>>Ventana's Board Unanimously Rejects Roche's Unsolicited Tender Offer as Inadequate
Wednesday July 11, 7:00 am ET
Urges Stockholders Not to Tender Their Shares
TUCSON, Ariz.--(BUSINESS WIRE)--The Board of Directors of Ventana Medical Systems, Inc. (NASDAQ: VMSI - News) today announced that it has thoroughly reviewed Roche's unsolicited tender offer with the assistance of its financial and legal advisors (Merrill Lynch & Co., Goldman, Sachs & Co., Sidley Austin LLP and Snell & Wilmer LLP) and unanimously determined that the $75 per share cash offer is inadequate in multiple respects and contrary to the best interests of Ventana's stockholders. Accordingly, the Board recommends that stockholders not tender any of their shares to Roche. The letter sent today by Ventana to the Chairman of Roche appears below.
"This is about stockholder value," said Jack Schuler, Chairman of the Board. "The Directors of Ventana have taken, and will continue to take, their responsibility as fiduciaries to stockholders extremely seriously. Simply put, we believe that Roche is trying to capture value for its stockholders that rightly belongs to Ventana's stockholders. We intend to communicate to the market in greater detail the momentum we see in our business and our strong financial expectations. We will also communicate our near and intermediate term initiatives to continue our leadership in advanced and primary staining through our robust R&D pipeline, as well as our leadership in companion diagnostics, which represents a significant opportunity for Ventana and the global pharmaceutical industry. Through its proposed transaction, Roche is attempting to obtain for itself unique strategic value and synergies that we believe would accrue to the broader pharmaceutical industry and Ventana's stockholders over the near and long term."
Christopher Gleeson, President and Chief Executive Officer, commented, "We have a strong, uninterrupted seven year track record of robust year-over-year revenue and earnings growth and a very clear strategic plan to ensure continued successful commercial and financial performance and value creation. Roche's offer does not come close to adequately compensating Ventana stockholders for the accelerating momentum of our business, the near-term potential from our innovative platforms, the numerous catalysts that are poised to drive long-term value, our game changing next generation technologies, and the Company's growing menu of differentiated, high-value diagnostics that are expected to deliver on the promise of personalized medicine. Ventana has a unique position in the market and we will continue to articulate this platform and plan for enhancing value in the weeks ahead."
Gleeson continued, "We believe Roche's public disclosures to date are attempts to deliberately mislead the market as to our prior interactions and contacts. Although Roche's overtures to our Board before June 25th were vague at best, our Board carefully analyzed and considered them and any inference otherwise is simply misleading and inaccurate. In fact, despite Roche's statements to the contrary, we notified Roche and its advisors clearly and repeatedly -- and well before June 25th -- that our Board would be considering their most recent proposal and responding after a special Board meeting scheduled for later that week. Instead, Roche chose not to allow the Directors to deliberate or wait for our Board's response before launching its hostile bid for Ventana. In a similar fashion, Roche commenced litigation without waiting to receive our Board's Schedule 14D-9 response. We can only attribute this to high-handed tactics being used in an effort to deprive our stockholders of fair value. Negotiating at these levels is a non-starter."
Gleeson concluded, "We remain committed to executing our business strategy and to building near and long-term value for all of our stockholders. We intend to vigorously resist Roche's attempt to acquire Ventana at this inadequate price. We expect to provide detailed financial information, including 2007 and 2008 financial guidance and insights into our R&D pipeline in conjunction with our quarterly earnings release after market close on Thursday, July 19 and on a conference call the morning of Friday, July 20."
Among the specific reasons cited in the Company's Schedule 14D-9 for recommending that stockholders reject the Roche offer are the following:
-- The Offer Does Not Fully Reflect Ventana's Standalone Value as the
Leader in Tissue-Based Cancer Diagnostics, One of the Fastest
Growing Segments in the Diagnostics Industry.
-- Over the past twenty years, Ventana has established itself as
the premier tissue-based cancer diagnostics company through the
development of differentiated automated platforms, high value
diagnostic tests and integrated patient information management
tools. Roche acknowledged this leadership in its June 26, 2007
conference call discussing the Offer (the "Roche Conference
Call"). However, Roche's Offer does not adequately compensate
Ventana stockholders for the Company's leading market position,
superior capabilities and resulting growth prospects.
-- The tissue-based cancer diagnostics market is growing rapidly
due to an aging population, increasing incidences of cancer,
laboratory labor shortages, automation, favorable reimbursement
and targeted therapeutics. Ventana's differentiated products and
technologies, commercial strength, and strong customer
relationships will enable it to take advantage of this market
opportunity and drive growth as well as maintain its market
leadership.
-- Over the last five years, Ventana has made significant
investments in its commercial infrastructure, resulting in it
having one of the leading commercial organizations in the
industry today. As Ventana introduces additional new products,
it expects to leverage this infrastructure to drive rapid market
adoption, enhance profitability and deliver significant value to
its stockholders.
-- The Offer Does Not Fully Reflect the Value of Ventana's Growth
Opportunities.
-- The Company has built and maintained its leadership position in
tissue-based cancer diagnostics through innovative research and
development initiatives. As Ventana continues to bring to market
a robust pipeline of automated platforms and high value
diagnostic tests, it believes it will continue its record of
driving rapid market adoption and enhancing the clinical utility
of its products. For example, the Company's molecular products
utilizing SISH technology, which have already been approved for
use in Europe, represent a key expansion of Ventana's assay
menu. These products facilitate the automation of tissue-based
genotyping assays, critical tools used in the diagnosis and
treatment of cancer. The Company's soon-to-be-introduced (2008)
new platform, UltraPlex, is designed to further enhance value by
adding functionality and capabilities such as automated,
simultaneous, same-day gene and protein testing.
-- The Company's research and development activities have generated
recent and pending near-term product introductions that the
Board believes have the potential to drive significant
additional value. For example, in the second quarter of 2006,
Ventana extended its laboratory workflow solution with the
launch of its Symphony H&E stainer, which is targeted at the
highest volume segment of the histology lab. Based on favorable
early adoption of this new product and pending peer reviewed
publications, Ventana believes primary staining represents a
meaningful new growth opportunity that will complement its core
advanced staining franchise.
-- The Company also anticipates significant future growth in
companion diagnostics. For example, Ventana recently entered
into a collaboration agreement with Roche's majority owned
subsidiary, Genentech, to co-develop and commercialize
tissue-based diagnostic assays for therapeutic candidates
designated by Genentech. In addition, Ventana has partnered with
many of the leaders within the pharmaceutical and biotechnology
industries across numerous projects to focus on the development
of biomarker assays and related companion diagnostics. Ventana
believes these companion diagnostics represent a sizeable
long-term growth opportunity for the Company, its collaboration
partners and the industry as a whole, and that the resulting
revenue opportunities are extensive and could drive Ventana's
growth well into the future.
-- The Offer Is Opportunistically Timed to Acquire Value Not Fully
Reflected in Ventana's Stock Price.
-- The Board believes that Roche recognizes the attractiveness of
the Company's near-term and future growth prospects and has
opportunistically timed the Offer to acquire Ventana before
these factors are fully reflected in the Company's stock price.
Revenue growth in the Company's core advanced staining business
remains extremely strong and overall profitability is
accelerating. Ventana is on the verge of realizing its
significant investment in primary staining and has an exciting
pipeline that will drive growth and value. As a result, the
Company believes it is ideally positioned to deliver strong
results based on its strategic plan.
-- Ventana has an opportunity to capture significant market share
from recently acquired and distracted competitors. In the Roche
Conference Call, Roche's Chief Financial Officer, Erich
Hunziker, acknowledged that the shifting competitive landscape
was a motivation for the timing of Roche's approach: "You may
ask yourself why Roche sees a certain urgency for this deal.
Leaving Ventana's successful team unchanged and giving them the
support of a global company could be very crucial in a time when
key competitors in this market are still aligning their efforts
after just having been taken over."
-- The Board has a serious concern that, to some significant
extent, Roche's interest in the Company may be based upon
confidential information shared with Roche or its affiliates for
collaborative purposes. The Board believes that Roche has moved
aggressively and opportunistically to seek to acquire Ventana
before the market has assimilated the information that Roche
fully appreciates.
-- The Offer Is Financially Inadequate.
-- The Board believes that the Offer does not fully reflect the
intrinsic value of the Company. On July 10, 2007, Merrill Lynch
and Goldman Sachs each delivered an oral opinion to the effect
that, as of the date of such opinion, the Offer is inadequate to
the holders of the Company's Shares from a financial point of
view. After considering the factors set forth herein, including
the oral opinions of Merrill Lynch and Goldman Sachs, the Board
has unanimously concluded that the Offer is financially
inadequate.
-- The Offer Does Not Reflect Sharing of Significant Potential Synergy
Value of a Combination.
-- In the Roche Conference Call, Roche asserted that the complete
spectrum of diagnostics capabilities achieved through a
combination of Ventana with Roche's existing diagnostics
franchise, together with Roche's strong oncology drug portfolio,
would uniquely position Roche for leadership in personalized
healthcare. According to Dr. Schwan's statements on the Roche
Conference Call, Ventana's technologies would allow Roche to
provide not only a comprehensive solution to pathologists, but
also a comprehensive in-house solution to its pharmaceuticals
division to develop targeted medicines, particularly in the
oncology market. However, the Offer does not reflect the
tremendous upside from this capability and the strategic and
competitive value to Roche of owning the exclusive rights to
Ventana's technologies.
-- As the leading tissue-based cancer diagnostics company with
superior technologies, commercial infrastructure and management,
and the last remaining independent company with the required
capabilities, Ventana is the best positioned and perhaps the
only company that could enable Roche to achieve its personalized
healthcare objectives. The Company believes that Genentech's
selection of Ventana as its partner of choice for companion
diagnostics development demonstrates that Ventana is ideally
situated to capitalize on this opportunity and represents an
attractive partner candidate for many of Roche's competitors.
-- In addition to the significant strategic value, the Board
believes that Roche would be able to achieve considerable cost
synergies, including distribution synergies, with Ventana's
strong position in the U.S. complementing Roche's strong
position outside the U.S. As Dr. Schwan noted on the Roche
Conference Call, "Tissue-based testing is very much geared
towards the pathologists and as such there are certainly
synergies in the sense that (Roche) can use (its) standing,
(its) brand and (its) infrastructure outside of the U.S."
-- The Offer Represents a Low Control Premium and Low Multiple
Compared to Precedent Transactions.
-- The Offer, which represents a premium of 45% to the average of
the closing prices of the Company's Shares for the one-month
period ending on June 25, 2007, the last trading day prior to
Roche's public announcement of the Offer, does not compare
favorably to the 143% one-month prior premium paid by Danaher
Corporation ("Danaher") for Vision Systems Limited ("Vision"),
one of Ventana's primary competitors. In addition, the EBITDA
multiples paid by Danaher for Vision and by EQT Partners ("EQT")
for Dako Denmark A/S ("Dako"), another of the Company's direct
competitors, were substantially higher than the EBITDA multiple
implied by Roche's Offer for Ventana; the forward year EBITDA
multiple paid by Danaher for Vision was 79x, and the trailing
year EBITDA multiple paid by EQT for Dako was 96x.
-- As Roche acknowledged in the Roche Conference Call, Ventana is
the premier company in its markets and has superior capabilities
to its competitors; however, the premium and multiples implied
by the Offer do not adequately reflect this leadership and
superiority.
-- The Offer Values Ventana at a Price Below Recent Trading Levels.
-- The market price has remained above the Offer price of $75.00
per Share since the public announcement of the Offer on June 25,
2007. The closing price per Share on the Nasdaq Global Select
Market on July 10, 2007, the last trading day prior to the date
of this Statement, was $80.25.
-- Ventana Has a Long and Proven Track Record of Delivering Value to
Stockholders.
-- The Board and management team of Ventana has a long and proven
track record of focusing on and delivering results that drive
significant stockholder value. Ventana has a seven year track
record of uninterrupted year-over-year revenue and earnings
growth. From 2001 to 2006, the Company's revenue grew at a CAGR
of over 20%. Over that same period, the Company's net income
grew at a CAGR of 85% and operating margin expanded from 1% to
19% despite accelerated commercial and R&D investment. As a
result of these strong, consistent financial results, the
Company's stock price increased approximately 430% in the last
five years, representing a 39% CAGR, as compared to a 9% CAGR
for the S&P 500 over that same period.
-- The Interests of Ventana's Board and Management Team Are Closely
Aligned with the Interests of Ventana's Stockholders.
-- As of June 30, 2007, the Board and management team owned
approximately 19% of the Company's outstanding Shares on a
fully-diluted basis. Since inception, this significant insider
ownership has ensured that the Company is solely focused on
building the leading company in its industry and delivering
significant stockholder value. Today, the interests of the Board
and management team remain closely aligned with the interests of
the Company's stockholders in maximizing stockholder value. The
Board and management team is committed to continuing to enhance
the Company's value as well as continuing to evaluate strategies
consistent with the best interests of Ventana stockholders.
Following is a copy of the letter Ventana sent today to Roche's Chairman:
Dear Dr. Humer:
Our Board of Directors, along with our financial and legal advisors,
met in person on June 27, by phone on July 6, in person on July 9 and
again by phone on July 10 to review Roche's proposed acquisition of
Ventana for $75 per share in cash.
After careful consideration and review, we reject your proposal. We
believe the offer of $75 per share is far below the value that can be
created for stockholders by our Company continuing to remain an
independent entity. Because $75 per share is so far below a reasonable
starting point for negotiations, we also decline to engage in
discussions regarding a sale of Ventana. We base our decision on a
variety of factors (as are detailed in our Schedule 14D-9), including
the following --
-- After conducting a detailed assessment of our current business
plan and receiving an opinion of inadequacy from our financial
advisors (Merrill Lynch & Co. and Goldman, Sachs & Co.), the
Board believes the intrinsic value of Ventana to be
substantially in excess of your offer of $75 per share in cash.
-- The price of $75 per share also does not fairly compensate our
stockholders for the strategic and synergy value of Ventana to
Roche. You acknowledged this value in your own investor
conference call on June 26, 2007.
-- Our current market value does not fully reflect the
value-creation potential of our business plan and our research
and development pipeline, including those innovations related
to companion diagnostics. Under all circumstances, our
stockholders must be adequately compensated for the significant
value that will be created.
We take strong exception to the inference that you are attempting to
create with the misleading statement in your letter dated June 18 that
we have "declined to engage in any meaningful dialogue." Each of your
proposals -- first, for a controlling equity investment; now, for a
100% acquisition -- were thoroughly considered and analyzed by our
Board. Similarly, you have created serious misimpressions in your
letter of June 25 by your statement alleging "an unwillingness to meet
for a discussion . . . or even to take my call," when, in fact, well
before June 25, you and your advisors were informed repeatedly and in
writing that we would get back to you following our Board meeting
later that week.
We have a serious concern that, to some significant extent, your
interest in our Company may be based upon confidential information
shared with you or your affiliates for collaborative purposes. At a
minimum, that indicates a serious breach of our trust. That, together
with your high-handed tactics, will no doubt serve as a cautionary
tale to those with whom you may seek to do business in the future. The
separate relevance of this to our stockholders is that you have moved
aggressively and opportunistically to seek to acquire Ventana before
the market has assimilated the information that you fully appreciate.
The Directors of Ventana have taken, and will continue to take, their
responsibility as fiduciaries to stockholders extremely seriously. As
you are well aware, our Board of Directors includes several
stockholders with significant ownership stakes in our Company. We are
committed to building value and looking out for the interests of all
our stockholders. Accordingly, we have determined that the appropriate
course of action is to vigorously resist Roche's attempt to acquire
Ventana at an inadequate price.
Sincerely,
Jack Schuler
Christopher Gleeson<<
"We deserve the same ridicilous multiple that the other guys got, dammit!" OK, they didn't really say that. VMSI off to near the levels I bailed at a couple of day ago. No white knight waiting in the wings; Roche must decide to up the price or walk away. Given that control law in Arizona, why wouldn't they walk away?
Cheers, Tuck |
