A Diagnostics & Imaging Week
Primedex Health Systems (Los Angeles) and Radiologix (Dallas) reported an agreement for Primedex to ac-quire Radiologix in a cash/stock deal of about $208 million, including debt.
Primedex said that the acquisition will make it the largest owner/operator of fixed-site diagnostic imaging centers in the U.S. with 80 centers in California, 32 centers in Maryland, 12 centers in New York and eight in other states.
Radiologix shareholders will receive 22,621,922 shares of Primedex stock and $42.95 million in cash. Based upon the July 6 closing price of Primedex stock of $1.75, each Radiologix shareholder would receive $1.84 for each Radiologix share, plus one share of Primedex common stock for a total consideration of $3.59.
Based upon the July 6 closing price of Primedex common stock of $1.75, Radiologix shareholders will own about 33% of the Primedex shares. The transaction is expected to close in the second half of the year.
The boards of both companies have approved the transaction, which is subject to Radiologix and Primedex shareholder approval and antitrust clearance. Contrarian Capital Management, the largest shareholder of Radiologix, has agreed to vote nearly 3.7 million of its Radiologix shares in favor of the merger, around 16.4% of the outstanding shares.
GE Healthcare Financial Services provided $405 million in senior debt financing, which includes a $45 million revolving credit facility available to Primedex at transaction close. The remaining $360 million will fund the cash purchase of Radiologix and refinance substantially all debt of the two companies.
Primedex will change its name to Radnet Inc., borrowing from the operating entity in which Primedex currently conducts operations, and Radnet will submit for American Stock Exchange listing.
Primedex said the acquisition enables it to expand its presence in California, give it a concentrated platform outside of California that it plans to grow, and also advance its strategies of "geographic clustering, exclusive capitation contracting and multi-modality product offerings" on a national scale.
The merged firm estimates more than $400 million of annual revenue and $11 million in synergies in a 12-month period following deal close.
Dr. Howard Berger, CEO and chairman of Primedex, said, "With truly complementary geographic operations and management systems, we are ideally positioned to strengthen what will be the leading provider in the fixed-center imaging services arena."
Sami Abbasi, CEO of Radiologix, will become vice chairman of Primedex.
For its fiscal year ended Oct. 31, 2005, Primedex and its subsidiaries performed 958,414 diagnostic imaging procedures. Radiologix owns and operates 70 diagnostic imaging centers in seven states.
The Endoscopy Division (Andover, Massachusetts) of Smith & Nephew (S&N; London) reported that it ac-quired privately held OsteoBiologics (OBI; San Antonio) for $72.3 million in cash.
OBI markets bioabsorbable bone graft substitutes (BGS) in Europe to repair cartilage defects in the knee, and offers the TruFit BGS Plugs in the U.S. as a bone void filler. S&N said that OBI's products add to its arthroscopy portfolio and will be sold through Smith & Nephew Endoscopy's global sales force.
Mike Frazzette, president of S&N Endoscopy, said that the addition of OBI's technology "will allow us to provide even more choices to surgeons when it comes to treating injuries within the joint."
OsteoBiologics' 2005 sales revenues were $3.3 million. S&N said the acquisition is expected to reduce its second-half 2006 earnings by $7 million and be "broadly neutral" in 2007.
OBI's primary product marketed in Europe, TruFit CB, is described as a one-step arthroscopic procedure for repairing bone and articular cartilage defects, often a result of traumatic injury or degenerative conditions found in conjunction with meniscal tears or ACL injuries.
"There is strong evidence that articular cartilage defects can lead to osteoarthritis," S&N said in a statement and that "less than 20% of cartilage defects in the knee are treated due to the lack of an efficacious and patient-friendly solution."
Joe Darling, vice president of marketing for S&N Endoscopy, said, "The availability of OBI's simple-to-use TruFit CB will allow these defects to be treated before they lead to additional damage within the joint. In addition, OBI is a powerful complement to our comprehensive knee repair product offering and further strengthens our arthroscopy portfolio."
The TruFit implants are manufactured with poly (D,L-lactide-co-glycolide) polymer, formed into a bi-layered cylindrical scaffold absorbed by the body within six to nine months.
S&N specializes in endoscopy, orthopedic reconstruction, orthopedic trauma and advanced wound management products.
In other dealmaking activity:
• Applied Biosystems Group (Foster City, Calif-ornia), a business of Applera (Norwalk, Connecticut), re-ported completing its acquisition of Agencourt Personal Genomics (APG; Beverly, Massachusetts), a developer of genetic analysis technologies, for about $120 million in cash. The deal was initially unveiled in late-May.
APG's parallel fluorescence sequencing by stepwise ligation technology is a high-throughput approach to DNA/RNA analysis. Applied Biosystems said it expects APG's technology to be complementary to its platforms and applicable to many genetic analysis applications, including de novo genome sequencing, medical sequencing, high throughput gene expression and high throughput genotyping.
The APG R&D team will continue to be based in Beverly and will join the Applied Biosystems' team reporting into the Molecular and Cell Biology Division of Applied Biosystems in Foster City.
APG was incorporated in January 2005 as a separate entity owned by Agencourt Bioscience. Since the acquisition of Agencourt Bioscience by Beckman Coulter (Fullerton, California) in May 2005, Beckman Coulter has owned 49% of APG, with 51% owned by other shareholders, including APG management.
• Bayer Diabetes Care (Tarrytown, New York), a member of the Bayer Group (Leverkusen, Germany), has ac-quired Metrika (Sunnyvale, California), manufacturer of the A1CNow+ device, a diabetes monitoring system. Fin-ancial details were not disclosed.
Employing single-use, disposable test cartridges, A1CNow+ is a pager-sized device, for use at home and with a healthcare provider, to monitor HbA1c (also known as glycated hemoglobin), a standard measure of blood sugar control. Sandra Peterson, president of Bayer Diabetes, said the addition of A1CNow+ "strengthens our portfolio to include a full spectrum of products for total diabetes diagnosis and management."
The HbA1c value is an index of mean blood glucose levels two to three months previously, with significant changes in the HbA1c levels due to blood sugar variability over the last 30 to 40 days being detectable. The newly released A1CNow+ provides access to HbA1c results in five minutes, via the integration of micro-optical technology and solid-state chemistry into a monitor in a three-step procedure using finger-stick or venous blood.
Bayer said that the Diabetes Control and Complications Trial and the UK Prospective Diabetes Study studies show that lower HbA1c values are associated with prevention of, or significant decreases in, the development of serious eye, kidney and nerve disease.
Bayer HealthCare Diabetes Care is a self-test diagnostic business selling in 100 countries.
• Quest Diagnostics (Lyndhurst, New Jersey), the nation's largest provider of diagnostic testing, information and services, said last week that it had completed the previously announced acquisition of Focus Diagnostics (Herndon, Virginia) in a cash transaction valued at some $185 million.
Focus Diagnostics is a leader in tests for infectious and immunologic diseases and has established a reputation for being first to introduce new assays to the market, including diagnostic tests for Lyme disease, West Nile virus and sudden acute respiratory syndrome. It also develops such diagnostic products as HerpeSelect for herpes simplex virus.
Focus is a portfolio company of private equity firms DLJ Merchant Banking and the Sprout Group. Excluded from the transaction is Focus Bio-Inova, Focus Diagnos-tics' pharmaceutical testing operation.
The transaction, which was initially reported in May and is expected to close sometime in 3Q06, is subject to regulatory review and other customary closing conditions. Additional terms of the transaction were not disclosed.
"Focus Diagnostics has been recognized worldwide for its leadership in infectious and immunologic diseases and its expertise in developing new diagnostics," said Surya Mohapatra, PhD, chairman and CEO of Quest. "[It] will further expand our capabilities and strengthen our position as the leading provider and developer of esoteric tests to hospitals and physicians."
Focus Diagnostics offers its reference testing services to large academic medical centers, hospitals and commercial laboratories.
The acquisition is not expected to have a material impact on Quest's 2006 earnings per share, excluding anticipated charges associated with the transaction.
• Reflect Scientific (Mountain View, California), a manufacturer of laboratory equipment and related supplies to the biotechnology, pharmaceutical and medical industries, reported closing of its acquisition of Cryomas-tor, a California company.
Principal terms of the merger required the company to pay an aggregate of $700,000 to the Cryomastor shareholders, pro rata; advance $300,000 for the operations of Cryomastor; assume and pay a $300,000 debt of Cryo-mastor owed for a U.S. patent that comprises its intellectual property within 90 days of the closing; and execute three-year employment agreements with Cryomastor's current directors and executive officers.
The company raised more than $1 million in a private offering of restricted common stock through a registered broker/dealer to accredited investors at $1 per share that was a condition of the closing of the merger.
Reflect said it anticipates an extension of the offering to July 31 to complete the maximum offering of $1.5 million.
As part of the completed merger, Reflect receives all rights to Cryomastor intellectual property, product and customer testing programs that the company has under way.
Cryomastor is a privately held company that was form-ed to provide low- and ultra low-temperature storage systems to the biotech, life science, hospitals, military, research and disease control centers industries.
• Cardinal Health (Dublin, Ohio) said it has reached an agreement to acquire five positron emission tomography (PET) radiopharmaceutical production facilities and manage a sixth site, in order to create a more efficient approach to the manufacture and distribution of PET radiopharmaceuticals.
Cardinal Health will acquire facilities in Newark, New Jersey; Dallas; Memphis, Tennessee; Birmingham, Alabama; and Columbus, Ohio, formerly owned by Regional Nuc-lear Pharmaceuticals (RNP; Birmingham, Alabama). A management agreement will be put in place at a sixth site in Jackson, Mississippi, which formerly was managed by RNP.
Through the agreement, Cardinal Health will gain ownership of five cyclotrons and related lab equipment to produce fluorodeoxyglucose (FDG), the primary radiopharmaceutical used in PET diagnostic imaging.
Financial terms of the agreement were not disclosed.
Cardinal Health has been the distributor of the FDG produced at these sites but, through the agreement, now will have complete control of the manufacturing process.
The company said it expects to provide additional investment to upgrade the facilities and improve the consistency of service provided to PET imaging centers in these six regions.
Cardinal Health owns and operates 15 other FDG production facilities located throughout the U.S. and more than 158 nuclear pharmacies, 80 of which distribute radiopharmaceuticals for PET imaging.
"We continue to look for new ways to create efficiencies in the healthcare supply chain and improve service for our customers," said Michael Mullin, vice president of nuclear manufacturing services for Cardinal Health. "This investment will enable a more streamlined approach to deliver the highest level of quality and service to the PET imaging centers supported by our nationwide network."
PET imaging is primarily used in the earlier diagnosis, staging and treatment monitoring of cancer, and the technology is expanding for use as a differential diagnosis of Alzheimer's disease and definitive cardiac assessment.
• Hologic (Bedford, Massachusetts) reported that the Federal Trade Commission FTC has closed its review of the company's pending acquisition of Suros Surgical Sys-tems (Indianapolis), a developer of devices used for minimally invasive biopsy and tissue excision. Closing of the deal unveiled in April, in which Hologic paid $24 million, plus a two-year earn-out remains subject to various conditions, including approval by Suros stockholders.