San Diego medical diagnostics giant Gen-Probe said that it has offered to pay roughly $334 million in cash for a Belgian biotechnology company, topping a friendly buyout offer made 40 days ago.

Gen-Probe said its offer for Innogenetics NV would create the biggest “stand-alone” molecular diagnostics company, with close to $500 million in annual sales, and open a beachhead in Europe for its clinical test products.

Sales of molecular diagnostics in Europe are expected to rise 24% annually until 2011, double the rate of the U.S. market, Gen-Probe said, citing data from market research firm Fuji-Keizai USA.

But the buyout – a relatively unusual move for Gen-Probe – also could trigger a bidding war with Solvay SA, a far bigger European pharmaceutical company, amid uncertainties surrounding a weakened dollar.

Solvay, based in Brussels, has about 10,000 employees and reported revenue of 9.6 billion euros for 2007 – or roughly $15 billion.

Gen-Probe, founded in 1983, has made relatively few acquisitions as it has grown into one of San Diego's biggest biotechs, with 2007 revenue of $403 million and a market valuation of more than $2.83 billion. Gen-Probe now has about 1,000 employees, including 850 in San Diego.

The company's previous buyout deal, for Molecular Light Technology Ltd. of Wales, was valued at $11 million in 2003.

Gen-Probe said its offer of 215 million euros for Ghent-based Innogenetics amounted to 6.1 euros a share, or $9.48, and was 6 percent higher than Solvay's 5.75-euros-per-share offer that was tendered April 25. It was a 7 percent premium to Innogenetics' close at 5.71 euros Monday.

European investors were obviously expecting Solvay to respond, however, as Innogenetics' shares climbed above Gen-Probe's bid to 6.41 euros, a 12 percent gain.

“We are evaluating all options,” Solvay spokesman Martial Tardy told Bloomberg News.

“We have been talking to Innogenetics since last summer and believe the company is a very good strategic fit,” Hank Nordhoff, Gen-Probe's chairman and chief executive, said in a conference call with analysts.

Innogenetics has not been profitable in recent years, Gen-Probe spokesman Michael Watts said.

“They have been going through a restructuring, with a de-emphasis on therapeutics and an emphasis on their diagnostics business,” Watts said. “We think they're turning the corner – not just on sustained profitability, but on sustained growth.”

Acquiring Innogenetics would be slightly dilutive to Gen-Probe's 2008 earnings per share, but the San Diego company said it expects Innogenetics will add to its earnings within 18 months after the deal is completed.

Gen-Probe valued the enterprise value of its offer at $340 million, about 4.3 times Innogenetics' diagnostics revenue of 51 million euros – $79.3 million – in 2007.

Watts said Innogenetics has developed strip-based tests for cystic fibrosis, human papillomavirus and a test for organ-transplant compatibility that are complementary to Gen-Probe's nucleic-acid-testing technology.

Gen-Probe has received regulatory approvals or clearances for more than 50 products that detect a wide variety of infectious microorganisms, including those causing sexually transmitted diseases, tuberculosis, strep throat, pneumonia and fungal infections.

SOURCE: San Diego Union-Tribune