A Diagnostics & Imaging Week

Hologic (Bedford, Massachusetts), a provider of diagnostic and digital imaging systems directed towards women's health, reported that it has agreed to acquire Suros Surgical Systems (Indianapolis), a developer of devices used for minimally invasive biopsy and tissue excision for $240 million, plus a two-year earn-out. The transaction will be structured as a merger of a Hologic acquisition subsidiary into Suros Surgical, Suros becoming a wholly owned subsidiary of Hologic.

The closing consideration will consist of $132 million in cash and an additional $108 million payable, at the election of Hologic, in cash, shares of Hologic common stock or a combination thereof. The earn-out will be payable in two annual cash installments equal to the incremental revenue growth in Suros Surgical's business in the two years following the closing.

The transaction is expected to close by the end of the second calendar quarter, subject to customary closing conditions.

Suros manufactures minimally invasive surgical technologies focused on breast biopsy and tissue removal. Suros Surgical's Automated Tissue Excision and Collection (ATEC) line of products, include percutaneous, automatic Vacuum-assisted breast biopsy systems, ancillary breast biopsy devices and biopsy site markers.

In addition to more conventional image guidance compatibility, the ATEC system, according to Suros, "has become the market leader in MRI-guided breast biopsy technology as well."

Jim Pearson, president and CEO of Suros. "The three-year partnership we have had with Hologic has laid solid groundwork for aligning our two companies. We believe our customers and employees will see significant benefits resulting from the combined efforts of two dynamic organizations.

Jack Cumming, Hologic's CEO and chairman, said, "Biopsy is the most widely accepted method for determining the presence or absence of cancer following detection of a breast abnormality. An estimated 1.8 million biopsies were performed last year in the United States, of which approximately 80% revealed benign lesions. . . . This acquisition should further strengthen our capabilities within women's healthcare by enabling our sales force to offer customers a comprehensive portfolio of product offerings in breast cancer detection."

Suros's revenue in calendar '05 was around $27.2 million, representing 71% growth over the previous year. Hologic said it expects sales related to this acquisition in '06 to be more than $40 million and for the transaction to be accretive to earnings in FY07.

Jim Pearson, president and CEO of Suros, billed the merger as "a natural fit. Our expertise in breast biopsy combined with Hologic's resources should further accelerate the adoption of our technology and ultimately benefit physicians and improve patient care."

Hologic's core business units are focused on osteoporosis assessment, mammography and breast biopsy, and mini C-arm and extremity MRI imaging for orthopedic applications.

Suros bills itself as the industry leader in commercially available MRI-guided vacuum assisted breast biopsy with its ATEC system.

Several Indiana-based venture capital groups participated in the early investment of Suros, including Periculum Capital, Rose Hulman Ventures, Twilight Ventures, and individual angel investors. Subsequent investors included River Cities Capital Funds of Cincinnati, Sightline Partners of Minneapolis and Morgan Stanley Venture Partners of New York. A total of $19 million has been raised by the company since 2000.

Hologic will release its second quarter FY06 operating results during a conference call April 25.

• Reflect Scientific (Mountain View, California), a manufacturer of laboratory equipment and related supplies, reported the integration of JMST Systems instrument product line into its Orem, Utah, manufacturing facility. Reflect's purchase of JMST was completed last week.

Reflect said it has begun the move of chemical detection instrumentation manufacturing from JMST in Colorado Springs, Colorado, to Orem, a move expected to lower the cost of goods and improve profitability of the former JMST product line. Full manufacturing integration is expected to be completed by May 19. Reflect said the acquisition is expected to "significantly increase" sales beyond JMST's historical levels. JMST reported prior-year revenues of about $480,000.

JMST is an OEM supplying leading biotech and pharmaceutical firms. The primary product line is comprised of optically based chemical detection instruments.

Tom Tait, vice president of Reflect, said, "The JMST products are part of a $2.6 billion market that has strong growth potential. With our extensive knowledge of the market and customer contacts, we believe that the JMST product line can significantly affect Reflect's earnings this year."

Company CEO Kim Boyce added, "In addition, we anticipate another smooth completion to the previously announced acquisition of the Cryomastor business in the near term."

Reflect provides products for the medical device, biotech and pharmaceutical and industries.