09 Jun Third Wave Technologies acquired by Massachusetts firm Hologic for $580 million
Madison, Wis. – In an move that could fast-track the commercialization of women’s health technology, Hologic, Inc., a women’s health company based in Bedford, Mass., has agreed to acquire Madison’s Third Wave Technologies.
The acquisition was completed for a purchase price of $11.25 per share, which represents a 24 percent premium over Third Wave’s average trading price during the past three months.
The boards of directors of both companies have unanimously approved the purchase, and it should be completed in the third quarter of 2008. Under the agreement, Third Wave shareholders would receive an estimated $580 million.
Hologic indicated that it would keep Third Wave’s research and development operations in Madison, where the company employs 140 people. Third Wave is located in University Research Park.
According to Hologic, the transaction will be conducted by a tender offer followed by a merger. The merger would combine Hologic, which has established a global sales and distribution network for women’s health products and has extensive business relationships with clinical labs and OB/GYN channels, with Third Wave, which is developing tests for the human papilloma virus. HPV has been linked to cervical cancer.
After completing clinical trials for its HPV 14-type high-risk and 16/18 genotyping tests, Third Wave recently submitted pre-market approval applications under the brand name Cervista to the Food and Drug Administration. Third Wave and Hologic expects FDA approval in the first half of 2009.
Jack Cumming, chairman and CEO of Hologic, called Third Wave a well-run company. He said the transaction is an outstanding opportunity to enter the molecular diagnostics market and achieve attractive revenue growth and earnings expansion.
He said Third Wave’s progress in advancing its HPV tests and recent FDA approval of its Cystic Fibrosis test validates the Madison company’s Invader chemistry as a platform for future tests. He also noted that Third Wave’s ongoing development of a fully automated lab solution is an example of the potential for future progress.
“With Third Wave, Hologic will be able to compete in all segments of the molecular diagnostics market,” Cumming said.
Upon FDA approval of the HPV tests, Hologic would “immediately begin to market these products,” he added.
The HPV tests, which will be offered on a molecular diagnostics platform, are designed to identify cervical cancer and other diseases at an early stage. Cumming cited several advantages associated with Third Wave’s HPV tests, including the reduction of false negatives.
Hologic’s core diagnostic product, Thin Prep, is used for pap testing but generates only modest revenue growth. The company expects the addition of Third Wave’s molecular diagnostics business to drive stronger growth in the $2.1 billion U.S. molecular diagnostics market.
During a presentation to investors, Hologic CFO Glenn Muir said Third Wave’s annual revenue, which now stands at $31.1 million, should reach $200 million three years after FDA approval is obtained.
Third Wave has reported a series of quarterly losses despite revenue growth in molecular diagnostics, but the acquisition will make Hologic’s global distribution and marketing systems available to it. That network includes 425 direct sales representatives concentrated on women’s health products, Cumming said.
Hologic would borrow $600 million to finance the transaction, which would expand its diagnostic product offerings and contribute to its growth in cancer screening. The U.S. HPV testing market now stands at $200 million, and over the next several years the company expects the global market for HPV testing to grow to $800 million.
In 2007, Hologic merged with the women’s health firm Cytic, which also produces tests to screen for cervical cancer.
Hologic develops diagnostic, GYN surgical, and medical imaging products, including mammography-screening devices. Its focus is on breast and skeletal health and gynecology.
The company reports $738 million in annual revenue and employs more than 3,500 people.
Third Wave, a portfolio company of the Madison-based Venture Investors, had secured a $25 million line of credit last December from Deerfield Management.
Muir said Hologic did not anticipate anti-trust issues in connection with the transaction, and Cumming said the company expects the integration process to be “smooth and seamless.”
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