Novartis seeks to acquire Genoptix for $470 million in all-cash offer

The integration of the 500-worker company into the Novartis Molecular Diagnostics unit is expected to expedite the development of companion diagnostic programs, especially in oncology

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BASEL, Switzerland—Novartis this week announced it has entered into a definitive agreement for the acquisition of Carlsbad, Calif.-based Genoptix Inc., a specialized laboratory providing personalized diagnostic services to community-based hematologists and oncologists. Under the terms of the agreement, Novartis will commence a tender offer for all outstanding shares of common stock of Genoptix $25 per share in cash. This represents a total equity value of $470 million and an enterprise value of $330 million. That represents a premium of 39 percent over Genoptix's unaffected share price of $17.98 on Dec. 13, 2010, and a 27 percent premium over the closing price of $19.76 on Jan. 21, 2011.

Novartis says that the Genoptix laboratory service offerings provide "strategic fit with the current portfolio of companion diagnostic programs within Novartis Molecular Diagnostics unit" and predicts that the acquisition will enhance Novartis's tools and services that aim to improve health outcomes for patients by advancing the ability to define and monitor individualized treatment programs.

Genoptix, which employs approximately 500 people, will become part of Novartis Molecular Diagnostics, a unit within the Novartis Pharmaceuticals Division, and the acquisition will support and expedite the development of companion diagnostic programs, most particularly in the area of oncology.

"The acquisition of Genoptix should fortify Novartis efforts in the area of molecular diagnostics," according to Andrew Weiss, an analyst with Bank Vontobel. "It also shows that despite the large Alcon transaction, Novartis is still able to continue its bolt-on acquisition strategy."

Mizuho Securities Analyst Peter Lawson wrote in a research note shortly after the announcement that "The acquisition fits in with Noavrtis' partnership with Gen-Probe for blood screening, and complements their hematology oncology drug franchises, namely Gleevac for leukemia."

Founded in 1999, Genoptix specializes in diagnosing cancers in bone marrow, blood and lymph nodes. In 2009, Genoptix had sales of $184 million, and for the first nine months of 2010, its reported revenue totaled $148 million.

"The acquisition of the Genoptix medical laboratory will serve as a strong foundation for our individualized treatment programs," says Joseph Jimenez, CEO of Novartis. "Genoptix is an innovative company with a talented team of people who share our commitment to transforming the way medicine is practiced. By integrating Genoptix within Novartis, we can greatly enhance the value we add to patients, clinicians, payers and society."

Jimenez says that Novartis plans to maintain the existing operations and continue delivering Genoptix's portfolio of personalized diagnostics services to community-based hematologists and oncologists across the United States.

The Genoptix Board of Directors has unanimously approved the transaction and agreed to recommend that Genoptix stockholders tender their shares. The transaction is conditional upon the tender of at least a majority of the shares of Genoptix in the tender offer, receipt of regulatory approvals and other customary closing conditions. The transaction is expected to close within the first half of 2011.

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