Originally Published IVD Technology
September 2003
INDUSTRY NEWS
Roche acquires Igen to maintain technology access |
In order to retain access to an essential diagnostic technology, Roche (Basel, Switzerland) has acquired
Igen International Inc. (Gaithersburg, MD). This acquisition has been estimated to be worth about $1.4 billion.
Under the terms of the agreement, which has been approved by the boards of directors of both companies, Roche will pay Igen shareholders $47.25 per share to purchase all of Igen’s outstanding stock, totaling about $1.26 billion. In addition, for each share they own, Igen shareholders will receive one share of a newly formed public company that will be spun off from Igen and will be wholly owned by Igen shareholders. Roche will also provide this new company with $155 million in working capital.
“Through this acquisition, we have been able to resolve this legally and contractually highly complex dispute in the best interests of both companies and their shareholders,” says Franz B. Humer, chairman and chief executive officer at Roche. “I am convinced that we have achieved a clear win-win situation for all parties involved. Putting this long period of uncertainty to an end will allow both Roche and the new spin-off company to fully focus on their respective businesses and to further develop them independently of each other.”
Through this deal, Roche will secure new nonexclusive, fully paid-up worldwide and perpetual rights to Igen’s electrochemiluminescence (ECL) technology. Securing the rights to this technology will allow Roche to continue to commercialize the ECL technology, such as in its Elecsys product line. Maintaining the rights to this technology is particularly important to Roche and its diagnostics business. Roche reported that in 2002, its ECL-based diagnostics business generated revenues of approximately $404 million, with a compound annual growth rate of approximately 23% during the last three years.
Upon completion of this agreement, the new company that will be spun off to Igen shareholders will own all of Igen’s patents, including the ECL technology, as well as the historic operations related to Igen’s biodefense, life science, industrial, and clinical testing businesses. This new company will be named prior to closing the transaction and will be run by Igen’s current management team. The company is also expected to be listed on the NASDAQ stock market after the completion of the acquisition and the spin-off.
“We are extremely pleased to have reached a definite agreement with Roche that delivers significant immediate value to our shareholders as well as the opportunity to create additional value through ownership of a well-positioned new growth company,” said Samuel J. Wohlstadter, chairman and chief executive officer at Igen. “The new company will have proven technology, businesses in many of the highest-growth areas in diagnostics, and the opportunity to establish strategic partnerships with a wide range of companies in the global marketplace.”
Also part of the deal, Roche will pay Igen $18.6 million in compensatory damages as ruled by the U.S. Court of Appeals for the Fourth Circuit. Roche will also pay the royalties owed to Igen for the quarter ended June 30, 2003. In addition, while there will be no further royalties owed to Igen, Roche will pay a fixed fee of $5 million per month to Igen for the use of the ECL technology until the transaction closes.
This agreement came about following a ruling by the Fourth Circuit Court of Appeals in a lawsuit that began in 1997 when Igen sued Boehringer Mannheim for multiple breaches of a license agreement relating to Igen’s ECL technology. (Roche inherited this case after it acquired Boehringer Mannheim in 1998.) While the appeals court’s ruling dismissed damages of $486.8 million previously awarded to Igen by the jury of a District Court of Maryland, the court affirmed Igen’s right to terminate the license agreement between the companies.
Industry analysts believe this acquisition could result in new products entering the market, as well as increased competition in the industry.
“Igen is now free to license its technology to any other company that might want to use it. So from that perspective, somebody like an Abbott that lost market share to Roche, which is the case, might be interested in licensing it,” says John M. Putnam, senior managing director at Belmont Harbor Capital (Chicago). “Other companies that might want to use the technology for other applications could also come in and do that as well. So there might be some product expansions or some new products from what’s existed before. As for Roche, they’re possibly going to encounter some competition that they didn’t have before.”
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