Swiss company to buy BioVeris

Roche plans to use Gaithersburg biotech to expand diagnostics

April 05, 2007|By Tricia Bishop | Tricia Bishop,Sun reporter

Swiss pharmaceutical giant Roche has agreed to acquire BioVeris Corp., a Gaithersburg biotechnology business, for $600 million, the companies announced yesterday.

Roche said the acquisition would help expand its diagnostics division by adding BioVeris' "electroluminescence" - or ECL - technology, which uses light emissions to help discover new drugs, monitor and diagnose diseases and identify bacteria or toxins in the environment.

"In comparison with other detection technologies, ECL offers distinct advantages such as enhanced sensitivity, short incubation times and broad measuring ranges," Severin Schawn, chief executive of Roche Diagnostics, said in a statement.

BioVeris' shares, which were in the $3 range a year ago, closed up $7.06 to $20.66 yesterday. The 52 percent price increase made it the most advanced stock on the Nasdaq. The deal, at $21.50 per share, is a 58 percent increase over Tuesday's BioVeris closing price of $13.60.

It's the latest in a string of mergers and acquisitions pairing big pharmaceutical companies in need of new products and technologies with smaller businesses developing them. On Monday, Roche said it would buy California's Therapeutic Human Polyclonals Inc. for $56.5 million. And last month, its diagnostic division announced plans to pay $140 million for Connecticut's 454 Life Sciences.

Such acquisitions are a staple for Roche Diagnostics, according to a January report by analyst Arun AK of Frost & Sullivan.

"The company is well-positioned in the market and constantly milking the innovative companies in order to stay ahead of the competition," AK wrote.

The BioVeris transaction is expected to close in the third quarter of this year. Both companies' boards of directors have approved the deal, though it's still contingent upon the support of BioVeris shareholders and certain regulatory approvals. Chief executive Samuel J. Wohlstadter, the company's majority shareholder with nearly 20 percent of the stock, has promised to vote in favor of the acquisition.

And he already has experience selling to Roche.

In 2003, Wohlstadter and colleagues sold parts of Gaithersburg-based IGEN Integrated Healthcare to Roche for about $1.3 billion after years of patent litigation.

The sale settled the legal dispute and BioVeris was created from there, with the understanding the Roche would not use IGEN's ECL technology in certain areas reserved for BioVeris.

But the Swiss company allegedly used the technology in unapproved ways, according to BioVeris, which complained of "out-of-field sales," for which it received a back payment of $2.8 million in January. This latest sale will resolve those accusations and put the ECL technology solidly in Roche's hands.

BioVeris, which has about 200 employees, has reported net losses ranging from $27.9 million to $93.3 million for all of its past fiscal years. Its revenue hit an annual high in fiscal year 2005 at $26.3 million.

"Given the history between the parties and the scope of Roche's existing diagnostics business, Roche is the natural buyer for BioVeris," Wohlstadter said in a statement, adding that he's "pleased that this transaction will deliver substantial value to BioVeris shareholders."

Wohlstadter plans to again spin out companies after the sale, purchasing some assets and rights to certain intellectual property having to do with vaccine research and some aspects of ECL.

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