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Roche to Acquire NimbleGen Systems for $272.5M in Cash; Expects to Close Deal in Q3

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Looking to strengthen its position in the genomics research market, Roche will acquire NimbleGen Systems for $272.5 million in cash, the firms said this week.
 
The acquisition, which must still be approved by NimbleGen shareholders and US regulatory bodies, is expected to close in the third quarter.
 
NimbleGen will then become a part of Roche Applied Science, a global business area of the Diagnostic Division of Roche. Following the transaction, NimbleGen will operate with some autonomy and continue with its pre-existing plans to add to its portfolio higher-density arrays, integrated instrument systems, and related reagents and consumables for advanced genome analysis.
 
Additionally, the firm will be able to continue expanding its sales and support services under Roche’s wings.
 
Roche also plans to maintain NimbleGen’s current facilities, including its headquarters in Madison, Wis., as well as its subsidiaries in Reykjavik, Iceland; and Waldkraiburg, Germany. Roche also expects to retain NimbleGen’s 140 employees.
 
Severin Schwan, CEO of Roche’s Diagnostics Division, said in a statement that the “acquisition represents a further milestone in our strategy to strengthen our position as a major player and complete solution provider in the genomics research market by extending our activities into the microarray segment.”
 
“The array systems from NimbleGen are highly synergistic and will complement the existing Roche portfolio of innovative genomic research tools such as the LightCycler qPCR systems and the high-throughput Sequencing Systems from the recently acquired company 454 Life Sciences,” he stated.
 
For privately held NimbleGen, being acquired by Roche will have serious implications. Firstly, it will halt its effort to become a publicly funded company. NimbleGen filed for an initial public offering with the US Securities and Exchange Commission in March (see BAN 3/20/2007).
  
As NimbleGen noted in its IPO filing, the company has currently issued approximately 19 million shares of its private stock to several investors, including Skyventure Capital, a California venture capital firm that owns 14 percent of NimbleGen; Cargill, also based in California, which owns 13.4 percent; and Schott, a German life sciences company whose stake in NimbleGen is 12.7 percent.
 
Secondly, it will give the firm a boost in its own efforts to shift from a services-based company to one that leans more on direct sales and support to generate revenues.
 
Since concluding licensing agreements with Oxford Gene Technology and Affymetrix since last fall, NimbleGen has been focused on expanding its worldwide sales force to support both catalogue arrays and its broadening line of array-based applications (see BAN 10/10/2006).
  
Roche and NimbleGen said in a statement this week that NimbleGen will now be able to “develop and market powerful array systems through Roche Applied Science’s extensive worldwide sales and distribution network.”
 
In its March SEC filing, NimbleGen noted that it began a "major expansion” of its sales force and commercial infrastructure worldwide in late 2006. The company also said that North American sales accounted for 63 percent of 2006 revenues, while European sales accounted for 28 percent and Asian sales contributed 9 percent.
 
NimbleGen’s revenues grew 42 percent to $13.5 million last year from $9.5 million in 2005, according to the SEC filing (see BAN 3/20/2007).
  
In the filing, the company said that it recently begun direct sales operations in Europe and discontinued exclusive distribution agreements covering “certain countries.”
 
“We intend to expand our European sales organization to directly cover more territories, in particular those regions that have not been effectively developed by distributors," NimbleGen stated in the filing.
 
The company also said it relies on distributors in Japan, China, Taiwan, Korea, and Australia. In 2006, distributor sales accounted for approximately 20 percent of NimbleGen's overall revenue, according to the filing.
 
According to Roche, it currently sells direct in 150 countries, a situation that could complement NimbleGen’s existing sales and support efforts.
 
Not Your Average Array Firm
 
By agreeing to acquire NimbleGen to meets its needs for an array platform, Roche has chosen a firm that has used its ability to generate custom high-density arrays with relatively long oligonucleotides to build a suite of emerging microarray applications and a loyal customer base around the world.
 
Because of its reliance on its Icelandic services lab to complete most projects for clients, and the fact that it sells only arrays, rather than integrated systems, NimbleGen is set apart from companies like Affymetrix, Agilent Technologies, and Applied Biosystems that have pursued a razor-razor blade model of instrument placements followed by sales of array-related consumable like chips and reagents.
 
Not following this model has instead allowed NimbleGen to sell itself as an application provider. To date the firm offers five catalogue applications: DNA-methylation analysis, gene expression, comparative genomic hybridization, comparative genome sequencing, and chromatin immunoprecipitation, which it calls (ChIP)-chip.
 

NimbleGen will now be able to “develop and market powerful array systems through Roche Applied Science’s extensive worldwide sales and distribution network.”

In the ChIP-chip application area, NimbleGen has recently benefited from the publication of papers related to the Encyclopedia of DNA Elements consortium that last week published a set of papers in Nature and Genome Research describing the four-year effort to understand the functional elements of the human genome.
 
NimbleGen’s ChIP-chip platform was used by a majority of investigators who participated in the study, and at least 15 papers have been published to date by ENCODE participants using the NimbleGen platform, the company said in a separate statement.
 
NimbleGen was not the only array firm to participate in ENCODE. An Agilent spokesperson told BioArray News this week that Agilent has supplied its chips to researchers that were not part of the pilot studies published this month but will be part of the formal project later.
 
Still, NimbleGen’s ability to engage researchers has made it among the most competitive firms in these various application areas, using its business model as a point of strength.
 
“In most cases, ENCODE researchers sent NimbleGen their ChIP samples to be processed at our array facility,’ NimbleGen CEO Stan Rose told BioArray News in an e-mail this week.
 
“The process included labeling, hybridization, scanning, and data extraction. In some cases, researchers obtain arrays from NimbleGen and process the samples at their own lab,” he wrote. “NimbleGen worked intimately with many researchers to develop optimized protocol[s] for their individual projects.”

Jason Lieb, a scientist at the University of North Carolina, Chapel Hill, and ENCODE author, told BioArray News in an e-mail this week that he decided to use NimbleGen’s platform because of its “capacity for flexible design and high probe density” and a “very good relationship with the NimbleGen R&D team.”

 
In addition to ENCODE, Rose wrote that NimbleGen is participating in several other ChIP-on-chip oriented projects, including modENCODE, a four-year, $57 million scientific mission to identify all functional elements in the genomes of the fruit fly and round worm, considered to be model organisms, andthe Epigenome Network of Excellence, a European consortium that has received a 5-year European Union grant of €12.5 million to establish a European Research Area in epigenetic research during by 2009.

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