Roche buys its way out of diagnostics trouble

Swiss drugs and diagnostics major Roche has moved to settle its long-running legal dispute with USA-based Igen by acquiring the firm in a deal valued at around $1.4 billion (€1.22bn).

Roche made an offer of $47.25 per share for the company, a total consideration of $1.22 billion, which has been approved by both boards and represents a hefty 21 per cent premium over Igen's nearest closing price. Roche is also providing the firm with about $155 million in working capital.

Igen will operate as a spun-off, separate company in the Roche group, and will be run by its current management, including chief executive Samuel Wohlstadter and chief operating officer Richard Massey.

In return, Roche gets a permanent, non-exclusive licence to allow its diagnostics division to use Igen's electrochemiluminescence (ECL) technology, a critical component of its Elecsys range of diagnostic products. This effectively brings to an end a long-running dispute between the firms that culminated in Igen terminating Roche Diagnostics' licence to use its in its products, although Roche also escaped having to pay nearly $500 million in damages to the US firm.

Igen's shares rose 60 per cent on 25 July, the day of the announcement, to close at $59.25.

Analyst Denise Gugerli-Etter at Sarasin in Switzerland welcomed Roche's move, pointing to the real danger that the Swiss firm would have lost SF560 million (€362m) in sales as a result of Igen withdrawing its ECL licence. The acquisition price, which was described by some analysts as steep, should be weighed against this loss of sales as well as indirect costs related to inventories and the recall of equipment and the expense of developing or acquiring a competing technology.

On the strength of this deal, as well as a solid first-half financial report which saw sales climb 6 per cent to SF13.88 billion and operating profits rise 15 per cent to SF2.57 billion at the group, Sarasin has raised their rating on Roche from 'neutral' to 'buy'.