Medical Device Daily

Roche (Basel, Switzerland) has signed a merger agreement to acquire 454 Life Sciences (Branford, Connecticut), a majority owned subsidiary of CuraGen (New Haven, Connecticut), for up to $154.9 million in cash.

Of this amount Roche will pay $140 million in cash, and up to about $14.9 million will be received from the exercise of stock options issued and outstanding prior to the acquisition.

Of the $140 million from Roche, $25 million will be placed in escrow for a period of 15 months. On a fully diluted basis, presuming exercise of all outstanding stock options, CuraGen expects to receive about $85 million before fees and expenses, of which about $14 million will be held in escrow.

"We are pleased to announce the successful implementation of this strategic initiative regarding 454 Life Sciences, which allows us to gain liquidity on our investment and to extend our runway to bring our oncology products to market," said Frank Armstrong, MD, president/CEO of CuraGen during a conference call on the deal.

"Already in 2007 we have strengthened our balance sheet by paying off our outstanding 2007 convertible debt of $66.2 million and we are now monetizing our investment in 454 Life Sciences. During the remainder of 2007, Armstrong said CuraGen will continue to generate important clinical trial results on velafermin, belinostat, and CR011-vcMMAE, that he said he believes "will enable us to advance one or more of these products into Phase III development by 2008."

Armstrong said that this infusion of capital would give the company a runway "of more than two-year's cash for developing our late-stage products."

CuraGen established 454 Life Sciences as a majority owned subsidiary in 2000 with the mission of developing next-generation sequencing technology. 454 Life Sciences and Roche signed a research and marketing collaboration in May 2005 that extends until Sept. 30, 2010, under which Roche Diagnostics has been acting as the exclusive worldwide distributor of the Genome Sequencer systems and associated reagents to all markets with the exception of regulated diagnostics.

454 was established for a total of about $36 million, and Armstrong said that with this transaction, "454 has delivered a considerable return to CuraGen. We are very pleased with this transaction and the approximately $85 million return on the $36 million investment we originally made in 454."

Through this acquisition, Roche Diagnostics (Mannheim, Germany), a Roche subsidiary, will now obtain access to 454 Life Sciences' future generations of sequencing products and the use of 454 Sequencing in regulated diagnostic applications.

Roche said it plans to maintain the 454 Life Sciences facility in Branford, Connecticut with its 167 employees as a fully integrated part of the Roche Diagnostics organization.

This transaction is expected to close in the 2Q07; approval by CuraGen or Roche shareholders is not required.

"Now, as part of Roche Diagnostics, 454 will be able to further develop their product offerings," Armstrong concluded. "We remain excited about the future prospects of 454 technology, but realize that the sequencing space is competitive and requires R&D investment to be successful and build a business. We believe that Roche is the right company to foster 454's goals."