through a definitive agreement calling for a price of $375million in cash and stock. But the deal could exceed the $700 millionmark, as the sellers of Ion Torrent are entitled under the agreementto additional consideration of $350 million in cash and stock uponthe achievement of certain technical and time-based milestonesthrough 2012.
Life Technologies' board of directorshas approved an additional share repurchase program to repurchase itsshares associated with the stock portion of the consideration. Theimpact on total share count is expected to be neutral.
Ion Torrent was founded by Dr. JonathanRothberg, who also helped launch CuraGen, 454 Life Sciences andRaindance Technologies. According to Life Technologies, Ion Torrenthas "revolutionized DNA sequencing by enabling a direct connectionbetween chemical and digital information through the use of provensemiconductor technology."
"We believe Ion Torrent's technologywill represent a profound change for the life sciences industry, asfundamental as the one we saw with the introduction of qPCR," saysGregory T. Lucier, chairman and CEO of Life Technologies. "Thistechnology will usher in a new era in science, one in which DNAsequencing can be done easier, faster and more cost effectively thanever before."
Ion Torrent's proprietary chip-basedsequencing represents what Life Technologoes calls "a new paradigmin DNA sequencing" by using PostLight sequencing technology,reportedly the first technology of its kind to reduce or eliminatethe cost and complexity associated with the extended opticaldetection currently used in all other sequencing platforms.
The first product using this technologywill be the Personal Genome Machine (PGM), reportedly an easy-to-use,highly-accurate benchtop instrument optimal for mid-scale sequencingprojects, such as targeted and microbial sequencing. The instrumentis currently available through an early access program and will belaunched later this year at an entry cost of less than $100,000.
Ion Torrent unveiled its chip-basedsequencer earlier this year at the Advances in Genome Biology andTechnology conference in Marco Island, Fla., which uses the PostLightsequencing technology to measure the release of hydrogen ions asnucleotides get incorporated by DNA polymerase. Unlike other existingsecond-generation sequencers, it does not require lasers, cameras orlabels.
Subsequent products will benefit fromcutting-edge semiconductor fabrication technologies that can expandthroughput at an accelerated pace, thereby dramatically lowering thecost to sequence a genome, Life Technologies reports.
"By leveraging the cumulative $1trillion already invested in semiconductor research and development,we believe that Ion Torrent will drive unprecedented scalability,delivering the solution required for future generations ofsequencing," Lucier says. "With a heritage of more than 25years as a leader in sequencing, Life Technologies is perfectlysuited to bring such an innovative technological breakthrough tomarket."
"This transaction enhances ourstrategy of providing a complete sequencing offering to our customersacross the research and applied markets," adds Mark Stevenson, LifeTechnologies' president and chief operating officer. "Ion Torrent'stechnologies are highly complementary to our existing portfolio ofsequencing CE and SOLiD platforms."
For his part, Rothberg will continue tolead Ion Torrent with the support of the Ion Torrent leadership team,the companies say. Life Technologies intends to retain Ion Torrent'spresence in Guilford and in South San Francisco, Calif., where it hasestablished research and development centers of excellence.
"Our products and mission make thisan ideal and logical strategic fit for both companies," Rothbergsays. "Both Ion Torrent and Life Technologies share rich culturesof innovation and excellence, and I firmly believe that LifeTechnologies is the right partner to bring such revolutionarytechnology in the sequencing arena to market."
In a research note,
Leerink Swann'sdirector of equity research, John Sullivan, indicted that LifeTechnologies is paying "a full price, given the commercial risks,but Ion Torrent's technology looks differentiated."
However, Sullivan and the Leerink Swannteam remain "unconvinced that the follow-on optical detectiontechnologies nearing the market are additive enough to threatensequencing leader Illumina." Still, Sullivan said that thetechnology is "uniquely well suited to drive new applications inlarge-scale sequencing."
Life Technologies will finance thetransaction with cash on hand, available lines of credit, and stock.Including the impact of specific cost saving initiatives, thetransaction is expected to be 2 cents dilutive to Life Technologies'earnings per share in 2010, neutral in 2011, and accretive in 2012and beyond. Earnings per share guidance for 2010 remains unchanged at$3.35 to $3.50. Life Technologies expects to deliver double-digitearnings-per-share growth in 2011 including the impact of thistransaction.
Upon closing, Life Technologies expectsto benefit from synergies created by combining Ion Torrent'sproprietary technologies, product pipeline and R&D capabilitieswith Life Technologies' commercial channel, sample preparation,sequencing automation, informatics, and reagent expertise.
According to Lucier and Stevenson, LifeTechnologies remains committed to a strategy of balanced capitaldeployment, including the execution of the previously announced $350million share repurchase. In addition, Life Technologies reaffirmsits goal of reaching 10 percent return on invested capital by 2012.
The transaction, which is expected toclose in the fourth quarter, is subject to customary closingconditions, including regulatory approval.
