Skip to main content
Premium Trial:

Request an Annual Quote

Qiagen to Spend $1.6B to Acquire Digene; Eyes Cancer, Women's Health MDx Market

This story originally appeared in Biocommerce Week, a newsletter that has been discontinued.
 
In a move aimed at bolstering its molecular diagnostics portfolio and providing it with entry into the oncology testing arena, Qiagen said last weekend that it will acquire Digene in a cash and stock deal worth $1.6 billion.
 
Digene is the only company to sell a molecular diagnostic product cleared for marketing in the US and Europe for human papillomavirus, the primary cause of cervical cancer. The acquisition will enable Qiagen to branch out beyond its current diagnostics focus on infectious diseases and into cancer testing, and will provide Digene with a global sales channel that it currently lacks.
 
Qiagen CEO Peer Schatz said in a statement that the deal "creates significant value for our shareholders and instantaneous market and technology leadership" in the molecular diagnostics market.
 
Qiagen’s molecular diagnostics sales force has been targeting the same customers as Digene, Schatz said during a conference call earlier this week. He said that with the acquisition, which is expected to close in either August or September, Qiagen will gain access to a rapidly growing HPV molecular diagnostics market potentially worth $1 billion.
 
“Digene’s position [in the HPV testing market] is exceptionally strong and its portfolio bridges our virology franchise in oncology molecular diagnostics, which is fast becoming a very exciting opportunity,” said Schatz during the call.
 
“It builds on the strategies of both companies and creates a new leader in molecular diagnostics with broader synergies in technology, content, channel, and infrastructure,” he said, and provides “a foundation for next-generation assays and platform technologies in infectious disease, women’s health, and oncology.”
 
Under the terms of the agreement, Digene shareholders will receive either $61.25 in cash for each share of Digene stock they hold or 3.545 shares of Qiagen's stock. The $61.25 per share offer reflects a 37 percent premium for Digene’s stock, which closed Friday at $44.77. The total consideration will consist of 55 percent cash and 45 percent Qiagen stock.
 
The combined company is expected to have more than $800 million in overall revenues in 2008, with $350 million coming from molecular diagnostics sales. Qiagen had $466 million in fiscal 2006 revenue, while Digene had revenues of $178 million for the year.
 
Once the deal is finalized, Digene, based in Gaithersburg, Md., will operate as a subsidiary of Qiagen, which is headquartered in Venlo, the Netherlands, but has its US headquarters in Germantown, Md., near Digene’s base. Qiagen's shareholders will own roughly 78 percent of the combined company, while Digene's shareholders will own around 22 percent.
 
The company will have roughly 2,060 employees worldwide, with 570 currently employed by Digene. Schatz said Qiagen does not expect any layoffs as a result of the merger.
 
Schatz and Digene President and CEO Daryl Faulkner, who joined the firm from Invitrogen in December, will co-chair an integration committee.
 
Faulkner said during the conference call that since he joined Digene the firm’s focus has been on improving its menu of assays, developing a next-generation instrument platform, and rapidly expanding its global reach. He said all three of these things could be achieved in two to three years less time by merging with Qiagen rather than remaining as a stand-alone firm.
 
Digene's core platform is its Hybrid Capture molecular diagnostics technology, which is the basis for the firm’s human papillomavirus test that screens for high-risk strains of HPV that have been linked to cervical cancer. The test has been cleared for marketing by both the US Food and Drug Administration and European regulators, and accounts for more than 75 percent of Digene’s revenue.
 
Digene’s portfolio also includes molecular diagnostics for chlamydia, gonorrhea, and blood viruses such as hepatitis B, C, and V.
 
The firm’s Rapid Capture System, the instrument platform on which the HPV test runs, was co-developed and is sold by Qiagen. Thus far, Digene has placed more than 100 of the instruments around the world, and expects to place another 30 this year, said Faulkner.
 
The firms are very familiar with each other’s capabilities and corporate cultures, having been partners for more than a decade. Also, Digene’s tests already incorporate Qiagen’s sample-prep technologies.
 
Leveraging a Global Sales Force
 
Digene currently derives 80 percent of its revenues from the US, with the other 20 percent coming from over 40 countries worldwide. “Together with Qiagen we expect to significantly increase our international scope,” said Faulkner.
 
Qiagen’s revenues in North America and Europe are evenly split. The firm derived 88 percent of its total 2006 revenues from those markets.
 
The deal will give Digene an immediate presence in Europe, which could be a lucrative and largely untapped market for the HPV test, and will strengthen Qiagen's molecular diagnostics assay portfolio. It also will combine two sales organizations with a heavy focus on molecular diagnostic products.
 
“With over 300 sales people in molecular diagnostics and over 1,000 overall, we have a very powerful sales infrastructure,” Schatz said of the combined company. Overall, the combined firm will generate 48 percent of its revenue from the molecular diagnostics market.
 
By connecting the two companies' virology and oncology molecular diagnostics programs, Schatz said that the deal "provides us with many ways to drive top-line and bottom-line growth, such as access to new channels with existing and new products and combined technology, resources, and infrastructure to provide greater operating strengths."
 
Schatz said he would provide more comment on revenue synergies and R&D plans after the deal closes. But he said, “The cross-selling synergies are quite significant.”
 
One issue hanging over Digene is its ongoing patent litigation with Third Wave Technologies. In January, Digene sued Third Wave for allegedly infringing its HPV patents. Third Wave responded with a countersuit in March that claimed Digene has “abused its monopoly power to thwart competition” in the HPV diagnostics market (see BioCommerce Week 3/7/2007).
 
Schatz said he also wouldn’t comment until after the close of the deal on any legal strategies regarding Digene’s ongoing litigation.
 
Bucking Its Own Trend
 
Over the past three years, Qiagen has acquired and integrated 12 companies along with a few other businesses or product lines. But the acquisition of Digene dwarfs any of these previous deals, which ranged in value from a few million dollars up to $40 million.
 
Earlier this year at the JP Morgan Healthcare Conference, Schatz said, “I always believe that acquisitions are not a strategy, per se, but are only a supplement and ingredient to strategies. If that gets turned around, it often goes wrong.
 
“For us, there was never an acquisition budget where we wanted to spend certain amounts of money. There was never a target in terms of the number of opportunities that we wanted to close in on. But there is definitely an internal strategy that can, if the right opportunities arise, resort to acquisitions” (see BioCommerce Week 1/10/2007).
 

“In the final analysis, both I and our board strongly agreed that this transaction is the best alternative financially, strategically, and operationally, and we have a significant opportunity to have a much stronger franchise with both companies as we go forward.”

The firm’s most recent acquisition, last month’s deal to acquire eGene for roughly $34 million, fit Qiagen’s strategy of focusing on smaller sample preparation or molecular diagnostic technology firms (see BioCommerce Week 4/18/2007).
 
Qiagen had been bucking a recent trend in the research tools and diagnostics spaces, where M&A transactions have been increasingly more expensive with several multi-billion dollar deals inked over the past year. The Thermo Electron merger with Fisher Scientific for an estimated $10.6 billion was the type of blockbuster deal that was unusual for the industry when it was signed a year ago (see BioCommerce Week 11/15/2006).
 
There has been a flurry of multi-billion-dollar acquisitions in the diagnostics industry recently, with Siemens’ acquisitions of Bayer Diagnostics last year for roughly $5.25 billion (see BioCommerce Week 7/5/2006) and Diagnostic Products Corp. for nearly $2 billion. Also, GE Healthcare acquired Abbott’s diagnostics business earlier this year for $8.13 billion (see BioCommerce Week 1/24/2007).
 
Beckman Coulter recently lost a bidding war to acquire Biosite, with Inverness Medical Innovations offering approximately $1.72 billion for the rapid diagnostics maker (see BioCommerce Week 5/16/2007).
 
In addition to those, Qiagen rival Stratagene is in the process of being acquired by Agilent for roughly $246 million (see BioCommerce Week 4/11/2007). Meanwhile, Bio-Rad Laboratories, which has been known for years to be a “value buyer” in the M&A market, signed a deal last month to acquire immunohematology diagnostics firm DiaMed Holding for $400 million (see BioCommerce Week 5/16/2007).
 
A Qiagen spokesperson told BioCommerce Week that “the transaction came about organically in discussions between senior management of both companies, [and was] neither the result of recent market developments nor made under any short-term considerations.” He noted that the boards of directors of both firms voted unanimously in favor of the deal.
 
While the acquisition of Digene runs counter to Qiagen’s strategy of focusing on smaller deals, Schatz said during the conference call this week, “I am confident in our ability to integrate and create value from this transaction.”
 
Jonathan Block, an analyst with SunTrust Robinson Humphrey, suggested in a research note this week the possibility of a rival bid emerging for Digene. “While the deal values DIGE at an attractive multiple, we still think there is the possibility that another suitor may emerge with a slightly higher take-out price,” he wrote.
 
But Digene’s Faulkner noted that there were a number of potential acquirers in talks with Digene and its representatives. “In the final analysis, both I and our board strongly agreed that this transaction is the best alternative financially, strategically, and operationally, and we have a significant opportunity to have a much stronger franchise with both companies as we go forward,” he said.
 
Goldman Sachs analyst May-Kin Ho is bullish on the deal, saying in a research note this week that “the combined company could be a formidable player in [molecular diagnostics] with one of the largest sales forces and broad platforms.”
 
She estimated that the firm will bring in annual molecular diagnostics sales of $1 billion by 2012, up from projected 2008 sales of $350 million. According to various industry estimates, Qiagen will be the second largest player in the molecular diagnostics space behind Roche, which reported 2006 molecular diagnostics revenue of $976 million.

The Scan

Push Toward Approval

The Wall Street Journal reports the US Food and Drug Administration is under pressure to grant full approval to SARS-CoV-2 vaccines.

Deer Exposure

About 40 percent of deer in a handful of US states carry antibodies to SARS-CoV-2, according to Nature News.

Millions But Not Enough

NPR reports the US is set to send 110 million SARS-CoV-2 vaccine doses abroad, but that billions are needed.

PNAS Papers on CRISPR-Edited Cancer Models, Multiple Sclerosis Neuroinflammation, Parasitic Wasps

In PNAS this week: gene-editing approach for developing cancer models, role of extracellular proteins in multiple sclerosis, and more.