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Roche Rachets Up Pressure as Ventana Rejects Takeover Offer

Swiss drugmaker Roche Holding ratcheted up the pressure in its $3 billion bid for Ventana Medical Systems on Wednesday, saying it could take action at the company's annual meeting.

If Ventana refuses to negotiate, Roche said it will continue to pursue a transaction unilaterally and will consider measures in connection with Ventana's 2008 annual meeting, the Swiss company said.

"Such action may include the nomination of new directors to Ventana's Board and/or proposals to amend Ventana's bylaws," Roche said in a statement.

Earlier, Ventana's board earlier unanimously rebuffed the offer, saying the hostile bid undervalues the diagnostics company and its prospects in the fast-growing cancer-testing market.

"Roche continues to believe that its offer of $75 per share in cash is a full and fair offer and a unique opportunity for Ventana's stockholders to receive value now that reflects Ventana's current business and full future potential," Roche Chief Executive Franz Humer said in the statement.

"It remains Roche's preference to enter into a negotiated transaction with Ventana," Roche said.
Ventana shares have been trading above Roche's offer price, indicating investors think a richer proposal could emerge, analysts have said. Ventana shares fell 25 cents to $80 in late-morning trading on the Nasdaq.

Acquiring Ventana, which specializes in tissue-based diagnostics, would give Roche access to technology that helps researchers and doctors better select the right drugs for individual patients.

"It would not surprise me if this is a prelude to Roche sweetening its offer a little bit," Morningstar analyst Alex Morozov said. "Whether we will see another suitor coming in ... that's not clear at this point."

Roche's bid for Ventana comes amid a spate of deals in the diagnostics sector. Established players are eyeing smaller developers of promising tests and technologies as an investment in the future of health care and a way to boost cash flow in the near term, analysts have said.

Roche has said its efforts to negotiate a friendly deal were rebuffed. Ventana on Wednesday took issue with Roche's public statements.

"We believe Roche's public disclosures to date are attempts to deliberately mislead the market as to our prior interactions and contacts," Ventana Chief Executive Christopher Gleeson said in a statement.

Ventana said Roche recognizes the attractiveness of Ventana's growth prospects and timed the offer before these factors are fully reflected in the stock price.

In a letter to Roche CEO Franz Humer, which Ventana made public, Gleeson and board Chairman Jack Schuler said: "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."

Morningstar's Morozov said Ventana's harsh language may indicate its desire to lure a friendly buyer with an offer superior to Roche's.

"What we may see here is Ventana inviting another suitor in the playing field," Morozov said.

Gleeson said the Tucson, Arizona-based company remained committed to its business strategy. Ventana plans to provide 2007 and 2008 financial expectations and details about its research pipeline when it releases quarterly earnings later this month.

Ventana was founded more than 20 years ago by a practicing pathologist at the University of Arizona. Artisan Partners LP held 8 percent of the company's outstanding shares as of March 31, while Schuler, the chairman, held 7.4% as of May 22, according to data compiled by Reuters Knowledge.