Through The Fly's Eyes: Ventana Medical Systems

from Laurie Pasternack of Theflyonthewall.com











Ventana Offered Huge Premium by Roche

In a move that could complement its other recent acquisitions, Roche Holding AG (RHHBY) yesterday made a $75-a-share hostile bid for Ventana Medical Systems, Inc (VMSI). The $3 billion cash offer would allow Roche to gain a test Ventana developed to screen patients who could respond to the Swiss pharmaceutical giant's breast cancer medicine, Herceptin. The main goal of acquiring Ventana would be to "move closer toward delivering tools to select the right drugs for the right patients, rather than saving costs," Roche CEO Franz Humer told the Wall Street Journal.

Roche has already agreed to three other diagnostic acquisitions this year: The company agreed to buy CuraGen Corp's (CRGN) 454 Life Sciences in March for $140 million, allowing it to gain the company's DNA-mapping technology, and later agreed to acquire BioVeris Corp (BIOV) for $600 million and NimbleGen Systems for $272.5 million. The acquisition of BioVeris will add a screening technology that stimulates cells to emit light, while the NimbleGen acquisition would add more genetic tools for drug research.

Should an acquisition be seen as a sure thing? No, executives at Ventana said. Although Roche has made several friendly efforts to engage in "meaningful discussions" with Ventana's chairman and board concerning a transaction, Ventana has so far rebuffed Roche. The company advised shareholders in taking any action in response to the offer, but said the Board would review Roche's offer and make a recommendation within 10 days. What may make this particular offer different is that the $75-per-share offer was nearly 45% higher than Ventana's closing price of $51.74 yesterday.

In the event of an acquisition, Roche said it would operate Ventana as a separate unit within its diagnostics division, allowing it to retain its management team and employees as well as its headquarters in Arizona. This would be a similar agreement to the one Roche maintains with U.S. biotech company Genentech (DNA), which is majority-owned by Roche but is managed as an independent company.

Based on a potential acquisition, analysts believe that biotechnology companies Gen-Probe (GPRO), Luminex (LMNX) and Cepheid (CPHD) could be potential acquisition targets based on their technology platforms and product offerings.