LONDON - Roche Holdings AG, the Swiss pharmaceutical giant, said yesterday that it had agreed to buy Igen International Inc. of Gaithersburg for $1.26 billion - and then give nearly the whole company right back to Igen's shareholders.
Roche would come away from the deal with one major benefit: a perpetual license to use Igen's patented amino acid-based technology in its diagnostic tests without paying royalties. Roche already has about $370 million in annual revenue from products based on the technology.
But ownership of the patents and virtually all the rest of Igen's business would be spun off in a new company 100 percent owned by Igen's current shareholders. The new company would also get $155 million in working capital from Roche, plus $5 million a month in fees until a closing, expected to take place in four to six months.
The deal, which has been approved by the boards of both companies and is subject to approval by regulators and Igen shareholders, would settle a long legal battle between Igen and Roche over royalty payments and other facets of their licensing agreement. This year, Igen won a $505 million judgment against Roche; this month, an appeals court reduced the award to about $19 million but gave Igen the right to cancel the license.
Analysts said Roche had little choice but to reach some kind of deal with Igen to preserve its access to the technology through 2018, when the patents expire.
The purchase price Roche agreed to pay, $47.25 a share, is a premium of more than 20 percent over Igen's closing price of $37.20 in regular trading yesterday. Counting the working capital payment and the court award, which Roche agreed to pay in yesterday's deal, the total cost to Roche would be about $1.4 billion, about 56 percent more than Igen's market capitalization at the market's close. Igen's stock was above $56 a share in after-hours trading.
Both Roche and Igen issued statements expressing satisfaction with the deal, which would end the litigation by the companies, including withdrawal of pending appeals, and would leave Igen's current management in charge of the as-yet-unnamed spinoff company.
The terms of the deal shocked some Roche investors, who expected the company to buy Igen outright for roughly its market capitalization. "Roche blinked," said one New York money manager.
Roche did not see it that way. "I think we got a fair deal," Franz B. Humer, the company's chairman and chief executive, said in a telephone interview. The deal allows Roche to resolve "this legally and contractually highly complex dispute in the best interest of both companies and shareholders," Humer said.
Though the deal allows Igen to license the technology to other companies as well, Humer said it took Roche eight years to develop the ability to manufacture and market products based on it, and "it's not as if somebody tomorrow can come on to the market."
The deal would also give Igen the right to enter with its own products some markets that had been off limits before, like hospitals and blood banks, while Roche would no longer have to share improvements it made to Igen's technology.