Diagnostics & Imaging Week
And D&IW

Big consolidations in the diagnostics sector continued this past week with Qiagen (Venlo, the Netherlands), a maker of genetic testing equipment, reporting over the weekend that it will acquire Digene (Gaithersburg, Maryland) and Inverness Medical Innovations continuing its drive to become what might be called a conglomerate with still another acquisition (see adjacent story).

Qiagen will buy Digene for $1.6 billion in cash and stock, to expand into testing for cervical cancer and sexually transmitted diseases. The deal values Digene shares at $61.25, a 37% premium to its closing price on the NASDAQ on Friday.

Digene shareholders may elect to receive for each Digene share either $61.25 in cash or 3.545 shares of Qiagne stock, subject to pro-ration so that the total consideration issued for Digene stock consists of 55% cash and 45% Qiagen stock.

Qiagen shareholders will own about 78% of the combined company and Digene shareholders will own about 22%.

Qiagen, one of the world’s largest providers of molecular diagnostics products is acquiring Digene, whose flagship product is a test for the detection of human papillomavirus (HPV), the cause of essentially all cervical cancers after a decade long collaboration between the two companies.

The Centers for Disease Control and Prevention (Atlanta; CDC) estimates that 6.2 million Americans acquire a new genital HPV infection every year and that 80% of women will be infected by the age of 50, the companies said.

The Digene HPV Test is the only test for HPV that is both FDA-approved and CE-marked.

“The strategic rationale for this transaction is compelling as it combines Qiagen’s leading technology portfolio and our breadth of molecular diagnostic tests with Digene’s leadership in what is seen as the fastest-growing segment of molecular diagnostics,” said Peer Schatz, CEO of Qiagen, during a conference call discussing the merger. “The joint franchises link virology with oncology, thereby creating an exceptional platform to add next-generation and high-value molecular diagnostic products and strategically position the company for future growth. Schatz noted that “currrent estimates predict a global potential market of more than $1 billion for HPV testing.”

“We are pleased to be able to build on the successful partnership we have had with Qiagen for more than a decade,” said Daryl Faulkner, president/CEO of Digene. “We have collaborated on various projects, such as our current Rapid Capture system, which Qiagen co-developed and manufactures. By accelerating this existing and productive working relationship, we anticipate future growth opportunities and have already begun to develop new products.”

Qiagen expects the acquisition to contribute revenue of $58 million to $60 million in the fourth quarter and $260 million to $270 million for the full year 2008 and the combined company will have more than 2,500 employees worldwide.

On an adjusted basis excluding one-time charges, integration and restructuring costs and other items, Qiagen said the acquisition is expected to dilute Qiagen’s adjusted earnings by 3 cents to 4 cents per share in the fourth quarter. It is anticipated that the transaction, slated to close in August or September, will boost Qiagen’s adjusted earnings in 2008 by 2 cents to 4 cents per share.

In connection with the transaction, Goldman, Sachs & Co. is acting as exclusive financial adviser to Qiagen, and Mintz, Levin, Cohn, Ferris, Glovsky and Popeo, P.C., De Brauw Blackstone Westbroek, and Freshfields Bruckhaus Deringer are legal counsel. JP Morgan is acting as exclusive financial adviser to Digene, and Ballard, Spahr, Andrews & Ingersoll are legal counsel.

In other dealmaking

• Enzo Biochem (New York) reported that its subsidiary, Enzo Life Sciences, has agreed to acquire Axxora Life Sciences (San Diego), a private manufacturer of life science research products, for about $16.3 million in cash.

Upon completion of the acquisition, Axxora will become a wholly owned subsidiary of Enzo Life Sciences and, according to Enzo will greatly expand its life sciences product development, production and marketing capabilities.

Axxora had revenues of about $16 million and 60 employees worldwide in 2006. It has wholly-owned subsidiaries in the U.S., Switzerland, Germany and the UK, as well as branch offices and distributors located in other major markets.

Enzo Biochem is engaged in the development of healthcare products based on molecular biology and genetic engineering techniques, and in providing diagnostic services to the medical community.

• Quest Diagnostics (Lyndhurst, New Jersey), a provider of diagnostic testing, reported that it plans to complete its previously disclosed $2 billion acquisition of AmeriPath (Palm Beach Gardens, Florida) today. The waiting period under the Hart-Scott-Rodino Antitrust Improvements Act expired on Tuesday.

The deal value, first disclosed in April, included roughly $770 million in debt.

AmeriPath is a national provider of physician-based anatomic pathology, dermatopathology and molecular diagnostic services to physicians, hospitals, clinical laboratories and surgery centers.

• Quest Diagnostics (Lyndhurst, New Jersey), one of the nation’s largest providers of diagnostics testing, information and services, reported the determination of pricing in connection with its cash tender offer and consent solicitation for any and all of the outstanding $350 million principal amount 10-1/2% senior subordinated notes due 2013 of AmeriPath (Palm Beach Gardens, Florida), which Quest is acquiring for $2 billion.

The total consideration for each $1,000 principal amount of notes validly tendered and not withdrawn at or prior to the consent deadline is $1,088.58. This includes a consent payment of $30 per $1,000 principal amount of the notes, which will be payable only in respect of the Notes purchased that were validly tendered and not withdrawn on or prior to the consent deadline, which was June 4.

In addition, Quest reported that about $348 million of outstanding notes, or about 99.4% of the aggregate principal amount of notes outstanding, had been validly tendered and not withdrawn at or prior to the consent deadline.