Igen International Inc and Roche Holding Ltd have reached definitive agreements to resolve their long-running dispute on the rights to Origen, Igen's electrochemiluminescence (ECL) technology used by Roche's diagnostics division. The transaction, which has been approved by the Boards of Directors of Igen and Roche, will enable both companies to independently maximize the value of their respective technology assets and businesses.
Under the terms of the agreements, Roche will acquire Igen, thereby securing rights to Origen technology used in its Elecsys diagnostics product line. For each Igen share, Igen shareholders will receive $47.25 in cash and one share of a newly formed public company to be spun off by Igen in a fully taxable transaction. Igen has 26.7 million fully diluted outstanding shares. The new company, which will be 100% owned by Igen shareholders, will own Origen technology, assume certain ongoing Igen businesses and is expected to have approximately $155 million in working capital. This working capital will be provided primarily by Roche as part of the transaction, in addition to the $47.25 per share cash payment to be made to Igen shareholders.
Through the acquisition of Igen, Roche will secure, among other assets, new non-exclusive, fully paid-up, worldwide and perpetual rights that will permit Roche to continue to commercialize Origen technology in the human in- vitro diagnostics field and continue to sell and further develop its Elecsys products for centralized laboratories, hospital labs and blood banks. In addition, Roche generally will be able to sell certain Origen-based immunochemistry systems into point of care sites and physicians offices. Improvements of the ECL technology developed by Roche until the closing date will remain with Roche. Igen will receive a license to those improvements. As reported by Roche, Roche's ECL-based Lab Diagnostics business had sales in 2002 of approximately CHF 560 million (US $404 million), with a compound annual growth rate in local currencies of approximately 23% over the last three years.
Upon completion of the acquisition, the new company to be spun-off by Igen to its shareholders will hold Igen's patents and assume its biodefense, life science and industrial businesses, as well as opportunities in the clinical diagnostics field. The new company will also hold Igen's equity interest in the Meso Scale Diagnostics ("MSD") joint venture. The new company will be able to address the entire clinical diagnostic market, including the hospital, blood bank and reference lab markets that were previously exclusively held by Roche. The new company will also receive rights to certain improvements relating to Roche's Elecsys product line and royalty-bearing licenses to PCR, a nucleic acid amplification technology, for use in most fields. The new company, which will be named prior to closing the transaction, will be managed by Igen's current management team and headquartered in Gaithersburg, Maryland. It is expected that the new company's shares will be listed on Nasdaq upon completion of the spin-off.
As part of the agreement, Roche will immediately pay Igen $18.6 million in cash for compensatory damages as confirmed on July 9, 2003 by the U.S. Court of Appeals for the Fourth Circuit. Roche will also immediately pay to Igen the royalties owed to Igen for the quarter ended June 30, 2003. Effective immediately, there will be no further royalties owed to Igen, and Roche will pay a fixed fee of $5 million per month to Igen for the use of Origen technology pending completion of the transaction. As part of the transaction, the MSD joint venture will expire. Following the closing, the new company will make a final capital contribution of $37.5 million to MSD.
The transaction is expected to close by calendar year-end, subject to the approval of Igen shareholders and receipt of necessary regulatory approvals and other limited closing conditions.
Franz B. Humer, Chairman and CEO of Roche, said, "We are very pleased with the result of these negotiations. Through this acquisition, we have been able to resolve this legally and contractually highly complex dispute in the best interest of both companies and their shareholders. I am convinced that we have achieved a clear win-win situation for all parties involved. Roche will be able to provide unrestricted access to all its diagnostics products for all its customers, and Igen's shareholders are offered an attractive price and will own a solid business with excellent prospects. Putting this long period of uncertainty to an end will allow both Roche and the new spin-off company to fully focus on their respective businesses and to further develop them independently of each other."
Samuel J. Wohlstadter, Igen's Chairman and Chief Executive Officer, said, "We are extremely pleased to have reached a definitive agreement with Roche that delivers significant immediate value to our shareholders as well as the opportunity to create additional value through ownership of a well positioned new growth company that will own Igen's patented Origen technology. The new Company will have proven technology, businesses in many of the highest growth areas in diagnostics and the opportunity to establish strategic partnerships with a wide range of companies in the global marketplace. Using Origen technology, over the years Roche has developed an extremely successful product line in the clinical diagnostics field."
The announcement of this agreement follows a July 9, 2003 ruling by the U.S. Court of Appeals for the Fourth Circuit in litigation that began in 1997 when Igen filed a lawsuit charging Boehringer Mannheim with multiple breaches of a license agreement relating to Igen's ECL technology. The ruling eliminated damages of $486.8 million previously awarded to Igen by the jury of the District Court of Maryland while affirming $18.6 million in compensatory damages, Igen's right to terminate the license agreement between the companies, and Igen's right to certain improvements in certain fields developed by Roche in certain fields under the license agreement. Roche inherited the case in its acquisition of Boehringer Mannheim in 1998. As part of today's agreements, Igen has agreed to suspend its patent infringement actions against Roche in Maryland and Germany pending consummation of the proposed acquisition, with the right to resume the actions should the transaction not close. Roche has agreed to file a motion to withdraw its petition for rehearing before the Fourth Circuit and both companies have agreed not to file any further appeals of the opinion issued by that court.
Lehman Brothers is serving as financial advisor to Igen and also provided a fairness opinion. Cravath, Swaine & Moore LLP is serving as Igen's legal counsel.