Filed by IGEN International, Inc. pursuant to Rules 165 and 425 promulgated
under the Securities Act of 1933, as amended, and deemed filed pursuant to
Rule 14a-12 promulgated under the Securities Exchange Act of 1934, as
amended.
Investors and security holders are urged to read the proxy statement/prospectus
regarding the business combination transaction referenced in the foregoing
information, when it becomes available, because it will contain important
information. The proxy statement/prospectus will be filed with the Securities
and Exchange Commission by IGEN and IGEN Integrated Healthcare, LLC. Investors
and security holders may obtain a free copy of the proxy statement/prospectus
(when it is available) and other documents filed by IGEN and IGEN Integrated
Healthcare, LLC with the SEC at the SEC's web site at www.sec.gov. The proxy
statement/prospectus (when it is available) and these other documents may also
be obtained for free from IGEN by directing a request to IGEN International,
Inc., 16020 Industrial Drive, Gaithersburg, MD 20877, (301) 869-9800, Attention:
Secretary.
IGEN, its directors, and certain of its executive officers may be considered
participants in the solicitation of proxies in connection with the business
combination transaction referenced in the foregoing information. Information
about the directors and executive officers of IGEN and their ownership of IGEN
stock is set forth in IGEN's Proxy Statement with respect to its Annual Meeting
for the year ended March 31, 2003. Investors may obtain additional information
regarding the interests of such participants by reading the proxy
statement/prospectus when it becomes available.
Subject Company: IGEN International, Inc.
Commission File No.: 000-23252
IGEN International, Inc.
First Quarter Financial Results and IGEN-Roche Agreement
Conference Call Script
July 30, 2003
4:30 PM EDT
OPERATOR: Introduction.
Migausky: Welcome to IGEN's conference call.
Before we start, I'd like to remind you that we will
be making forward-looking statements during this
call. Comments that relate to the Roche litigation
and transaction, trends and changes in financial or
operational performance, technology or product plans,
revenue growth and prospective new licensing or
business agreements, are forward-looking statements.
We have based these forward-looking statements on
management's current expectations, estimates and
projections and they are subject to a number of
risks, uncertainties and assumptions which could
cause actual results to differ materially from those
described in the forward-looking statements. The
following factors are among those that may cause
actual results to differ materially from our
forward-looking statements: our ability to develop
and introduce new or enhanced products; our ability
to enter into new collaborations; our ability to
develop our manufacturing, selling, marketing and
distribution capabilities; protection and validity of
patent and other intellectual property rights and our
ability to enforce those rights. Actual results might
differ materially from these statements due to risks
and uncertainties. Detailed descriptions of the risks
and uncertainties that apply to IGEN appear in our
Annual Report on Form 10-K and other SEC filings.
IGEN disclaims any intent or obligation to update
these forward-looking statements.
In addition, investors and security holders are urged
to read the proxy statement/prospectus regarding the
business combination transaction with Roche when it
becomes available, because it will contain important
information. The proxy statement/prospectus will be
filed with the Securities and Exchange Commission.
Investors and security holders may obtain a free copy
of the proxy statement/prospectus (when it is
available) and other documents related to the
transaction at the SEC's web site at www.sec.gov. The
proxy statement/prospectus (when it is available) and
these other documents may also be obtained for free
from IGEN by directing a request to IGEN
International, Inc., 16020 Industrial Drive,
Gaithersburg, MD 20877, Attention: Secretary.
IGEN, its directors, and certain of its executive
officers may be considered participants in the
solicitation of proxies in connection with the
business combination transaction referenced in the
conference call today. Information about the
directors and executive officers of IGEN and their
ownership of IGEN stock is set forth in IGEN's Proxy
Statement with respect to its Annual Meeting.
Investors may obtain additional information
regarding the interests of such participants by
reading the proxy statement/prospectus when it
becomes available.
Now I'll turn the call over to Sam Wohlstadter,
Chairman and CEO of IGEN.
Wohlstadter: Thank you and thanks to all our shareholders
for joining us today. On the call today are
Dr. Richard Massey, President and COO, George
Migausky, CFO, and Dan Abdun-Nabi, our General
Counsel. We will discuss the definitive agreements we
signed with Roche last week and also briefly discuss
IGEN's first quarter financial results for the
quarter ended June 30, 2003.
Let me begin by saying that we are extremely pleased
to have resolved our long-running dispute with Roche
on their right to the continued use of our ORIGEN
technology. A key objective for us during the
negotiation of these agreements was to deliver
significant near-term value to shareholders.We
believe we have achieved that goal. The structure of
the Roche transaction also provides our shareholders
with the opportunity to participate in a new publicly
traded company.
First, through the acquisition of IGEN, shareholders
get a substantial cash premium - a payment of $47.25
per share, which is higher than IGEN shares had ever
traded prior to the announcement of the transaction.
In fact this is a 37% premium to our closing stock
price on July 21st, which was the last day prior to
the published press reports of a potential
transaction between IGEN and Roche.
Second, in addition to the cash payment, IGEN
shareholders will have the potential to benefit from
additional value creation in the future through 100%
ownership of a new public company which will be spun
off by IGEN. We are very excited about the new
company's potential to generate additional
significant value for shareholders and we are
committed to make that happen. The new spin-off
company will be well-positioned to compete in the
global biodefense, clinical testing, life science,
and industrial markets - including the opportunity to
address the entire clinical diagnostics market. This
includes hospitals, blood banks, and reference labs.
The new non-exclusive arrangement with Roche also
enables the new company to seek strategic
partnerships with a wide range of companies in the
global marketplace to address the $6 billion clinical
immunodiagnostic testing market, as well as the $1.2
billion DNA probe market. It will own the ORIGEN
technology and is expected to begin with
approximately $155 million in working capital
provided primarily by Roche as part of this
transaction.
It has been a long and arduous road but we have
achieved what we believe is an excellent outcome for
IGEN and its shareholders - and one that is
beneficial to Roche as well. I would like to thank
everyone at IGEN for their dedication and hard work,
and especially our customers for their commitment to
the company throughout this process. I would also
like to thank our loyal shareholders for their
steadfast support.
Next, George Migausky will provide comments on IGEN's
first quarter financial results and then discuss the
details of the Roche transaction.
Migausky: Thank you, Sam.
This will be a review of IGEN's operating results for
the first quarter of its fiscal year ending March 31,
2004. First, I will provide a summary of results
released earlier today.
3 Mo. Ended 06/30
2003 2002
----------------------
REVENUE 17.1 12.0
INCOME (LOSS)
FROM OPS (0.8) (2.2)
NET LOSS (7.2) (7.4)
LOSS PER SHARE $0.30 $0.33
SHARES USED 23.8 23.2
REVENUE BREAKDOWN:
Royalties 11.6 8.1
Product Sales 5.4 3.6
Contract Fees 0.1 0.3
-----------------------------------------------
We have been delivering the double-digit revenue growth
that has been our goal. This has been occurring each
quarter now for the last 2 + years. Revenue for the
quarter grew by 42% over last year, including a 51%
growth in direct product sales of IGEN.
The revenue growth - together with reduced expenditures
in certain areas - has provided an improvement in the
bottom line. The operating loss and net loss for the
quarter decreased from a year ago, with the net loss
lower by approximately 2% for the quarter, despite an
increase in Roche litigation related costs of $2.5
million.
Royalties - The royalties grew by 42% for the quarter to
$11.6 million. This includes a one-time true-up of Roche
royalties from prior quarters of approximately $700,000.
Without the one-time true-up, the royalties still would
have increased 34%. All of the Roche royalties come from
Roche sales, as reported by Roche to us. Looking ahead,
it is important to note that under the agreements signed
last week, Roche will no longer pay royalties to IGEN.
Rather, effective July 1, 2003, Roche will pay IGEN $5
million per month for the use of ORIGEN technology
through closing of the transaction only. We will speak
more about the Roche agreements in a moment.
Product sales - Product sales grew by 51% this quarter
over last year. We saw continued growth this quarter in
our biodefense/industrial sales. These sales, which were
approximately $1.5 million for the quarter, were 3 1/2
times higher than last year. Biodefense/industrial sales
are expected to be a big part of our sales mix going
forward, particularly with the Department of Defense
contract expansion announced in June. This contract
provides for product sales at the election of the
government of up to a total of $23 million over four
years, with approximately $7 million of product sales
through June 2004.
Sales of the M-Series instruments and consumable reagents
continue to drive the Life Science product sales, which
remains the largest single product sales category for the
Company. Our growth was a 30% increase in Q1.
Physician Office Lab sales were about $600,000 of the
total product sales mix for the quarter - a decline of
$100,000 from last year's Q1. These Physician Office Lab
customers are being served by IGEN under the terms of a
court order related to Roche selling outside their
licensed field and these customers will be transferred
back to Roche when the acquisition closes.
For all of the product sales, the consumable reagent and
services portion of our business was approximately 65% of
the sales mix this quarter with instrumentation making up
the remainder.
With the product sales traction, recent product launches
(such as the M-1), and the biodefense opportunity, our
goal remains and we continue to believe that IGEN's growth
will well exceed the industry average.
Litigation Costs -
Costs associated with the Roche litigation - including
appellate work, patent infringement suits prepared and
filed by IGEN, settlement negotiations and the merger
transaction itself - increased this quarter to $3.6
million. As Dan Abdun-Nabi will relay in a moment, these
litigations are now all finished and the costs should be
dramatically reduced. There will of course, be costs
(legal, accounting and investment banking) associated with
the consummation of the merger and the registration and
listing of the new company.
Now I will review the terms of the agreements with Roche.
These comprehensive agreements have been approved by the
Boards of Directors of both IGEN and Roche.
Under the terms of the agreements, Roche will acquire
IGEN, thereby securing non-exclusive rights to ORIGEN
technology in the human in-vitro diagnostics field. For
each IGEN share, IGEN shareholders will receive $47.25 in
cash and one share of a newly formed public company to be
spun off by IGEN. The new company will be 100% owned by
IGEN shareholders.
It's obviously impossible for us to predict the value of
the new company and how it will trade in the public
market. In approximately 6 weeks, IGEN will be filing a
proxy statement / prospectus with the SEC, which will
provide much more information on the new company. Until we
file this document, we are in a period where we are
restricted about what we can say about the new company.
Therefore, today we will cover only certain aspects of the
new company.
The new company will hold IGEN's patents, and assume
IGEN's biodefense, life science and industrial businesses,
as well as IGEN's opportunities in the clinical
diagnostics field. As Sam mentioned earlier, since Roche's
rights to ORIGEN technology will be non-exclusive, the new
company will have the opportunity to address the entire $6
billion clinical immunodiagnostics testing market -
including hospitals, blood banks, and reference labs,
either directly or through new strategic partnerships. It
will also be able to address the $1.2 billion DNA probe
market.
In addition, the new company will hold IGEN's interests in
the Meso Scale Diagnostics ("MSD") joint venture. Rich
Massey will speak about the MSD joint venture in a moment
including the new company's obligation to make a final
$37.5 million contribution to MSD.
Importantly, the new company will receive rights to
certain improvements relating to Roche's Elecsys product
line and licenses to PCR - a valuable DNA testing
technology. The royalty-bearing licenses with Roche for
PCR enables us to use the license in most diagnostics
fields. We are pleased to have secured these improvements
and PCR licenses and expect that the future businesses
established by the new company will be enhanced as a
result.
As stated earlier, we expect that the new company will
start with approximately $155 million in net working
capital. Let me briefly summarize the mechanics as to how
we get there.
First, we have the existing cash in IGEN and the ongoing
revenues of the business between signing and closing.
Roche has already paid $18.6 million in damages upheld by
the Fourth Circuit Court of Appeals, royalties due for the
period through June 30, 2003 and will continue to pay $5
million per month for use of the ORIGEN technology until
closing. Separately, prior to closing, Roche will provide
an additional $214 million to IGEN.
A portion of these funds will be utilized to support
IGEN's ongoing business through the closing, as IGEN will
pay its operating costs and other obligations between
signing and closing. It will also pay the transaction
costs associated with the deal, and repay its Senior
Secured Notes. Then, IGEN will contribute all of its
remaining cash, together with certain of its other assets
and liabilities to the new company. The new company will
sell MSD-related preferred stock to Sam Wohlstadter to
fund the portion of the final MSD contribution in excess
of $30 million. The new company will also pay $50 million
to Roche for the PCR licenses. Therefore, when all is
complete, the new company is expected to have
approximately $155 million in cash and no debt
obligations, except for routine trade payables.
Among the uses of this working capital is the final $37.5
million investment in MSD. The new company's
obligation to make this final contribution to MSD is
separate from IGEN's existing obligation to provide
funding to MSD through November 30, 2003.
We expect to list the new company's shares on Nasdaq after
the completion of the spin-off. It will be managed by
IGEN's current management team and headquartered in
Gaithersburg, Maryland. As I mentioned, a more complete
description of the new company and its business will be
available in the proxy statement / prospectus. Until then,
we cannot provide more information about the new company
beyond what we have said today.
I will now turn the call over to Rich Massey, who will
describe how the Roche transaction affects the MSD joint
venture arrangements.
Massey: Thank you, George.
By way of background, Meso Scale Diagnostics is a joint
venture initially formed in 1995 by IGEN and Meso Scale
Technologies ("MST") to develop and commercialize products
that combine IGEN's ORIGEN technology and MST's
multi-array technology. In the last year, MSD launched its
first two instrument systems.
In conjunction with the Roche transaction, IGEN's
interests in, and rights and obligations under, the MSD
joint venture will be transferred to the new company that
will be spun off to the IGEN shareholders. This includes
both IGEN's 31% equity interest and its Class C Preferred
Return interest in MSD, which generally provides for a
preferred return payable out of a portion of MSD's future
profits and certain third-party financings.
The transfer of these interests from IGEN to the new
company required MSD's consent. As part of obtaining that
consent, IGEN and MSD amended certain of the MSD
agreements. An independent committee of IGEN's Board of
Directors with the advice of independent counsel
negotiated and approved those amendments, which include
providing additional funding to MSD following the
completion of the Roche transaction.
The additional funding contemplated by these amendments
requires the new company to make a final $37.5 million
contribution to MSD. Samuel Wohlstadter, IGEN's Chairman
and CEO has agreed to provide the portion of this
contribution that is greater than $30 million through the
purchase of a new series of preferred stock in the new
company. The economic characteristics of this series of
preferred stock will mirror the new company's economic
interest in its Class C preferred return interest in MSD.
Neither IGEN nor the new company will have any additional
funding obligations related to MSD after completion or
termination of the Roche transaction.
As part of the Roche transaction, the MSD joint venture
agreement will expire on November 30, 2003 or, if later,
the completion or termination of the Roche transaction.
Upon the expiration of the MSD joint venture agreement,
MSD and MST have the right to buy out all of IGEN's (or
the new company's) interests in MSD at fair market value
determined under the joint venture agreement less a
specified discount. If MSD or MST exercise this purchase
right, the purchase price will be paid out over time from
a portion of MSD's future revenues and third party
financings. In addition, many of IGEN's (or the new
company's) licenses and other arrangements with MSD and
MST will continue in accordance with the existing terms
with the new company standing in IGEN's place.
Additional information about the MSD joint venture can be
found in IGEN's filings with the SEC and copies of the
licenses and other arrangements with MSD and MST may also
be obtained from the SEC.
I will now turn the call over to Dan Abdun-Nabi, who will
cover the closing conditions and other aspects of the
agreements.
Abdun-Nabi: Thank you, Rich.
First, let me briefly discuss how IGEN and Roche have
agreed to handle the various lawsuits that are now
pending. As part of the comprehensive set of agreements
signed last week, IGEN agreed that it would suspend its
patent infringement action against Roche in both Maryland
and Germany pending consummation of the proposed
transaction. IGEN will retain the right to resume both of
those suits should the Roche transaction not close. In
addition, Roche has agreed to withdraw its petition for
rehearing that it filed with the Fourth Circuit Court of
Appeals and both companies have agreed to not file any
further appeals of the opinion issued by the Fourth
Circuit on July 9. Consequently, the opinion of the Fourth
Circuit will become final and this litigation will be
closed.
Let me now briefly discuss our expectations regarding the
closing of the Roche transaction. As mentioned in our
earlier press release, we expect that the transaction will
close by calendar year-end. The conditions to closing the
Roche transaction are, in our view, quite limited,
straight forward and favorable to IGEN.
As part of this process, and as is customary for
transactions like this, we are required to, among other
things, secure Hart Scott anti-trust clearance, secure
stockholder approval of the merger, and file with the SEC
a proxy statement / prospectus that will include the
details of a special shareholders meeting to be held to
vote on the transaction. That document will provide
shareholders additional information about both the
transaction and the new company to be spun off.
We do not anticipate any difficulties with any of the
regulatory processes or other closing conditions to the
Roche transaction and we are highly confident that the
transaction will indeed close. Importantly, Roche has also
publicly made it quite clear that that they wish to secure
rights to the ORIGEN technology through this transaction.
Just a quick and final comment on taxes. As we noted
earlier, the acquisition of IGEN by Roche and the spin-off
of the new company will be a fully taxable transaction for
IGEN shareholders. Because tax matters are complicated and
depend on an investor's particular situation, we urge
investors to consult with their own tax advisors about the
consequences of the transaction.
I will now turn the call back over to Sam.
Wohlstadter: Thank you George, Rich and Dan. In closing, I would like
to express my sincere appreciation to the IGEN Board
of Directors for their persistence in pursuing a course
of action pending a transaction that we believe
maximizes value to all of our shareholders.
Finally, and perhaps most importantly, I would like to
thank all of the tough monkeys - whether diligently
working at the Company or investors who have supported the
Company- all have helped to make IGEN a success and set
the stage for a bright future.
I look forward to being able to discuss the new company
with all investors after the proxy statement / prospectus
is filed.
Migausky: Now we will take some questions. I would ask that
everyone limit yourself to one question. If you have more
than one question, please get back in the queue.
Operator, please review the instructions for asking
questions.
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