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Life Technologies to acquire Ion Torrent for $375 million
CARLSBAD, Calif.—Life Technologies Corp. has announced its intention to acquire Guilford, Conn-based Ion Torrent through a definitive agreement calling for a price of $375 million in cash and stock. But the deal could exceed the $700 million mark, as the sellers of Ion Torrent are entitled under the agreement to additional consideration of $350 million in cash and stock upon the achievement of certain technical and time-based milestones through 2012.
Life Technologies' board of directors has approved an additional share repurchase program to repurchase its shares associated with the stock portion of the consideration. The impact on total share count is expected to be neutral.
Ion Torrent was founded by Dr. Jonathan Rothberg, who also helped launch CuraGen, 454 Life Sciences and Raindance Technologies. According to Life Technologies, Ion Torrent has "revolutionized DNA sequencing by enabling a direct connection between chemical and digital information through the use of proven semiconductor technology."
"We believe Ion Torrent's technology will represent a profound change for the life sciences industry, as fundamental as the one we saw with the introduction of qPCR," says Gregory T. Lucier, chairman and CEO of Life Technologies. "This technology will usher in a new era in science, one in which DNA sequencing can be done easier, faster and more cost effectively than ever before."
Ion Torrent's proprietary chip-based sequencing represents what Life Technologoes calls "a new paradigm in DNA sequencing" by using PostLight sequencing technology, reportedly the first technology of its kind to reduce or eliminate the cost and complexity associated with the extended optical detection currently used in all other sequencing platforms.
The first product using this technology will be the Personal Genome Machine (PGM), reportedly an easy-to-use, highly- accurate benchtop instrument optimal for mid-scale sequencing projects, such as targeted and microbial sequencing. The instrument is currently available through an early access program and will be launched later this year at an entry cost of less than $100,000.
Ion Torrent unveiled its chip-based sequencer earlier this year at the Advances in Genome Biology and Technology conference in Marco Island, Fla., which uses the PostLight sequencing technology to measure the release of hydrogen ions as nucleotides get incorporated by DNA polymerase. Unlike other existing second-generation sequencers, it does not require lasers, cameras or labels.
Subsequent products will benefit from cutting-edge semiconductor fabrication technologies that can expand throughput at an accelerated pace, thereby dramatically lowering the cost to sequence a genome, Life Technologies reports.
"By leveraging the cumulative $1 trillion already invested in semiconductor research and development, we believe that Ion Torrent will drive unprecedented scalability, delivering the solution required for future generations of sequencing," Lucier says. "With a heritage of more than 25 years as a leader in sequencing, Life Technologies is perfectly suited to bring such an innovative technological breakthrough to market."
"This transaction enhances our strategy of providing a complete sequencing offering to our customers across the research and applied markets," adds Mark Stevenson, Life Technologies' president and chief operating officer. "Ion Torrent's technologies are highly complementary to our existing portfolio of sequencing CE and SOLiD platforms."
For his part, Rothberg will continue to lead Ion Torrent with the support of the Ion Torrent leadership team, the companies say. Life Technologies intends to retain Ion Torrent's presence in Guilford and in South San Francisco, Calif., where it has established research and development centers of excellence.
"Our products and mission make this an ideal and logical strategic fit for both companies," Rothberg says. "Both Ion Torrent and Life Technologies share rich cultures of innovation and excellence, and I firmly believe that Life Technologies is the right partner to bring such revolutionary technology in the sequencing arena to market. "
In a research note, Leerink Swann's director of equity research, John Sullivan, indicted that Life Technologies is paying "a full price, given the commercial risks, but Ion Torrent's technology looks differentiated."
However, Sullivan and the Leerink Swann team remain "unconvinced that the follow-on optical detection technologies nearing the market are additive enough to threaten sequencing leader Illumina." Still, Sullivan said that the technology is "uniquely well suited to drive new applications in large-scale sequencing."
Life Technologies will finance the transaction with cash on hand, available lines of credit, and stock. Including the impact of specific cost saving initiatives, the transaction is expected to be 2 cents dilutive to Life Technologies' earnings per share in 2010, neutral in 2011, and accretive in 2012 and beyond. Earnings per share guidance for 2010 remains unchanged at $3.35 to $3.50. Life Technologies expects to deliver double-digit earnings-per-share growth in 2011 including the impact of this transaction.
Upon closing, Life Technologies expects to benefit from synergies created by combining Ion Torrent's proprietary technologies, product pipeline and R&D capabilities with Life Technologies' commercial channel, sample preparation, sequencing automation, informatics, and reagent expertise.
According to Lucier and Stevenson, Life Technologies remains committed to a strategy of balanced capital deployment, including the execution of the previously announced $350 million share repurchase. In addition, Life Technologies reaffirms its goal of reaching 10 percent return on invested capital by 2012.
The transaction, which is expected to close in the fourth quarter, is subject to customary closing conditions, including regulatory approval.