Roche has announced it is buying the United States diagnostics company Igen International, ending a long-standing licensing dispute between the two concerns.
Under the terms of the $1.4 billion (SFr1.89 billion) deal, Roche will gain access to Igen technology which has been at the centre of a legal battle since 1997.
Although Roche has cleared an obstacle to its expanding diagnostics business, it has had to pay a high price.
The deal represents a 26 per cent premium over Igen’s Thursday closing share price on the Nasdaq stock exchange, where it closed at $37.20.
Roche has a 12 per cent market share in the $6 billion diagnostics area, with its business growing by more than 20 per cent annually.
"We certainly think it's a very high price to pay," Barclays analyst Morten Herholdt told swissinfo.
"But if you consider the alternative to Roche, it probably was worth paying this kind of premium in order to avoid any particular disruption to the diagnostics division, which has been doing quite well," he added.
The dispute concerned technology that detects bacteria, toxins and disease-causing pathogens. Igen had accused Roche of using it more widely than allowed under an agreement between the two.
Roche will now be able to use the lab testing technology without having to pay royalties.
In a complex accord, Igen shareholders are to receive $47.25 for each share they own and also one share in a new company that would own the technology in question.
The new firm, which will eventually be listed on the Nasdaq, will be able to license the technology to other parties.
Announcing Roche’s first-half profit of SFr1.585 billion on Wednesday, group chairman and CEO Franz Humer said he would not be cornered into an acquisition of Igen.
In a company statement announcing the Igen deal, Humer said that both parties had achieved a “clear win-win” situation in a highly complex dispute.
“Roche will be able to provide unrestricted access to all its diagnostics products for all its customers, and Igen’s shareholders are offered an attractive price and will own a solid business with excellent prospects,” he said.
“Putting this long period of uncertainty to an end will allow both Roche and the new spin-off company to fully focus on their respective businesses and to further develop them independently of each other,” he added.
Despite the high price of the takeover, Humer said he was sticking to Roche’s earnings guidance.
He commented that the deal would have “no effect” on company predictions or on profitability.
Roche generated some SFr500 million last year in sales from products based on Igen technology and paid the Maryland firm royalties of nine per cent.
Roche’s total diagnostics division reported sales of SFr7.24 billion.
The deal is expected to close by the end of the year and the new company will be named shortly before that.
swissinfo with agencies
Roche key facts
Roche generated some SFr500 million last year in sales from products based on Igen technology.
The Basel-based pharmaceuticals giant paid the Maryland firm royalties of nine per cent.
Roche has a 12 per cent market share in the $6 billion diagnostics area.
On Wednesday Roche reported that first-half adjusted net profit had fallen by almost a quarter to SFr1.585 billion ($1.16 billion).
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