Diagnostics & Imaging Week Associate
Home Diagnostics (HD; Ft. Lauderdale, Florida) reported that it has registered for an initial public offering (IPO) of up to $115 million in common stock, according to a filing with the Securities and Exchange Commission.
Founded in 1985, HD makes blood glucose monitoring systems and disposable supplies for diabetics.
Details about the specific number of shares to be offered or an estimated price range for the IPO were not disclosed in the filing.
The company said it intends to use the net proceeds from the IPO to redeem all of its outstanding preferred stock, to purchase manufacturing equipment for new product development, to repay debt and for general corporate purposes.
Risk factors for the company include its acknowledgement that the market for blood glucose monitoring devices is intensely competitive, plus "subject to rapid change and significantly affected by new product introductions."
The company noted that it competes directly with several major players, among them Bayer Diagnostics (Tarrytown, New York); BD (Franklin Lakes, New Jersey); LifeScan (Milpitas, California), a division of Johnson & Johnson (New Brunswick, New Jersey); the MediSense (Bedford, Massachusetts) and TheraSense (Alameda, California) subsidiaries of Abbott Laboratories (Abbott Park, Illinois); and Roche Diagnostics (Indianapolis).
The company said it may also become ensnared in patent infringement litigation.
In April 2005, the company said it paid $5 million to settle a claim by an undisclosed competitor that one of its products infringed on one of the competitor's patents. In February 2004, Roche Diagnostics filed suit against the company alleging that HD's TrueTrack Smart system infringes claims in two Roche patents.
The company also noted that it lacked material controls over its financial reporting. This control deficiency resulted in a restatement of the company's 2002, 2003 and 2004 consolidated financial statements
Additionally, the company said that in the most recent year ended Dec. 31, it derived nearly 25.1% of its total net sales from two customers, McKesson (San Francisco) and Walgreen (Deerfield, Illinois. It noted that the loss of either of these customers could have a "material adverse effect" on its financial condition and results of operations.
The company markets its products through distribution channels in two ways, under its own HD brands, including SideKick, TrueTrack Smart System, TrackEASE Smart System and Prestige IQ, and in a co-branded format through which its customers market its products under their brands alongside HD brands.
As of March 31, the company said it employed 475 people worldwide, about 232 were engaged in manufacturing, 49 in R&D, 103 in sales, marketing and distribution and 91 in general and administrative activities.
In other financing news: Gen-Probe (San Diego) has licensed from the University of Michigan (Ann Arbor) exclusive worldwide rights to develop diagnostic tests for recently discovered genetic translocations that have been shown in preliminary studies to be highly specific for prostate cancer tissue.
Gen-Probe will pay the university an up-front license fee of $500,000, recorded as R&D expense in the second quarter. Gen-Probe also will pay royalties on any eventual product sales, as well as development milestones.
In addition, Gen-Probe will fund research at Michigan State over the next five years to discover other potential prostate cancer translocations.
A translocation is the fusion of two pieces of DNA in an aberrant fashion. In the October 28, 2005, issue of the peer-reviewed journal Science, researchers from Michigan, in collaboration with scientists from Brigham and Women's Hospital, a teaching affiliate of Harvard Medical School (both Boston), published early-stage research that indicated that 23 of 29 cancerous prostate samples contained the newly discovered translocations.
Researchers who have since tested approximately 300 samples at four laboratories have confirmed that between 60% and 80% of cancerous prostate tissues contain the translocations, but have not found the translocations in healthy prostate tissue.
"This discovery could prove to be one of the most exciting breakthroughs in prostate cancer diagnostics to date," said Larry Mimms, PhD, Gen-Probe's executive vice president for R&D "By combining our proprietary technology platform with innovative markers from DiagnoCure, Corixa, the Center for Prostate Disease Research and now the University of Michigan, we believe we have amassed one of the most exciting pipelines in prostate cancer diagnostics."