19 Jun NimbleGen to discontinue IPO after Roche's $272.5 million acquisition
Madison, Wis. – NimbleGen Systems, a manufacturer of gene chips for pharmaceutical research, will discontinue its work toward an initial public offering of stock following its acquisition by Roche, the Basel, Switzerland based pharmaceutical giant.
NimbleGen had sought to raise $75 million in the IPO, but under the terms of a definitive agreement announced by the two companies, Roche will acquire 100 percent of the privately held NimbleGen from shareholders for $272.5 million in U.S. dollars, enabling a more lucrative exit for investors.
The transaction is expected to close in the third quarter of 2007, subject to regulatory clearance and approval by NimbleGen shareholders. Since Roche is based in a foreign country, the regulatory review will involve the Department of Homeland Security.
Roche, perhaps best known for pharmaceutical products like Tamiflu and Valium, acquired NimbleGen to gain entry into genomics research, which it considers a high-growth global market of about $600 million.
Meanwhile, NimbleGen will have access to Roche’s worldwide sales and distribution network.
Dr. Stan Rose, CEO of NimbleGen, said Roche had contacted NimbleGen after it filed a registration statement for the IPO, but the two companies have had informal talks for several years. Some of those interactions centered on lower-level topics like technology collaborations, but the possibility of Roche acquiring NimbleGen was “intriguing,” he said.
According to Rose, joining Roche will accelerate and broaden NimbleGen’s opportunities in the high-density DNA microarray business, and do the same for new technologies focused on targeted DNA sequencing.
“This puts us in a position to reach our longer-terms goals more rapidly than if we had to build all of that infrastructure on our own,” Rose said.
NimbleGen, which reported $13.5 million in revenue last year, was spun out of the University of Wisconsin-Madison and has reached this point with the help of venture funding from firms like Baird Venture Partners and Venture Investors. The company pursued an IPO in part because it has raised tens of millions in venture investments, and it needed an exit strategy to provide a return on that investment.
The $272 million acquisition price dwarfs what the company was hoping to raise as part of an IPO. Pete Shagory, a partner at Baird Venture Partners and a member of NimbleGen’s Board of Directors, was not surprised that Roche was willing to pay that much.
“This is a reflection of the potential of NimbleGen’s technology, so I’m not surprised at all by the acquisition price,” Shagory said. “The investors and the management team always had confidence in what the market opportunities could be and what the value of the technology could be in life science.”
No job cuts
Under the terms of the agreement, NimbleGen will become a fully integrated part of Roche Applied Science, a global business area in Roche’s diagnostic division. Roche pledged to retain all of NimbleGen’s 140 employees, and maintain the current NimbleGen facilities in Madison, Reykjavik, Iceland; and Waldkraiburg, Germany.
NimbleGen, which is planning to move and expand within Madison’s University Research Park and expand its foreign locations, will continue to develop its suite of DNA microarrays, or gene chips, that are used as a discovery tool in pharmaceutical research. Researchers use the chips to enhance their understanding of the genetic causes and predisposition factors of disease, for comparative genomic analysis, and to identify potential drug targets.
In addition, NimbleGen plans to expand its product portfolio to include higher-density arrays and integrated instrument systems for advanced genome analysis.
In 2006, the Roche pharmaceuticals division reported sales of 33.3 billion Swiss francs, and the diagnostics division posted sales of 8.7 billion Swiss francs. The company, which employs about 75,000 people worldwide, has research and development agreements and strategic alliances with multiple partners, including majority ownership interests in companies like Genentech and Chugai.
Roche Diagnostics CEO Severin Schwan said the NimbleGen acquisition represents a “further milestone” in Roche’s strategy to become a major player in genomics research. He called NimbleGen’s array systems “highly synergistic” complements to Roche’s portfolio of genomic research tools.
Those tools include high-throughput genome sequencing systems from 454 Life Sciences, another recent acquisition, and a self-developed, quantitative genomic research technology known as PCR, which is used in many of the company’s diagnostic products. Roche holds patents on PCR technology.
“Microarrays were one of the last significant segments of genomics where we had no position,” explained Lonnie Shoff, senior vice president of Roche Applied Science and Molecular Diagnostics in the U.S.
While no final decisions on NimbleGen’s executive makeup can be made until after the closing, Shoff said it’s Roche’s intention to retain “the specialized skills the NimbleGen team possesses.”
Big pharma at last
Jim Leonhart, executive vice president of the Wisconsin Biotechnology & Medical Device Association, called the acquisition a “very exciting” development for the state’s biotechnology industry, noting that state officials have been trying to attract a global pharmaceutical company.
Leonhart cited the state’s courting of Abbott Labs, which has acquired 500 acres of land in the Kenosha County communities of Pleasant Prairie and Bristol, but has yet to officially announce whether it will build a research laboratory, a distribution center, or another type of facility on the property.
“Whenever one of our companies has a relationship with a major, world-renown biotech company, that’s a plus for us,” Leonhart said. “Who knows what other opportunities Roche will see because they are exposed to our biotech industry?”
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