A Diagnostics & Imaging Week

Quest Diagnostics (Lyndhurst, New Jersey), one of the nation's largest providers of diagnostic testing, information and services, said it will acquire infectious disease testing provider Focus Diagnostics (Herndon, Virginia) in a cash transaction valued at about $185 million.

Quest said the acquisition of privately held Focus will add annual revenues of about $65 million.

Focus Diagnostics is a portfolio company of private equity firms DLJ Merchant Banking and The Sprout Group. Excluded from the transaction is Focus Bio-Inova, Focus Diagnostics' pharmaceutical testing operation.

The transaction, which 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."

The company said the acquisition is not expected to have a material impact on its 2006 earnings per share, excluding anticipated charges associated with the transaction.

Focus Diagnostics offers its reference testing services to large academic medical centers, hospitals and commercial laboratories. The company has also established a reputation for being the first to introduce new assays to the market, including diagnostic tests for Lyme disease, West Nile virus and SARS. In addition, Focus develops diagnostic products, such as HerpeSelec for Herpes Simplex Virus.

In other dealmaking news:

Inverness Medical Innovations (IMI; Waltham, Massachusetts) reported that it will acquire 49% of the capital stock of TechLab (Blacksburg, Virginia) a privately held diagnostics company, in exchange for 303,417 shares of Inverness common stock. TechLab develops rapid noninvasive intestinal diagnostics tests in the areas of intestinal inflammation, antibiotic as sociated diarrhea and parasitology.

The company said the transaction provides IMI, whose Wampole subsidiary already distributes TechLab's products in the U.S., with exclusive global distribution rights to TechLab's line of enteric disease testing products, as well as future human medical diagnostic products, as Techlab's existing global distribution relationships lapse.

These products include both ELISA and rapid format assays for the detection of C. difficile toxins A&B.

TechLab has developed and now, with access to Inverness' intellectual property, expects to begin selling the only FDA-cleared rapid membrane assay to detect fecal lactoferrin, a test that can help differentiate bacterial enteric infections and inflammatory bowel diseases from maladies such as irritable bowel syndrome and diverticulitis.

TechLab will continue to operate with the current executive management team of Tracy Wilkins, PhD, as president, David Lyerly, PhD, as vice president of research and development and David Wall as vice president of operations.

The agreement includes an option for IMI to acquire any shares of TechLab offered for sale to third parties by the existing shareholders.

• Source Medical Solutions (Birmingham, Alabama), a provider of outpatient information management solutions, reported that it has acquired Prescient Healthcare Systems (Branford, Connecticut), a provider of business process solutions for ambulatory surgery centers.

"The combination of Source Medical's market leadership and Prescient's product responsiveness culminates an eighteen-month process that has focused all of Source Medical's resources on meeting the challenges of the rapidly growing outpatient market," said George McTavish, CEO of Source Medical.

"One of the factors we considered carefully prior to agreeing to the acquisition was the extensive changes made at Source Medical over the past 18 months. We were watching the new team at Source Medical carefully and were very excited about the potential of a combined organization," said Scott Palmer, CEO of Prescient.

Beginning in 4Q04, Source Medical built a new senior management team and complemented its middle management ranks with extensive staff additions and promotions.

Recently, Source finalized a round of private equity financing as well as a new credit facility to enable the company to execute its business strategy and further support its customers. This week, Source Medical retired its remaining indebtedness to HealthSouth (also Birmingham), which initially funded the company's growth.

McTavish said Prescient founder Palmer, professional services director Ron Pelletier, director of development Tim Spencer and the rest of the Prescient team will join Source Medical. He also noted that the company will maintain Prescient's offices in Branford.

Source Medical provides outpatient information solutions and services for ambulatory surgery centers, rehabilitation clinics and diagnostic imaging centers nationwide.

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