NEW YORK (GenomeWeb News) – Quest Diagnostics and Celera today announced they have signed a definitive agreement for the purchase of Celera by Quest for $671 million, or $344 million net of cash and short-term investments.
Quest will pay $8 for each share of Celera. The deal includes $327 million in acquired cash and short-term investments.
The companies said the transaction value is expected to be further reduced through a tax credit available to Celera, net operating loss carryforwards, and capitalized R&D, which totaled $117 million at the end of 2010.
The boards of both firms have approved the deal.
"For Quest Diagnostics, this is an important transaction which will further strengthen our leadership position in molecular diagnostics discovery and development and drive sustainable revenue growth," Surya Mohapatra, chairman and CEO of Quest, said in a joint statement. "We will gain immediate access to an impressive range of proprietary tests and products, and a strong pipeline of biomarkers for the future.
"This transaction advances our growth strategy to be the leading innovator and provider of esoteric and gene-based testing for cancer, cardiovascular disease, infectious disease, and neurological disorders," Mohapatra added.
According to Celera CEO Kathy Ordoñez, Celera's ability to discover and validate new biomarkers had surpassed its ability to bring them to market. "Combining Celera's expertise in genetics with Quest Diagnostics' medical leadership, market access, and scale is expected to speed the realization of our vision to personalize medicine," she said in a statement. "We believe this is a compelling transaction that accelerates the delivery of value to our shareholders."
Mohapatra added that he looks forward to the prospect of the addition of Ordoñez and other members of management from the Alameda, Calif.-based firm to Quest.
Celera was founded in 1998 by J. Craig Venter and Applera, and separately but in parallel with an international public project, it sequenced a first draft of the human genome in 2000. Venter left the firm in 2002, and eventually Celera morphed into a diagnostics shop. In 2008, parent company Applera split Celera and Applied Biosystems into separate firms, and Celera began trading under its own ticker symbol on the Nasdaq.
Since then, Celera has had some financial struggles, and today the company reported an 18 percent drop in its 2010 revenues. During the past year, the company has been plagued by softness in its laboratory services business, and in the summer when Celera reported its second-quarter 2010 earnings, Ordoñez said increased competitive pressures had eaten into its business.
"We're urgently assessing how best to respond to these competitive pressures and regain market share," she said during a conference call in August.
In addition, last year, Celera subsidiary Berkeley HeartLab sued Health Diagnostic Laboratory and former employees of BHL who moved to HDL for allegedly soliciting BHL's client healthcare providers to refer patients to HDL. In its lawsuit BHL said the former employees were responsible for almost 35 percent of its total sample volume in 2009. Celera and HDL eventually reached a settlement under which Celera received at least $7 million.
Regardless, BHL is a primary asset that Quest acquires as a result of the deal. The acquisition also gives Quest access to genetic tests and a pipeline of biomarkers. "Celera's current research and development pipeline is focused on cardiovascular disease and cancer and is expected to produce significant value," the firms said.
The deal also provides Quest with in vitro diagnostic products and development capabilities, they said. Celera develops and manufactures test kits and reagents for transplantation genetics, cystic fibrosis, HIV drug resistance, and Fragile X syndrome.
Quest said that the deal is expected to be dilutive to its GAAP earnings per share by an "immaterial" amount for this year, before anticipated charges related to the transaction. It is not expected to materially impact Quest's 2012 EPS, and assuming the deal closes at the end of April, it is anticipated to add just over 1 percent to Quest's revenue growth for 2011.
Quest has secured fully committed bridge financing for the transaction.
In early morning trading today, Celera shares were up 29 percent at $8.09 on Nasdaq. Quest shares were up a fraction of 1 percent at $54.22 on the New York Stock Exchange.