A Medical Device Daily

Primedex Health Systems (Los Angeles) and Radiologix (Dallas) reported an agreement for Primedex to acquire 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 Radio-logix, 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,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.

In other dealmaking activity:

• Bayer Diabetes Care (Tarrytown, New York), a member of the Bayer Group (Leverkusen, Germany), has acquired Metrika (Sunnyvale, California), manufacturer of the A1CNow+ device, a diabetes monitoring system. Financial 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.

• Covalent Group (Wayne, Pennsylvania), a clinical trials and patient disease registries manager, disclosed amended terms regarding the purchase of Remedium Oy (Helsinki, Finland), a private clinical research organization, first reported in March. With the amended terms, Covalent will not be required to secure financing to complete the purchase.

After an audit of Remedium's financial results for the years 2003-2005, the boards of both companies and the shareholders of Remedium agreed to the amended terms, including:

  • The $4 million fund raise required by Covalent as a condition to closing in the original combination agreement is no longer a condition precedent to closing.
  • Remedium shareholders will be required to recapitalize their company, prior to deal closing, with an additional contribution of EUR 1 million.
  • At closing, Remedium shareholders will receive $11 million of Covalent stock vs. the equivalent of $14 million under the prior agreement.
  • At closing, Remedium shareholders will receive $2.5 million in cash vs. $4 million under the prior agreement. On March 30, 2007, an additional $1.5 million will be paid to the Remedium shareholders.

Covalent expects that the combined company will continue to be listed on the Nasdaq after closing, expected by the end of the third quarter.

Kenneth Borow, MD, Covalent's president/CEO, said, “We believe that the overall trends that we are seeing for Covalent and Remedium are favorable.”

Covalent reports having drug/biologics development and trial experience across a variety of therapeutic areas such as cardiovascular, endocrinology/metabolism, diabetes, vaccines, infectious diseases, gene therapy, immunology, neurology, oncology, gastroenterology, dermatology, hepatology, women's health and respiratory medicine.