TRENDS AND PERSPECTIVES
Digene Corp. (Gaithersburg, MD) is poised to be acquired by Qiagen (Venlo, The Netherlands) in late summer in a merger agreement that both companies hope will create a strong global presence that capitalizes on each organization’s unique strengths.
Doug White, senior vice president, commercial operations, Americas and Asia-Pacific at Digene comments, “We are very excited by the opportunities we see as the companies come together. It is very complementary. Having a strong global organization to enhance what we have in North America will create multiple opportunities for expansion.”
The companies signed the merger agreement on June 3 for $1.6 billion. If the deal is successful, Digene stockholders will choose to receive either $61.25 cash for each Digene share or 3.545 shares of Qiagen stock, subject to 55% cash and 45% stock maxi-mums for Digene holdings. Qiagen shareholders will own more than three-quarters of combined company stock on a fully diluted basis.
While the holding company will remain in The Netherlands, the new company’s headquarters after the deal will be in Gaithersburg, MD. Digene is barely more than four miles from Qiagen’s offices in Germantown, MD, which is a bonus—both companies say—for employees, emphasizing that the merger is about growth and opportunity, rather than cost-effectiveness and streamlining, and will be a net positive for most employees.
Chandra Krishnan, global marketing director at Qiagen, acknowledges that, “any kind of a merger like this is a time of change.” He believes the upside is that this merger will make Qiagen a leading molecular diagnostic player and will lead to increased opportunity for employees.
Jeff Ellis at Crosstree Capital comments, “The two companies are very close to each other geographically, so one would think there would be a lot of savings in redundancies there,” adding that, “Digene’s strength is sales and marketing. They haven’t been known as a huge R&D powerhouse, but Qiagen is. They complement each other nicely and I don’t see a lot of overlap in those areas or a need to scale back the workforce. For general and administrative duties, however, I would imagine there could be some cuts there.”
The proximity of the two companies as well as their history together might indeed make for a smooth transition. Stock prices seem to be holding steady as well, which can indicate shareholder confidence, says Shelley Ducker, associate director, corporate communications, at Digene.
While both companies endeavor to become market and technology leaders in molecular diagnostics, the opportunity to diversify Qiagen’s portfolio and increase its presence in applied testing, pharmaceuticals, and diagnostics is another major goal of the deal, according to Krishnan. To that end, Qiagen is especially interested in Digene’s HPV-targeted molecular diagnostic test. “HPV is a market all by itself—women’s health," he says.
According to Ellis, the move makes sense. “Qiagen historically has been a tools company that hasn’t had a lot of FDA-regulated diagnostic products, but they have a lot of expertise to get them into FDA-approved products. With the acquisition of Digene, they will have significant presence in the women’s health market, allowing Qiagen to accelerate adoption of the HPV assay in its pipeline.”
He continues, “Digene is the 800-pound gorilla in HPV, so Qiagen will gain a great, well-recognized brand plus Digene’s sales and marketing expertise. Digene’s HPV test does have room for improvement. Roche, Third Wave, and others have similar tests coming out that they claim are better than what Digene has.”
Ellis says that since Digene has limited assays with HPV as the predominant revenue generator, the company does not have a strong pipeline in R&D, but they do have tremendous sales and marketing, a reputable brand, and a strong customer base. “Qiagen can leverage Digene’s well-established sales channel to put its HPV assay in the running with Roche and other emerging players,” according to Ellis.
Digene’s White agrees. “We’ve been very successful in North America with our flagship product for HPV screening and have had some luck in Europe. We have needed, for quite a while, the critical mass to expand globally. Qiagen is a global organization with a large footprint in Europe, Asia, and in other markets where we have a very small footprint.”
