By: Richard Park

Under the five-year agreement, Inverness will utilize its global sales force to promote the use of this point-of-care system co-exclusively with Epocal in all geographies worldwide, except Japan, India, Bangladesh, Nepal, Bhutan, and Sri Lanka. Inverness paid $20 million to Epocal in connection with the entry into the distribution agreement, which provides that Epocal will supply to Inverness all of Inverness’ requirements for Epocal products and that Inverness will pay Epocal 50% of its revenues from the sales of Epocal products. Separate from the distribution agreement, Inverness will work with Epocal in a collaboration to develop additional test menu content for the epoc testing platform, thereby expanding Inverness’ portfolio of test platforms in the point-of-care market.

 

Inverness has also entered into a definitive agreement to acquire all of the issued and outstanding equity securities of Epocal for a total potential purchase price of up to $255 million, including a base purchase price of up to $172.5 million if Epocal achieves certain gross margin and other financial milestones on or prior to October 31, 2014. Additional payments could reach up to $82.5 million if Epocal achieves certain other milestones relating to its gross margin and product development efforts on or prior to this date. The acquisition will also be subject to other closing conditions, including the receipt of any required antitrust or other approvals.

 

“This move to acquire Epocal is to bolster Inverness’ health management products portfolio,” says Harry Glorikian, managing partner, Scientia Advisors (Cambridge, MA). “Epocal’s epoc product facilitates the availability of a very low consumables price to the consumer. This enables a smooth transition to the home market which is a large driver of Inverness becoming a leader in the home monitoring space with its health management portfolio.”

 

Inverness also commenced a cash tender offer to acquire a majority equity interest in Standard Diagnostics, a leading innovator of rapid diagnostics in Korea. Inverness offered to acquire up to 75.79% of the issued shares of Standard Diagnostics. Dr. Young Shik Cho, representative director, president, and chief executive officer of Standard Diagnostics and its largest shareholder, announced he would tender 720,000 of his shares in support of Inverness’ investment. Inverness’ obligation to purchase shares was conditioned on the tender of at least 2,408,000 shares, including Cho’s 720,000 shares, which was approximately 30.1% of the total shares issued as of January 8, 2010. If the minimum tender were achieved, Cho and Inverness would own more than 50% of Standard Diagnostics.

 

The tender offer price was KRW 40,000, which represented a premium of more than 33% of the 90-day trailing average (29,867 KRW) of Standard Diagnostics’ share price. Shareholders could tender their shares from January 11, 2010 until February 1, 2010. The settlement date was February 8, 2010. Standard Diagnostics had revenues of approximately $36.8 million in 2008 and $36.0 million for the nine-month period ended September 30, 2009.

 

On February 1, Inverness announced that it completed its tender offer for Standard Diagnostics. Although Daewoo Securities Co., the tender offer agent, was confirming the exact number of shares that were tendered, preliminary results showed that approximately 4,767,025 shares were tendered by Standard Diagnostics shareholders, representing approximately 61.9% of the issued and outstanding shares in Standard Diagnostics. The final number and percentage of shares tendered will be announced in accordance with legal requirements with all validly tendered shares being settled at KRW 40,000 per share on February 8, 2010.

 

“For the Standard Diagnostics acquisition, the most remarkable detail may be that they have a diabetes business,” says Manfred Scholz, PhD, MBA, president, Scholz Consulting Partner LLC (Medford, MA). “This implies that Inverness’ non-compete in whole blood glucose testing has expired. I suspect that Standard’s whole blood glucose testing is the real value driver in Inverness’ view.”

 

In addition, Inverness entered into a binding agreement with Kroll Inc. to purchase Kroll Laboratory Specialists Inc. (Gretna, LA), its substance abuse testing division that provides forensic-quality substance abuse testing products and services across the United States. The purchase price is $110 million, subject to a customary working capital adjustment. The acquisition is expected to close in the first quarter of 2010 but remains subject to customary closing conditions. Kroll Laboratory Specialists operates two laboratories in Gretna, LA and Richmond, VA, and had revenues of approximately $40.2 million in 2008.

 

Inverness officials declined to comment on any of these acquisitions for this article.