offer was first disclosed last month.

Patrick Sullivan, Cytyc's chairman, CEO/president, said, "Cytyc's offer represents superior value to Vision Systems shareholders and the combination of our two companies will generate an attractive return for Cytyc shareholders. In preparing our offer we have conducted extensive due diligence, particularly regarding the litigation initiated by Ventana against Vision Systems. We are completely satisfied that this litigation will not affect our resolve to complete the tender offer or its timing."

In connection with the transaction, Cytyc said it believes it will incur certain one-time charges, to be detailed at the close of the transaction. Excluding transaction-related expenses and transaction amortization, Morgan Stanley & Co. provided Cytyc with a financing commitment, which along with Cytyc's available cash and committed financing, will be used by Cytyc to finance this transaction, it said.

Cytyc's ThinPrep System also provides the platform from which the company launched its expansion into breast cancer risk assessment with the FirstCyte Breast Test.

Its MammoSite Radiation Therapy System is a single-use device for the treatment of breast cancer that positions radiation sources directly into the post-lumpectomy site to optimize radiation treatment delivery while minimizing damage to healthy tissue. Its NovaSure Impedance Controlled Endometrial Ablation System, or the NovaSure System, is an endometrial ablation device to treat menorrhagia, or excessive menstrual bleeding.

Sullivan said during a conference call on Thursday that Vision Systems is an "exciting growth company." He noted that the acquisition would give Cytyc a "very efficient way" to expand into the histology sectors, the study of tissue for diagnostic evaluations of cancer and infectious diseases.

Vision Systems operates two core business units: Vision Bio-Systems makes automated instruments and reagents for biopsy-based detection of cancer and infectious diseases in pathology laboratories worldwide. Products include the Bond-maX advanced staining system, the Peloris tissue processor, and Novocastra antibodies and biochemical reagents. The second business unit is Invetech, a global provider of research and development services for both internal and external clients, primarily in the international healthcare sector, the company said.